Government adopts new laws on contributions and income tax

SARAJevo, (Patria) - Federal Minister of Finance Jelka Milićević emphasized after today's session of the FBiH Government that the new laws on contributions and income tax, which the FBiH Government adopted in the form of proposals at today's session in Sarajevo and sent to the parliamentary procedure, affect every citizen.

- These are laws that regulate the rules of contributions for employers, the rights of employees and beneficiaries of these rights from extra-budgetary funds, and in a way, they are laws defined through the Reform Agenda - said Milićević.

The importance of adopting this law is reflected in the fact that this area will be comprehensively regulated and that significant discrepancies in terms of rates, bases, and contribution obligations will be avoided.

The proposed solutions abolish employer contributions, and the aggregate contribution rate is reduced from the current 41.5 to 33.5 percent. At the same time, the base for calculating contributions has been expanded, and in addition to salaries, it will also be calculated on meal allowances and holiday pay.

- So, the main principle was to expand the base for calculating taxes and contributions and to reduce this rate in a way. Until now, we had contributions for salaries and allowances of 41.5 percent, but its specificity, besides the amount, was also the problem because there were complications, i.e., a specific calculation method. In the new law, in addition to wanting to relieve the cost of labor, we also wanted to simplify the calculation of contributions. In this Bill, it is 33.5 percent and consists of pension contributions of 18.5 percent of gross salary, 13.5 percent for health, and 1.5 percent for unemployment - said Milićević.

Milićević added that the laws are also important for employees, because until now there was a large share of non-taxable income, so workers often had small bases for paying contributions, and thus small pensions when they retired.
She pointed out that at the moment, all income received from employment or outside of employment is taxed and affects, or rather, is included in the base for calculating pension contributions.

- Especially specific are the compensations that were previously for author's works - income from independent work. Namely, they were paid, but there were no rights from these compensations, i.e., taxes and contributions. In this case, these incomes, i.e., the contributions paid, are included in the base for future pensions and the like - emphasized Milićević.

The laws recognize income from six sources - income from dependent work, which is the work of employees for an employer. The second is income from independent work, which includes work contracts, work in commissions, representative bodies, occasional jobs for employers under certain conditions.

Also, there is income from property and property rights, which includes rentals or realization of rights from the sale of real estate.

- Income from financial investments for the first time and dividend payments are taxed. In addition, we have a part from interest, where only time deposits are taxed at a rate of 10 percent, and other income which is income for special athletes, artists, and people in sports and culture - said Milićević.

Compared to the current Law, the proposed Law on Income Tax taxes all winnings from gambling, which means there will no longer be a non-taxable part.

- In this way, since we did not succeed with amendments to the Law on Gambling, we will reintroduce the taxation of all gambling winnings through income tax - stated the federal minister.

Given that until now there was a single rate of 10 percent, the new Law on Income Tax introduces three rates - one is zero for salaries up to 700 KM, a rate of 10 percent for incomes up to 1,500 KM, and 20 percent for incomes over 1,500 KM.

The intention of this tax burden is to differentiate between those with lower incomes and those with higher incomes.

Assistant Federal Minister of Finance Mira Bradara explained that the adoption of the new laws was guided by the principle of maintaining a neutral impact on the revenues of extra-budgetary funds.

- The second principle was to expand the base and reduce contribution rates, and not only were the rates reduced by about eight index points (from 41.5 to 33.5 percent), but it is very important that the base and rates are harmonized throughout almost the entire country. This is a significant step forward - confirmed Bradara.

Assistant Federal Minister of Finance Hajrudin Hadžimehanović told citizens that the Law on Contributions abolishes the aggregate contribution rate on salaries of 10.5 percent (the para-fiscal part that burdened the employer).