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4.1. Domestic PE of a Foreign Entity

A foreign entity may carry on its business activities, wholly or partially, through a registered place i.e. a PE in the territory of the Federation of Bosnia and Herzegovina (FBiH) or the Republic of Srpska (RS).

A PE in FBiH can conduct activities through a branch, management headquarters, business office, factory, workshop, location of natural resources extraction, and construction site for a period exceeding 6 months, provide consultancy / business services consecutively for a period of 3 months or more, or a representative conducting activities on behalf of a non-resident.

A PE in RS generally includes place of management, branch, office, factory, store, workshop, mine, an oil or gas well, quarry, or any other place of extraction of natural resources in the territory of RS, building site, installation, or assembly works, place of infrastructure used for research or extraction of natural resources or supervisory of the same, place of business where an individual or legal person concludes contracts in the name of the non-resident entity, place where a resident individual or legal person does business in the name of the non-resident entity by holding stock of goods or merchandise and carries out deliveries on a regular basis.

A PE in the Brčko District (BD) is considered to be construction works, installation and assembly works, infrastructure used for research or exploitation of natural resources, or supervisory of the same, or a place of business where an individual or legal person concludes contracts on behalf of a foreign legal entity.

In certain cases, a non-resident employer may be considered as having a PE in Bosnia and Herzegovina. A number of tax treaties, including those between Yugoslavia (as it applied to Bosnia and Herzegovina) and Sri Lanka or China, provide specifically for Service PEs, all of which require the physical presence of an employee or of personnel of the non-resident company in Bosnia and Herzegovina for a prescribed period (ranging between 6 and 9 months).

When a foreign entity is deemed to have PE in FBiH/RS/BD, income from its activities conducted through the PE in FBiH/RS/BD will be subject to tax in FBiH/RS/BD.