Bosnia And Herzegovina – Transfer Pricing (2025)

Legal framework and scope

Transfer pricing rules in Bosnia and Herzegovina are applied at the entity level across the Federation of Bosnia and Herzegovina (FBiH), the Republika Srpska (RS) and the Brčko District. In FBiH the arm’s length principle is incorporated in the Law on Corporate Income Tax (“Official Gazette of the Federation of BiH” No. 15/16 and 15/20) Article 44, paragraph (1), which states: “The taxpayer that takes part in a transaction with a related entity shall determine its taxable income in a manner consistent with the at arm’s length principle.” Practical application, methods and evidentiary procedures are set out in the Rulebook on Transfer Pricing (“Official Gazette of the Federation of BiH” No. 67/16). In the Republika Srpska the corresponding statutory provision is Corporate Income Tax Law (Official Gazette of the Republic of Srpska, 94/15, 1/17 and 58/19), Article 32, paragraph (1): “A taxpayer which has one or more transactions with related persons shall determine its taxable profit in a manner compliant with the arm’s length principle.” In the Brčko District, the obligation is enshrined in the Rulebook on Corporate Profit Tax Law (“Official Gazette of the Brcko District of Bosnia and Herzegovina” No. 9/2011, 40/2012 and 9/2013), Article 35, paragraph (2): “Taxpayer is obliged to show in his tax balance sheet related parties transaction value using transfer prices and prices to free competition market prices under the arm’s length principle.”

Arm’s length principle and the role of the OECD Guidelines

The OECD Transfer Pricing Guidelines are not legally binding in these jurisdictions, but they serve as technical guidance. The FBiH Rulebook provides specific application rules for methods, determination of transfer prices and burden of proof, drawing on OECD principles. The RS legislation and rulebook are explicitly based on OECD guidance and the RS authorities use the OECD TPG as guidance; RS is planning amendments to better incorporate BEPS Actions 8-10. In the Brčko District the local rulebook aligns conceptually with OECD methods, though the OCDE Guidelines are not directly incorporated.

Definition of related parties

Definitions are consistent on key elements although thresholds differ. In FBiH, Law on Corporate Income Tax Article 44, paragraph (3) applies the term “related entities” to two entities where one acts or is likely to act according to the directions, requests, proposals or wishes of the other, or both act according to a third entity; special inclusions are family relationships and legal entities where an individual directly or indirectly owns 25 percent or more of value, shares or voting rights. The FBiH Rulebook (Article 6) clarifies that related parties include natural persons related by family under Article 44 Paragraph (3) Point a), legal persons directly or indirectly controlling or being controlled by another, persons owning 25% or more of capital or voting rights and that participation in control means at least 25% ownership. In the RS, Corporate Income Tax Law Article 31 (2)-(5) defines related parties where direct or indirect participation in management, control or capital exists, with a presumption at 25% shareholding or when de facto control exists; family relationships are explicitly enumerated. The Brčko District uses lower percentage thresholds: Corporate Profit Tax Law Article 2 j) 1)-3) states that a physical person is related to a legal person if the physical person owns directly or indirectly 10% or more of the stock, and a legal person is related to another if it owns directly or indirectly 10% or more of stock or share capital, and ownership is attributed to spouses and close relatives.

Methods and application criteria

All jurisdictions provide for classic transactional methods (CUP, resale price, cost plus), as well as transactional net margin method (TNMM) and profit split, and permit other methods where appropriate. In FBiH, Law on Corporate Income Tax Article 45, paragraphs (2) and (3) requires selection of the most appropriate method among CUP, cost plus and resale price, and where these cannot be applied, allows profit split, TNMM or any other reasonably applicable method that yields an arm’s length result. The RS Rulebook (Article 8) adopts the “most appropriate method” approach based on criteria including advantages/disadvantages of methods, correlation with the facts (notably functional analysis), availability of reliable information and level of comparability; it also requires the tax administration to base its inspection on the method selected by the taxpayer if properly applied. The Brčko District Rulebook (Article 35, paragraph (4)) lists similar methods and indicates the comparative market price method as preferred when feasible.

Comparability and ranges

The analysis of comparability is prescribed in the FBiH Rulebook (Articles 29-45) and in the RS Rulebook (Article 12 etc.), which closely follow the concepts in Chapter III of the OECD Guidelines: functional analysis, account of assets and risks, and economic circumstances are required. FBiH Rulebook Article 42 paragraph (4) expresses a preference for local comparable data where possible and allows regional or foreign comparables if local data are insufficient. The Rulebook in FBiH and RS requires comparability adjustments when appropriate; the FBiH Rulebook (Article 45) explains that adjustments can be accounting or functional/risk adjustments and cautions against excessive, subjective or immaterial adjustments. The RS Rulebook (Article 11) specifically addresses an arm’s length range and statistical measures: it defines the range as the set of financial indicators from comparable transactions, considers a tested transaction arm’s length if its indicator lies within that range and prescribes that if the tested indicator is outside the range, the tax authority shall increase the tax base to the median of the range unless other circumstances justify a different point; the burden of proof for justifying another point lies with the party requesting it.

