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New Ministry Standpoint in regard to application of the tax incentive based on newly recruited employees
Tax News, July 2018
One of tax incentives introduced by the new Corporate Income Tax Act (“Official Gazette of FBiH”, no: 15/16) is related to recruitment of new employees.
Namely, a taxpayer is entitled to a tax-deductible expense in the double amount of gross salary, paid to newly recruited employees, if both of the following conditions are met:
- the duration of the employment contract is at least the period of 12 months full-time and
- newly recruited employee has not been employed by the taxpayer or a related party in the previous five years.
Considering the doubts that emerged in practice in regard to application of the aforementioned incentive, the Federal Ministry of Finance (the “FMF”) has several times issued official opinions/standpoints.
Within the recently issued Standpoint, no. 05-14-2-3665/15-1 as of 16 June 2018, the FMF has explained that a taxpayer which is FBiH resident and which has business units (branch offices) in Republika Srpska and/or Brčko District, is also entitled to a right to use tax incentive based on newly recruited employees in those business units (if all prescribed conditions are met).
Permanent residence address of newly recruited employees in those business units is not relevant for application of the tax incentive, i.e. it also applies to employees with permanent residence address in Republika Srpska and/or Brčko District.
The Standpoint can be found on the following web address: http://www.pufbih.ba/v1/public/upload/zakoni/b7378-poticaj-novouposleni-05-14-2-3665.pdf