At its session on January 12, the Government of the Federation of Bosnia and Herzegovina adopted amendments to the proposed Laws on Contributions and Income Tax, which have been in the parliamentary procedure for years.
In the discussions about the formation of a new government and the budget for 2023, this news went unnoticed, even though it is a key reform that has been talked about for at least a decade.
The Government of the Federation told us that the goal of the law is to reduce the tax burden on labor and simplify the entire system, as well as to increase the wages of workers and their future pensions. In addition, these laws are key to creating new jobs, international competitiveness and exports.
“Taking into account the growth of public revenues, the Government decided on additional relief in relation to the proposals that have been in the Parliament of the Federation of Bosnia and Herzegovina since 2018. Thus, the contribution rate was reduced by one percentage point and in the future, it would be 31.5 percent instead of 41.5 percent. In addition, the personal income tax deduction is increased to 1,000 KM, and any additional income above that amount would be taxed at a rate of 13 percent,” explained the Government.
They added that the intention of these changes is that workers who earn a lower salary than the average in the Federation of Bosnia and Herzegovina do not pay a single KM of income tax.
“At the moment, the personal deduction is 300 KM, with the fact that it can be higher in the case of a dependent spouse and depending on the number of children. However, according to the new proposal, an employed married couple would have a tax deduction of a total of 2,000 KM, which is incomparably more than the average household has at the moment. The latest changes of the Government of the Federation of BiH, therefore, inevitably go in the direction of additional relief of labor and the economy between 200 and 300 million KM per year,” the Government emphasizes.
They also add that the fiscal laws in the future will tax all currently non-taxable items such as meal allowance, transportation and holiday pay.