On June 27 2017, the Prime Minister of Bosnia and Herzegovina adopted a decision ratifying the income tax treaty between Bosnia and Herzegovina and Romania, which was signed on December 6 2016. When it becomes effective (pending Romania's ratification), the treaty will replace the former Yugoslavia–Romania income and capital tax treaty of 1986.
The new treaty provides for the following withholding tax reliefs:
- Dividends may be taxed up to 5% of the gross amount paid in cases of participations exceeding 25% in the distributing entity, or at a 10% rate in all other cases;
- The interest withholding tax rate is limited to 7% (previously 7.5%) of the interest income. Full relief may be available in cases of a government authority beneficiary; and
- The new treaty defines a 5% withholding tax on royalties (previously 10%).
The updated treaty is expected to enable faster and easier flow of capital, goods, services and knowledge, and to improve both tax compliance and trade exchange between the countries, which amounted to €150 million ($178 million) in 2016.
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