VAT refund for the first purchased property on hold: Indirect Taxation Authority Management Board has not adopted the Rulebook for nine months

(Patria) - The Management Board of the Indirect Taxation Authority of BiH has not adopted the Rulebook on Amendments and Additions to the Rulebook on the Application of VAT Law in BiH for nine months, after amendments to the VAT Law regarding VAT refund on the first purchased property were adopted in April 2025.

The Rulebook was supposed to define all procedures to prevent any abuses. Although the ITA Management Board has drafted the Rulebook, it has not yet been adopted, and therefore the law has not entered into force. Interested citizens call the Indirect Taxation Authority daily, but everything is in the hands of the ITA Management Board. The Management Board consists of three finance ministers (state and two entity ministers, and three experts appointed by the Council of Ministers of BiH and entity governments).

The ITA Management Board has had multi-month breaks in its sessions in the past period, and after the session on December 10, where there was no agreement on opening a new border crossing Gradiška, no more sessions have been held. The Management Board cannot reach an agreement even on the coefficients for the distribution of VAT revenue. Expert from FBiH Zijad Krnjić believes that the Federation of BiH is damaged and that money belonging to this entity ends up in the coffers of the RS entity. Due to political turmoil, the Rulebook on VAT refund for the first purchased property is now also on hold. Given that property prices have significantly increased in the last few years, the VAT refund was supposed to be a relief for those who decide to buy a new property.

The Draft Rulebook stipulates that the buyer can exercise the right to a VAT refund for 40 square meters and an additional 15 m2 per household member. The definition of household members was made to specify who are the persons for whom the additional 15 square meters can be used, not to deny the buyer the right to a VAT refund. If it is determined, for example, that a "brother" as a household member owns an apartment (property), and the "sister" is the buyer of a new apartment (and she does not own property or has not owned it in the last 7 years), she will be able to exercise the right to a VAT refund, but will not be able to use the right to a refund for an additional 15 square meters for the "brother" as a household member, because he already owns an apartment.

According to the adopted amendments to the VAT Law, the right to a refund belongs to an adult natural person who is a citizen of Bosnia and Herzegovina with permanent residence in Bosnia and Herzegovina, who is the buyer of the first residential property.

A residential property is considered a newly built individual residential building and/or an economically divisible unit within a newly built collective residential building in the territory of Bosnia and Herzegovina intended for housing, for which special confirmations from competent authorities will be required.

In case of action contrary to the provisions of this law, the ITA will subsequently calculate and collect VAT. There are also penalty provisions, and a fine ranging from 5,000 KM to 10,000 KM can be imposed on a natural person from whom VAT is subsequently collected."

Given that the Law does not define a deadline for the adoption of subordinate acts, the ITA BiH Management Board has not adopted the necessary acts for months, due to which the law has not entered into force.

However, all buyers who purchased an apartment from the date the Law entered into force (April 2025) until today have the right to a refund regardless of when the Management Board adopts the Rulebook and the law enters into force, provided they meet the prescribed conditions and submit the required documentation.