DTT with Azerbaijan comes into effect

UniCredit Bank d.d.
Summary: 
The Double Tax Treaty between Bosnia and Herzegovina and Azerbaijan entered into force on 1 January 2014
Mon, 03/02/2014

The Double Tax Treaty (DTT) between Bosnia and Herzegovina and Azerbaijan, signed on 18 October 2012 and ratified on 29 August 2013, became effective as of 1 January 2014. The agreement is applicable to the income, profit and assets of private individuals and legal entities.

According to the DTT, dividend and interest income can be subject to withholding tax in the country of residence of either the issuer or the beneficial owner. If the withholding tax is applied in the country of residence of the beneficial owner, the tax rate that can be applied to both dividend and interest income cannot be higher than 10%, regardless of the ownership share.

Please take note that:

  • in the Federation of Bosnia and Herzegovina, dividend income received by non-resident legal entities is subject to withholding tax at the rate of 5%, while dividend income of private individuals is not taxable

  • in Republic of Srpska, dividend income received by non-resident private individuals are subject to withholding tax at the rate of 10%, while dividend income of legal entities are is taxable

  • interest income is not subject to withholding tax in Bosnia and Herzegovina

The updated list of countries with DTTs with Bosnia and Herzegovina is available in the Documents part within the market's section on the UniCredit GSS website (http://gss.unicreditgroup.eu/markets/bosnia_and_herzegovina).

Impact on investors: A new DTT with Azerbaijan has become applicable to income earned as of 1 January 2014.