Salaries in Bosnia and Herzegovina to be paid in gross amounts

New salary payment form is being introduced in the Federation of Bosnia and Herzegovina (FBiH) with the new bill to take effect on January 1, 2009. The bill known as Law on Personal Income Tax (New PIT law) was adopted in April 2008. It was developed to make some amendments to the existing wage calculation methods.

Previously most employers in the FBiH used a net system for salary payment and only few of them practiced a gross system. The net system implies salaries are expressed in net amounts which means that employers calculate, withhold and pay relevant taxes and contributions on the basis of the net amounts and pay the net salary to the employees.

Under the new PIT law all income from dependent activity (all employment-related payments) will be treated as a gross wage paid to the employee. All employers in the country should calculate and show salaries in the tax records and all other reports in the gross amount before the bill comes into effect on January 1, 2009 otherwise they will have to recalculate taxes and contributions for the salaries of all employees in terms of gross amounts determined on the basis of a statutory formula for the conversion of net salary amounts into gross amounts.