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Social Security Contributions Paid by the Employer and the Employee
Bosnia and Herzegovina is a republic but due to the complexity of its regional units, Bosnia and Herzegovina does not function as a republic. It is composed of two entities and a district, i.e. the Federation of Bosnia and Herzegovina (51% of the territory), the Republic of Srpska (49% of the territory) and the Brcko District (which was the subject of disputes and international arbitration and then finally recognized as a district).
There is an obligation to pay social security contributions with each payment of income (wage). The wage represents a basis for the payment of social security contributions. The general definition of a social security contribution payer is that it is a natural person (individual), resident of Bosnia and Herzegovina who, in terms of regulations governing the area of the pension and disability insurance, health insurance and unemployment insurance, is obliged to be insured under certain circumstances or voluntarily insured.
The wages are determined in gross and net amount. The gross amount of a wage includes a net wage, income tax and contributions (contributions for health insurance, pension and disability insurance and for unemployment insurance).
A net wage includes the basic wage (earnings of employees reduced by tax and contributions) and benefits (meal allowance – a certain amount added to net earnings for each day spent at work, annual allowance – the twelfth part of the total annual earned sum which the employee will get when going for the annual leave and plus an addition for previous years of work – for each year of work the employee receives a percentage increase on the earnings).
The social security contribution payer is obliged to report its contribution obligation to the Tax Authority for each month and the same has to be filled-in on the monthly withholding tax application form set in accordance with the Income Tax Regulations.
Contribution payment is made in accordance with the place of the payee’s seat, i.e. the employer’s headquarters.
Share in contributions paid by employees:
- In the Federation of Bosnia and Herzegovina: 17% for the pension and disability insurance, 12.5% for health insurance and 1.5% for unemployment insurance (in total: 31% on gross wage).
- In the Republic of Srpska: 18.5% for the pension and disability insurance, 12% for health insurance, 0.8% for unemployment insurance and 1.7% for child protection (in total: 33% on gross wage).
- In the BrckoDistrict: 17% for the pension and disability insurance for employers applied in accordance with the Federation of Bosnia and Herzegovina Act and 18% for pension and disability insurance for employers applied in accordance with the Republic of Srpska Act, 12% for health insurance and 1.5% for unemployment insurance (in total: 30.5% or 31.5% on gross wage).
Share in contributions paid by employers:
- In the Federation of Bosnia and Herzegovina: 6% for the pension and disability insurance, 4% for health insurance and 0,50% for unemployment insurance (10,50% on gross wage).
- In the Republic of Srpska: no such contributions are paid.
- In the BrckoDistrict: 6% for the pension and disability insurance for employers who apply the Federation of Bosnia and Herzegovina Act.
The lowest wage in Bosnia and Herzegovina represents the lowest amount payable to the employee by the employer for full time work and standard performance and the same amounts 410,00 BAM per month, while the average wage is 800.00 BAM per month.
There is ongoing process of the harmonisation of the state legislation with the laws, regulations and directives of the European Union. The Law on Personal Income and Social Security Contributions introduces the principle of world income through categories of unlimited (resident) and limited (non-resident) taxpayers and thus fully harmonises the law with the regulations applicable in the countries of the European Union.
Natasa Krejic is a Partner, employed by the Law Firm SAJIC since 2003. Natasa graduated from the University of Banja Luka School of Law in 2004.
In addition to company law and M&A, Natasa's area of expertise is tax and customs law, as well as competition and foreign investments and in these areas of law she advises both local and foreign clients.
Natasa is a member of the European Association of Attorneys (AEA) and Union Internationale des Avocats (UIA), IBA.