Bosnia and Herzegovina has one currency and one VAT, but three income tax systems. The Federation of Bosnia and Herzegovina (FBiH), Republika Srpska (RS) and Brčko District each tax a sole trader under their own law, so what a contractor pays depends on where they are registered. For a foreign client the set-up is simple: a services contract with a registered obrt or preduzetnik, invoices in euros priced against a fixed 1.95583 KM per euro (cbbh.ba, checked 2026-09-29), and a SWIFT payment, because Bosnian banks are not yet in SEPA.
Three tax systems: the Federation, Republika Srpska and Brčko District
The country’s two entities and Brčko District each have an income tax law, a contributions law and a tax administration. VAT and customs sit at state level, with the Indirect Taxation Authority.
| Federation (FBiH) | Republika Srpska (RS) | Brčko District | |
|---|---|---|---|
| Income tax on a sole trader | 10% on profit; a flat-rate regime for some activities | 2% of revenue for a small entrepreneur up to KM 100,000 (minimum KM 600 a year below KM 50,000, KM 1,200 above); otherwise 10% on profit | 10% |
| Contributions, 2026 | 36% of a fixed base: KM 576.72 a month for a craft keeping books, KM 975.60 for a free profession, KM 487.80 on the flat-rate regime | 31% of 70% of the average gross wage: KM 509.73 a month | Own law |
| Unregistered freelancer | Form AMS-1035 within 5 days of each foreign payment: 10% tax and 4% health after 20% standard expenses | — | — |
Sources: FBiH income tax (PwC), FBiH contributions (bloombergadria.com), AMS-1035 (poreznikalkulator.ba), RS income tax (paragraf.ba), RS contributions (euronews.ba), Brčko (paragraf.ba); all checked 2026-09-29.
The Federation cut its combined contribution rate from 41.5% to 36% in 2025, but bases follow the average wage, so the monthly bill still rose in 2026. RS raised its small-entrepreneur ceiling from KM 50,000 to KM 100,000 from 2025 and removed some activities, including consultants and accountants, from the regime; programmers kept it (kontoprom.com, checked 2026-09-29). For you, the entity matters in two places: it explains the contractor’s rate, and it tells you which rules apply if the relationship is questioned. Record it at onboarding from the contractor’s registration decision.
Obrt, preduzetnik or d.o.o.
- Obrt / samostalna djelatnost (FBiH). A sole trade registered at municipal or city level, in a process that takes 15 to 30 days (act.ba, checked 2026-09-29). It keeps business books and pays contributions every month, whether or not it earns.
- Preduzetnik (RS). Entered in the central register of entrepreneurs kept by APIF (apif.net, checked 2026-09-29). With revenue up to KM 100,000 and no more than three employees, it can be taxed as a small entrepreneur.
- D.o.o. A limited company paying 10% corporate income tax in all three jurisdictions (PwC, checked 2026-09-29). It suits higher earners and small teams, and it puts a company, not a person, on the other side of your contract.
VAT registration becomes mandatory above KM 100,000 of taxable supplies (uino.gov.ba, checked 2026-09-29). Rights transfers, consulting and engineering services for a client without a seat in BiH are supplied where the client is (VAT Law, Art. 15, paragraf.ba, checked 2026-09-29), so most export invoices carry no BiH VAT.
Reclassification risk
Two rules matter. The Federation’s income tax rulebook decides whether work is dependent or independent from the whole picture of the relationship; its markers of dependent work include the client determining the type, place and time of work, providing the means of work, bearing business expenses and paying regular compensation (Pravilnik on the Income Tax Law, Art. 13, paragraf.ba, checked 2026-09-29). And the Federation’s Labour Law presumes an open-ended employment relationship where someone performs paid work for an employer without a written employment contract, unless the employer proves otherwise (paragraf.ba, checked 2026-09-29).
A foreign client without a Bosnian entity is rarely the first target, but the facts still decide. A developer on your working hours, with your equipment, reimbursed expenses and a flat monthly fee fits the rulebook’s picture of dependent work. Project scope, the contractor’s own tools and schedule, and other clients point the other way.
Contract and IP
- A written services contract with the obrt, preduzetnik or d.o.o.: deliverables, rate, currency (euros avoid exchange-rate risk under the peg), who bears bank charges, and the payment schedule.
- IP. Under the Law on Copyright and Related Rights (Official Gazette of BiH 63/10), all economic rights in software made under a commission contract are presumed to pass to the client unless the contract says otherwise (Art. 103). For other commissioned work, such as designs, texts or illustrations, the author keeps the copyright except for distribution unless the contract provides otherwise (Art. 98(3)). Transfers of economic rights must be in writing (Art. 80), and a transfer of rights in all of the author’s future works is void (Art. 79). A client who acquires rights cannot pass them on to a third party, such as a customer or a licensee, without the author’s consent unless the contract allows it (Art. 78). State the assignment explicitly, include onward transfer and cover non-software deliverables.
- Independence terms: the contractor’s own tools and schedule, the right to serve other clients, and pay tied to deliverables rather than hours.
Taxes and paperwork on the client’s side
Nothing is withheld on your side; the invoice is paid in full. From the US, ask a sole trader for a W-8BEN and a d.o.o. for a W-8BEN-E; no 1099 is filed, because services performed in Bosnia and Herzegovina are foreign-source income (irs.gov, checked 2026-09-29). There is no US income tax treaty with Bosnia and Herzegovina; it does not appear on the IRS treaty list (irs.gov, checked 2026-09-29). Your file: the contract, the contractor’s registration decision (it shows the entity), invoices and SWIFT confirmations.
How to pay contractors in Bosnia and Herzegovina
Payments are SWIFT transfers in euros or dollars to the contractor’s foreign-currency account, sent from your bank, from Wise or through a payout platform. The Central Bank applied to join SEPA on 6 August 2026, and first transactions are expected at least six months after admission (klix.ba, checked 2026-09-29). Receiving banks charge per inflow with a minimum, so one monthly payment costs less than several small ones. The rails compared, bank fees, common failures and platforms ranked for this country are on how to pay contractors in Bosnia and Herzegovina.
Contractor of Record in Bosnia and Herzegovina
A contractor with several clients and their own schedule can sign directly with you. A Contractor of Record earns its fee in two cases: a full-time, single-client engagement that fits the Federation’s picture of dependent work, or a team spread across the Federation and Republika Srpska whose contracts and IP terms have to stay consistent. 4dev acts as Contractor of Record — the contracting party for each contractor — which reduces reclassification risk. Other COR providers sign as the counterparty in the same way, and what they actually accept is set by the liability clause in their contract rather than by the product name, so read it. If the person is doing a job in all but name, an EOR is the better route. Providers are compared in our COR rating.