Doing business in Bosnia and Herzegovina (BiH) involves navigating its complex, decentralized legal structure, but it also offers opportunities in various growing sectors.
Here is an overview of key aspects for starting and operating a business:
1. Legal and Business Setup
- Political Structure: BiH is highly decentralized, consisting of two entities—the Federation of Bosnia and Herzegovina (FBiH) and the Republika Srpska (RS)—and the Brčko District. Business registration and regulations can vary between these entities.
- Company Formation: Foreign investors generally have the same rights as domestic investors. Common legal forms include:
- Limited Liability Company (D.O.O. or D.O.O.L.): The most common choice.
- Sole Proprietorship (Samostalni Preduzetnik or Obrt): For individuals.
- Registration Process:
- The process typically involves reserving a company name, court registration, and enrollment with tax and social security authorities.
- Be prepared for the registration process to take time, often longer than the European Union average, due to the administrative complexity.
- Foreign Investment Restrictions: Foreign equity in companies involved in the production/sale of arms, ammunition, and explosives for military use, and media businesses is generally limited to 49%.
- Real Estate: Foreign investors can generally acquire property by establishing a local legal entity (a company).
2. Taxation and Labor
- Taxes: BiH offers competitive flat tax rates:
- Corporate Income Tax: 10%
- Personal Income Tax: 10%
- Value Added Tax (VAT): 17% (The standard rate)
- Social Contributions: Employers and employees both pay social security contributions (pension, health, unemployment), which can be a significant cost burden.
- Labor:
- The standard work week is 40 hours.
- Full-time employees are entitled to a minimum of 18 working days of paid annual leave.
- Companies must register each employee with the Tax Administration at least one day before they start work.
3. Key Business Sectors and Opportunities
The economy is largely service-driven, but there are strong opportunities for investment, particularly in:
- Energy: Significant potential in renewable energy (hydropower, wind, solar) and the modernization of the electrical power grid.
- Manufacturing/Industrial Processing: A relatively strong base, with demand for raw materials, chemicals, and modern, computerized equipment for metal-based industries.
- Information Technology (IT): A growing sector with demand for IT equipment, software, and cybersecurity services.
- Tourism: An area with high development potential, leveraging the country’s natural resources and historical sites.
- Agriculture: Opportunities in meat, livestock, dairy, processed and fresh fruits/vegetables, and grain imports.
4. Business Culture and Etiquette
Developing personal relationships and trust is crucial for long-term success in BiH.
- Relationships: Bosnians highly value trust and personal connections. Be prepared to spend time building rapport, often over shared Bosnian coffee or a meal, before diving into business specifics.
- Communication:
- Use titles like “Gospodin” (Mr.) or “Gospođa” (Mrs.) and last names until invited to use first names.
- Direct communication is valued, but when discussing sensitive topics, people may use more subtle language to avoid confrontation.
- Face-to-face meetings are preferred for important discussions.
- Meetings and Punctuality:
- While punctuality is appreciated, meetings can sometimes start late (“Balkan time”)—be patient and flexible.
- Initial meetings often involve small talk (family, travel, football) before business begins. Never refuse an offer of food or drink, as it is considered impolite.
- Dress Code: Dress smartly with a professional, conservative, and fashionable business attire.