VAT for small farms and guesthouses in BiH: the 100,000 KM threshold and 5% flat-rate compensation

This article explains when a small farm or rural guesthouse in BiH must enter the VAT (value added tax, PDV) system, what counts toward the threshold, and how the farmers' flat-rate compensation works. VAT is a state-level tax collected by the Uprava za indirektno oporezivanje BiH (UIO, Indirect Taxation Authority), not by the entity tax administration.

In short

• The standard VAT rate is 17%.
• You must register when taxable turnover in the previous year exceeds, or is likely to exceed, 100,000 KM (the threshold was raised from 50,000 KM by an amendment, Službeni glasnik BiH 80/23).
• A farmer who pays income tax on cadastral income as head of a household is not a VAT payer if the total cadastral income of all household members is below 15,000 KM.
• Such a farmer can obtain a 5% flat-rate compensation that a VAT-registered buyer adds to purchases. UIO must approve the right first.
• The compensation covers only agricultural and forestry products and services, not accommodation or catering services.
• Businesses below the threshold may register voluntarily, but then stay in the system for at least 60 months.

Who it applies to

• Farms, processors, restaurants and rural guesthouses that supply goods or services for payment.
• Tourist accommodation is taxable turnover. A guesthouse that crosses the threshold must charge VAT on lodging and services.
• Turnover of related firms and entities under common control is taken into account when testing the threshold.
• Article 57 counts taxable turnover plus turnover exempt with a right to deduct (for example exports). Residential lettings longer than 60 days and leasing of agricultural land are exempt from VAT. For mixed activities (farm plus guesthouse) check the calculation with UIO or your accountant, because Article 44 speaks of "total turnover".

What to do

1. Track turnover over the calendar year. If you are close to 100,000 KM, plan registration ahead.
2. If you pass the threshold or are likely to, submit the registration request to UIO no later than the 20th of the month following the month in which turnover passed it. If you are starting taxable business, submit at least eight days before you begin.
3. UIO issues the registration decision within 15 days of receiving the request. Use form ZR 1. Attach: the court registration decision (or the permit from the competent authority to run the business, if you are an entrepreneur), ID cards of owners and responsible persons, the bank's signature deposit card (karton deponovanih potpisa) for all transaction accounts, the notice of the main account, and the tax registration certificate (if the PIB/JIB is not in the decision). Submit to the competent UIO regional centre. Fees: 10 KM for the request, 10 KM for the decision and 20 KM for the registration certificate. Check the full list on the UIO page.
4. After registration: issue invoices with VAT, keep books as the law requires, and file and pay the monthly return between the 1st and the 10th of the following month.
5. Flat-rate compensation: a farmer who is not a VAT payer applies to the competent UIO regional centre (Tax Department, Support Group). Needed: proof from the competent authority of income from agriculture, an ID copy, a supply contract or proof of sale to a VAT payer, and proof of the land. Fees: 10 KM for the request and 10 KM for the decision. Report any change of data affecting your status to UIO within 8 days at the latest.
6. The buyer (a VAT payer) pays the 5% on the net value of purchased products only to a producer holding a UIO decision, and issues a payment confirmation. A producer without a decision does not receive it.

Deadlines and amounts

• Registration threshold: 100,000 KM of taxable turnover. The amendment in Službeni glasnik BiH 80/23 was published on 24 November 2023 and entered into force on the eighth day after publication, that is on 2 December 2023. Since then Article 57 paragraph 1 sets 100,000 KM instead of the earlier 50,000 KM.
• Household cadastral income limit for farmers: 15,000 KM. UIO may register farmers above it ex officio.
• Flat-rate compensation: 5% of net value under the Rulebook; UIO may set the percentage each year, so confirm it with UIO before selling.
• Below the threshold: a small business may not show VAT on invoices and cannot deduct input VAT.

Where to go

• Uprava za indirektno oporezivanje BiH, farmers and flat-rate compensation: regional centres (Banja Luka, Mostar, Sarajevo, Tuzla) and phone numbers. Check which centre covers your municipality.
• UIO, registration of taxpayers

Laws and sources

• Law on Value Added Tax, unofficial consolidated text (Službeni glasnik BiH 9/05, 35/05, 100/08, 33/17, 46/23, 80/23 and 20/25), Articles 44, 45 and 57
• Law amending the Law on Value Added Tax (Službeni glasnik BiH 80/23), the 100,000 KM threshold
• Rulebook on the Implementation of the Law on Value Added Tax (Pravilnik o primjeni Zakona o porezu na dodatu vrijednost, Službeni glasnik BiH 93/05, 21/06, 60/06, 6/07, 100/07, 35/08, 65/10, 85/17, 44/20, 47/22, 87/22, 62/23, 25/25 and 45/26), Article 83. UIO publishes the base text and all amendments on its regulations page.
• Law on Administrative Fees and Tariff of Administrative Fees, Chapter VII (Službeni glasnik BiH 8/06, 98/12 and 14/25), UIO fee overview

Note: the consolidated text is unofficial and cannot be relied on for official purposes. For your own case, ask UIO or a licensed accountant.