Freelancing in Bosnia and Herzegovina: two entities, one nationwide VAT, and the KM 100,000 threshold
Bosnia and Herzegovina taxes income at the entity level: the Federation of BiH applies a flat 10% and Republika Srpska a flat 8%, and social contributions differ between them too. VAT, by contrast, is a single state-level system with a KM 100,000 registration threshold and a 17% rate. E-invoicing and real-time fiscalisation are arriving on different timelines in each entity, so where you register genuinely changes the rules.
This article is general information, not tax advice. Regulations change — verify the current rules with the official sources below before acting.
The single most important thing to understand about freelancing in Bosnia and Herzegovina is that it is not one tax system but layered ones. VAT is nationwide, but income tax and social contributions are set separately by each entity — the Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska (RS), with Brčko District as a further special case. Where you register changes your rules.
Registering — and choosing an entity
Independent workers typically register a sole proprietorship at the entity level: in FBiH this is often an obrt or samostalna djelatnost, in RS a samostalni preduzetnik. Registration happens with the competent entity or municipal authority and the relevant tax administration (the Tax Administration of FBiH or the Tax Administration of RS). As a sole proprietor you and the business are the same legal person, and your entity of registration sets which direct-tax rules apply to you.
Income tax depends on the entity
Personal income tax on a sole proprietor's net profit (revenue minus deductible expenses) is a flat 10% in the Federation of BiH and a flat 8% in Republika Srpska. This is a genuine difference, not a rounding detail — two freelancers doing identical work can face different rates purely because of where they registered. Confirm the exact deduction and filing rules with your entity's tax administration.
Social contributions also differ
Mandatory social contributions — pension, health and unemployment — are governed by separate entity laws, and both the rates and the contribution base differ between FBiH and RS. FBiH has also been reforming its contribution rates in recent years. Because the burden and the base are not uniform, treat the entity's own current schedule as the authoritative figure rather than assuming a single national rate.
VAT is nationwide — KM 100,000
Unlike direct taxes, VAT is a single state-level system run by the Indirect Taxation Authority (UIO/ITA). Registration is mandatory once taxable supplies exceed KM 100,000 (convertible marks), and the standard rate is 17%, identical across FBiH, RS and Brčko. Separately, e-invoicing and real-time fiscalisation are being introduced on different timelines by entity — FBiH adopted a new fiscalisation law effective in 2026, while RS runs its own fiscalisation model — so check the rules for your entity specifically.
General information about freelancing in Bosnia and Herzegovina, current as of the review date above, and not tax advice. Entity rules, thresholds and rates change — confirm current figures with the Indirect Taxation Authority (UIO/ITA) and your entity's tax administration, or a qualified accountant.
Frequently asked questions
What is the VAT registration threshold in Bosnia and Herzegovina?
KM 100,000 (convertible marks, BAM) of taxable supplies over a rolling period. VAT is administered at the state level by the Indirect Taxation Authority (UIO/ITA) and applies uniformly across the whole country, so the threshold and the 17% standard rate are the same whether you operate in the Federation of BiH, Republika Srpska or Brčko District. Below the threshold, registration is voluntary.
How is a freelancer's income taxed — does the entity matter?
Yes. Direct taxes are set by each entity, not nationally. Personal income tax on a sole proprietor's net profit is a flat 10% in the Federation of BiH and a flat 8% in Republika Srpska, and mandatory social contribution rates differ between the two entities as well. Because of this split, the entity where you register your activity determines your income-tax rate and your contribution burden, even though VAT is identical countrywide.