“Things on the state level have been rather stagnant because the government on the state level has not been formed yet, but much buzz was created around the Federation of B&H Government’s proposed new Law on Contributions and new Income Tax Law,” says Mirna Milanovic-Lalic, Partner at the Mirna Milanovic-Lalic i Jasmina Suljovic Law Firm in Sarajevo.
The proposed Income Tax Law increases the income tax from 10% to 13% and introduces a new tax on dividends, which MIlanovic-Lalic says is “causing an uproar” in the business community.
The IT Industry has been vocal about its opposition to the proposed legislation, as “it is a fast-growing industry, with IT companies employing a number of people with well above the average salaries, who will be affected by the new law,” she explains. Milanovic-Lalic says that the government will see how the new law actually affects IT companies before considering making additional changes. “I am sure the government will engage to see if they can in any way accommodate specific requests from IT companies,” she says, “but it is unlikely that they will be given special treatment.”
According to Milanovic-Lalic, because the proposed Income Tax Law will tax parts of salaries that have not been taxed in the past, the opposition is insisting that a minimum salary is ensured, “so that employers do not use the new law to the disadvantage of employees.” Milanovic-Lalic herself does not believe the government would introduce a minimum wage, saying that it “would be unfavorable to the business community and would be seen as a constraint that burdens employers.”
When it comes to BiH’s proposed Law on Contributions, which includes social security insurance, she notes, the major difference from the current system will be a lowering of the cumulative percentage of contributions from 41.5% to 32.5%, which will be payable against the gross amount of the salary, including payments that were previously exempt.
Eventually, Milanovic-Lalic says, both laws will affect business in the country, with “some companies looking for alternative business models, alternative arrangements, or alternative destinations, and a more favorable environment.” She points out that doing business remains challenging, and unfortunately, she says, no market “can satisfy everybody.”