What is VAT and Who Must Register

A beginner's guide to value added tax in BiH and the thresholds for mandatory VAT registration.

Value added tax (VAT) is one of the most important tax forms in Bosnia and Herzegovina. For many new entrepreneurs, the VAT system can seem unfamiliar, but understanding it is essential for legal and successful business operations.

In Bosnia and Herzegovina, the standard VAT rate is 17%. According to the VAT Law, any person whose taxable turnover of goods or services in the previous year exceeds 50,000 BAM is required to register as a VAT payer with the Indirect Taxation Authority (ITA).

However, many entrepreneurs choose to voluntarily enter the VAT system even before reaching this threshold. Why? If you primarily work with other businesses (B2B) that are already registered for VAT, they will prefer you to be in the system so they can deduct input VAT.

Maintaining VAT records requires precision and regularity. Returns are filed monthly, by the 10th of the month for the previous month. Lapses in this area are strictly penalised, so entrusting this work to a professional accountant is the best decision.