Law on Contributions and Income Tax Imposes New Burdens on the Real Sector

For the month of October, some workers' earnings were reduced by slightly more than 100 KM due to the application of the Rulebook on Income Tax, which taxes meal allowances exceeding 8 KM. On the other hand, some employers with fewer employees have benefited their workers by reducing the meal allowance and increasing the salary amount.

Adnan Smailbegović, president of the Employers' Association of FBiH, told Patria that employers are trying to bear the burden for a month or two, hoping that the new law on contributions, which starts from the New Year, will bring some relief.

Smailbegović explains that taxes are currently calculated at 41.5% of the gross base, while the government plans for 33% with the new law.

- But in parallel, they are expanding the base by taxing the entire severance pay and transportation allowance. According to this Rulebook, the government has lowered the non-taxable amount from 8 KM to 0 KM. Now everything will be taxable, but the rate will be lower – says Smailbegović.

He explains that it will be more favorable for some employers, but less favorable for others.

- Employers who paid salaries close to the minimum and meal allowances close to the maximum had a real rate of 40% when weighted, not 70%. And now they are offering it at 52%. All those who had a non-taxable portion of benefits (total employee income) over 25% will have to pay more. All those who had higher salaries and lower meal allowances will find it more favorable – says Smailbegović.

Smailbegović explained how this looks in practice when it comes to the real sector.

- I think this will be an additional blow to the real sector. You have 150,000 workers with salaries up to 500 KM, which is every third employee. They don't receive 500 KM, but an additional 300 to 400 KM for meal allowance and severance pay, and these workers, or rather their employers, will be disadvantaged.

In any case, he pointed out that the positive aspect is that we have a law, as the dynamics have been respected, and the quality will be seen.

An extraordinary session of the Economic and Social Council for the territory of the Federation of Bosnia and Herzegovina will be held on Tuesday, November 8, with the Draft Law on Income Tax and the Draft Law on Contributions on the agenda.