Documentation and reporting requirements

All three jurisdictions require transfer pricing documentation. In FBiH, Law on Corporate Income Tax Article 49, paragraph 4 together with the Rulebook on Transfer Pricing Articles 68-96 require both local documentation and, where applicable, a master file and country-by-country report. The master file is mandatory for taxpayers belonging to MNE groups with consolidated gross profit exceeding BAM 1.5 billion (approx. EUR 750 million). Local transfer pricing documentation must accompany the corporate tax return and, upon request, be submitted to the tax administration within 45 days; local documentation must include at least group structure and operations overview, taxpayer activity analysis, functional analysis, method selection and conclusion. Local documentation must be prepared and submitted in one of the official languages of Bosnia and Herzegovina; the master file may be in English but the administration may require translation. Form CBC-901 (CbCR) must be submitted with the corporate tax return by 31 March of the current year for the previous year if the resident generates consolidated gross revenue of at least BAM 1.5 billion; Form CBC-901 must be in an official language. Form TP-902 (summary of transactions) must accompany the corporate tax return where total transactions with related parties exceed BAM 500 000 (approx. EUR 254 033) in the tax period; it must be submitted by 31 March and in an official language. In RS, the Rulebook requires master file, local file and CbCR consistent with OECD Annexes I-III; the local file must exist at tax return time and be delivered within 30 days of a tax administration request. RS also requires an annual declaration of controlled transactions where transactions exceed the Minister’s threshold of BAM 700 000 (approx. EUR 350 000). Documentation in RS must be submitted in the local language. In Brčko District, mandatory reporting is performed through specific annexes and forms (Form 1102 must be submitted with the corporate tax return by 31 March and in an official language) and the Rulebook prescribes required annexes to report transactions with related parties.

Safe harbours, exemptions and materiality

There are no extensive safe harbours across these jurisdictions. The RS and Brčko District do not employ safe harbours. The Federation does provide a limited simplification for low value-adding intra-group support services: Rulebook on Transfer Pricing Article 54, paragraph (2) allows application of a 5% cost reimbursement fee under the arm’s length principle when specified conditions are met, including lists of qualifying support services and the condition that the provider does not offer such services to unrelated parties.

APAs, MAPs and dispute avoidance

There is no developed APA program in these jurisdictions. While the questionnaire responses indicate that Mutual Agreement Procedures (MAPs) are available conceptually, the narrative for FBiH, RS and Brčko District notes that “There are no MAPs procedures or guidance in place,” meaning that taxpayers should not expect a mature domestic administrative MAP process.

Penalties and other administrative considerations

Documentary non-compliance and failure to apply arm’s length conditions attract significant fines. In FBiH, Law on Corporate Income Tax Article 58 paragraphs 2e), h), j), k) prescribes fines on taxpayers from BAM 3 000 (approx. EUR 1 524) up to BAM 100 000 (approx. EUR 50 867) for failures including not submitting summaries of transactions exceeding BAM 500 000, not applying the arm’s length principle, lacking transfer pricing documentation or failing to submit documentation on request. In RS, Corporate Income Tax Law Article 58 paragraph (1) establishes fines from BAM 20 000 (approx. EUR 10 173) to BAM 60 000 (approx. EUR 30 500) for failure to have documentation and failure to deliver it within 30 days. Brčko District’s profile does not list specific penalties. Year‑end adjustments are permitted: taxpayers can adjust transfer prices in the tax return and file amended returns within specified timeframes (FBiH allows amended returns within 180 days after filing deadline; RS and Brčko District permit amendment within national procedural limits). Secondary adjustments are not defined explicitly in the law. Regarding attribution of profits to permanent establishments, FBiH and RS state they follow the Authorised OECD Approach (AOA), though practical treaty-related implementation experience is limited.

Conclusion

Bosnia and Herzegovina’s transfer pricing framework is substantive and growing towards closer alignment with OECD principles, but it remains fragmented across entities with different thresholds, language and procedural requirements. Taxpayers operating in the country should maintain comprehensive local documentation, adhere to specified thresholds for CbCR and specific filings, and be prepared for administrative requests with strict deadlines (45 days in FBiH, 30 days in RS). The limited availability of APAs, the absence of mature MAP procedures, and meaningful penalties make proactive compliance and robust comparability analyses essential. Planned harmonisation with BEPS Actions 8-10 suggests further convergence with international standards in the near term.

References

Country profile information extracted from the OECD Series. For the OECD transfer pricing country profiles page: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html