On February 26, 2020, in the “Official Gazette of FBiH”, no. 15/20, the Law on Amendments to the Law on Profit Tax was published. Amendments to the current FBiH Profit Tax Law:
- Article 16, paragraphs (1) and (2) are amended to read as follows: “(1) Financial institutions are recognized expenses based on value adjustments of receivables of balance sheet assets and provisions to cover expected credit losses for off-balance sheet assets that are recorded in the balance sheet. (2) Expenses based on value adjustments of receivables of balance sheet assets with a low level of credit risk (level of credit risk 1 and 2) the expense is not a tax deductible. Income from deductions is excluded from the tax base. “
- Article 18 of the current Law has been amended in such a way that now, except for banks and insurance companies and leasing companies, the application of the rules of thin capitalization is exempted. The reason for the change is that leasing companies are also under the supervision of the FBiH Banking Agency, which controls capital adequacy.
- Article 19 has been amended in such a way that the definition of assets from paragraph (1) of the previous Law has been extended to assets with the right of use, all with the aim of harmonizing the Law with the new financial reporting standard “IFRS 16 – Leases”. Assets with the right of use are depreciated with the lessee from the first day of the lease term until the expiration of the lease term and represent a taxable expense.
- Article 49 was amended by deleting paragraph (3), which abolished the obligation of legal entities to submit the income statement to the Tax Administration of the FBiH in addition to the tax balance.
These amendments to the Law on Profit Tax will enter into force on February 27, 2020.