Bosnia and Herzegovina: Tax Treaty between Bosnia & Herzegovina and Azerbaijan
A tax treaty between Bosnia & Herzegovina (B&H) and Azerbaijan for the avoidance of double taxation and the prevention of fiscal evasion (DTT) related to income and capital taxes was concluded on October 18 2012. Following ratifications from both parties, the DTT entered into force on December 26 2013 and became aplicable as of January 1 2014. The treaty is generally based on the OECD Model Convention.
In B&H, the treaty covers the tax on income of physical persons, the tax on profit of legal entities and the tax on property.
On the other hand, in Azerbaijan the treaty applies to the tax on income of individuals, tax on profit of enterprises, the tax on property and the land tax.
Dividends (such as income from shares, founders' shares or other rights excluding debt-claims, participation in profits) arising in one state and paid to a resident of the other state, may be taxed in that other state and vice versa. The treaty defines that the tax levied on dividends shall not exceed 10% of the gross amount of the dividends, in case if the beneficial owner of the dividends is a resident of the other contracting state.
In regards to interests, the treaty generally stipulates a tax rate of 10%. Interest arising in one state shall be exempt from tax in that state if the payer of the interest is the government of that state or a political or administrative-territorial subdivision or a local authority or Central Bank, or if the interest is paid to the government of the other state (including political, administrative or territorial subdivisions, local authorities or Central Bank) or if the recipient of the interest is a financial institution fully owned by the other state.
The royalty withholding tax rate has been set at 10%. Again, as in the case of interest, an exemption applies if the royalties are derived by the state, government, or a payer resident of that state.
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