KS Government Adopts Amendments to Tax Law: Significant Relief for Young First-Time Homebuyers

(Patria) - The Government of Sarajevo Canton has adopted the Bill on Amendments and Supplements to the Law on Real Estate Transfer Tax and Inheritance and Gift Tax and sent it to the KS Assembly for consideration.

The proposer of the Law, the Minister of Finance of KS Afan Kalamujić, states that the most important amendments relate to the introduction of significant tax relief for young people who are solving their housing issue for the first time, as well as to the more precise definition of tax obligations and exemptions.

The key novelty is the introduction of relief for real estate buyers who are solving their housing issue for the first time. A buyer who meets the conditions of being a citizen of Bosnia and Herzegovina, an adult under 38 years of age, and who is solving their housing issue for the first time (has not owned an apartment or house larger than 20 m2 as owner/co-owner), is exempt from paying real estate transfer tax, specifically:

• up to KM 10,000 of the total calculated tax, if they have had registered residence in KS for at least two consecutive years; and
• up to KM 15,000 of the total calculated tax, if they have had registered residence in KS for at least five consecutive years.

This measure aims to provide direct support to young people in Sarajevo Canton and encourage demographic renewal.

Regarding the expansion of exemptions from real estate transfer tax, the amendments expand and clarify the cases in which real estate transfer tax is not paid (Articles 14 and 15 of the Law), including:
• Acquisition of a yard up to 200 m2 around a house;
• Cases of division of marital and non-marital property, partition of co-ownership, and establishment of condominium ownership;
• Purchase of replacement property by the former owner of expropriated property;
• Exemption for veterans and war invalids who are solving their housing issue for the first time by purchasing an apartment/house with a yard up to 200 m2 or land up to 300 m2 for building a house;
• Real estate transfer in case of termination of a craft or independent professional activity.

The Bill also introduces changes in the taxation of inheritance and gifts.

Inheritance and gift tax is also paid on movable property, including cash, motor vehicles, monetary claims, company shares, and securities, but the tax is only paid on movable property whose individual value exceeds KM 5,000.

The taxpayer is any natural or legal person who inherits or receives such real estate or movable property as a gift.

Exemptions from gift tax are granted, among others, to children and grandchildren of the donor whose parent has died, the donor's spouse/partner and parents, humanitarian organizations, religious communities, endowments, and waqfs.

Penalties are foreseen for payment transaction organizations that make payments of inherited monetary claims without proof of paid tax.

These amendments to the Law, if adopted by the KS Assembly, will come into force with the aim of simplifying tax administration and providing significant support to the citizens of Sarajevo Canton.