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6.5. Deduction of Cross-Border Payments and Non-Deductible Expenses

Generally, all business expenses incurred in the ordinary course of business are allowed as a deduction, unless specifically disallowed. Payments made to foreign affiliates are generally allowed, if they relate to realized revenue.

The following general expense types are not deductible or have limited deductibility for tax purposes in FBiH/ RS/ BD:

  • Amortization of goodwill
  • Fines and penalties
  • Corporate income tax
  • Interest on a related party loan , if certain conditions are not fulfilled (See sec. 13.2)
  • Start-up expenses without adequate supporting documents relating to registration etc.

Specific expenses with limited deductibility in FBiH:

  • Expenses incurred in excess of 3% of total income for humanitarian, cultural, educational, scientific, and sports purposes (except professional sports)
  • Expenses incurred in excess of 30% of representation costs in relation to business activity
  • Membership fees paid to chambers in excess of 0.1% of total income (except fees regulated by law)
  • Sponsorship expenses paid in excess of 3% of total income
  • Bad debts written-off are deductible, if they are outstanding for more than 12 months and the recovery procedure has been initiated by the tax payer

Specific expenses with limited deductibility in RS:

  • 70% of the expenses incurred on  entertainment, meals, and amusements
  • Sponsorship expenses paid in excess of 2% of total revenue
  • Costs of reclamation of goods and services in excess of 3% of the business revenue

Specific expenses with limited deductibility in BD:

  • 70% of the expenses incurred on entertainment, meals, and amusements are not deductible
  • Sponsorship expenses paid in excess of 2% of total revenue
  • Costs of business trips, meal allowance, transportation and holiday allowance in excess of the prescribed amount.
  • Expenses of research and development in excess of the prescribed amount as per the Rulebook.
  • Awards to employees, exceeding prescribed amount.
  • Scholarships to students exceeding specified limit
  • Committee membership fees, exceeding 0.2% of total revenue in the tax year.