Dividend Tax – Everything You Need to Know in 2026
Dividend tax is one of the most important obligations for company owners and investors, especially during periods when regulations change or new tax rules are introduced. As 2026 brings greater attention to business transparency and the harmonization of tax systems in the region, many entrepreneurs and individuals want to understand when the tax obligation arises, what the rate is, and who it applies to. This guide provides a clear and comprehensive overview of how dividend tax works in Bosnia and Herzegovina, what counts as a taxable payout, and the key differences between residents and non-residents — without complicated legal language.
What is dividend tax? (basic definitions)
Dividend tax is a form of taxation applied to profits that company owners receive after the distribution of profits. It is a separate category of income that differs from salary, income from service contracts, or income from self-employment, because it does not arise from work, but from ownership participation in a company. Countries establish specific tax rates and rules for this type of income, and the method of calculation may vary depending on whether the dividend is paid to a resident, non-resident, or legal entity.
For company owners and investors, it is important to understand the difference between dividend income and other tax categories, as they are subject to different deadlines, rates, and possible tax benefits. A clear understanding of these rules enables accurate profit distribution planning and helps avoid double taxation, especially in international business operations.
For entrepreneurs considering an international business structure, more information about how an offshore company works can be found here.
What is dividend tax? (basic definitions)
The obligation to pay dividend tax arises at the moment when the company adopts a decision on the distribution of profits and when the dividend becomes available to the owner. This may occur even before the actual payment of funds, as taxation applies to the right to receive income, not merely to the physical transfer of money.
Who is the taxpayer?
The taxpayer is the person receiving the dividend — either an individual or a legal entity. In some cases, the company paying the dividend calculates and pays the withholding tax on behalf of the recipient.
Multiple owners
When there are multiple shareholders, the tax is calculated proportionally to their ownership shares or according to the internal agreement on profit distribution.
What is considered a dividend payment?
A dividend is considered paid when it has been:
- transferred to the owner,
- recorded as their income,
- used to offset mutual claims between the parties.
Therefore, the tax obligation arises even when the dividend is “available” to the recipient, even without an actual transfer of funds.
Who pays dividend tax?
Dividend tax applies to different categories of taxpayers, regardless of whether the income is generated domestically or abroad. The main groups subject to taxation are outlined below.
1. Individuals
All individuals receiving dividends — either as company shareholders or owners of equity interests — are subject to dividend tax. The tax rate depends on the regulations of the country where the income is earned.
2. Legal entities
When a dividend is received by another company, it may also be subject to taxation. In certain jurisdictions, exemptions may apply (e.g., parent companies or specific holding structures), but the rules vary depending on the country.
3. Residents and non-residents
- Residents pay dividend tax regardless of where the profit was generated.
- Non-residents pay tax on dividends generated in the country where the payment is made, often through withholding tax.
4. Simple example
If a company distributes profits to owners who include:
- a person from Bosnia and Herzegovina,
- a person from the EU,
- a person from the EU,
— all recipients may be subject to dividend taxation according to the rules applicable to residents and non-residents, with the possibility of applying double taxation treaties.
What is the dividend tax rate in Bosnia and Herzegovina?
Unlike many countries in the region, Bosnia and Herzegovina does not tax dividend payments. This means that the dividend tax rate is 0%, regardless of whether the dividend is paid to residents or non-residents.
Due to this taxation model, Bosnia and Herzegovina represents an attractive jurisdiction for business owners seeking a simpler financial framework and a lower tax burden.
Unified rules in both entities and Brčko District
Regardless of where the company is registered:
- in the Federation of Bosnia and Herzegovina,
- in the Republika Srpska, or
- in the Brčko District
dividends are not taxed and there is no obligation to pay withholding tax.
This rule applies to both individuals and legal entities, including foreign investors.
Why is this important for business owners?
The taxation model in Bosnia and Herzegovina enables:
- more efficient profit distribution planning,
- avoidance of double taxation in practice,
- simpler financial management,
- a more favorable position compared to countries where dividend tax rates range from 10–20%.
For these reasons, many entrepreneurs considering international business structures explore the opportunities offered by Bosnia and Herzegovina in greater detail. For an overview of models supporting global business operations, see our guide on offshore companies.
| Country | Corporate Income Tax | Dividend Tax | Total |
|---|---|---|---|
| BiH (Brčko) | 10% | 0% | 10% |
| Serbia | 15% | 15% | 25% |
| Croatia | 10–18% | 12% | 22–30% |
| Montenegro | 9% | 9% | 18% |
| Cyprus | 12.5% | 17% | 29.5% |
| Luxembourg | 21.84% | 0% | 21.84% |
| Malta | 35% | 0% | 35% |
| Ireland | 12.5–25% | 10% | 22.5–35% |
How is the effective tax rate calculated?
The effective tax rate is not a simple sum of corporate income tax and dividend tax, because the dividend is taxed on the net profit (after corporate income tax has been paid).
General formula
Effective tax rate = CIT + (1 − CIT) × Dividend Tax
CIT = Corporate Income Tax (tax on profit)
Example
If the corporate income tax is 10% and the dividend tax is 10%, the total tax burden is not 20%, but 19%, because the second tax is calculated on the remaining 90%.
In numbers
Profit: €100,000
Corporate income tax (10%) → €10,000
Remaining amount → €90,000
Dividend tax (10%) → €9,000
Total taxes paid: €19,000
Effective tax rate: 19%
How is dividend tax calculated? (calculation examples)
Although dividend tax is not paid in Bosnia and Herzegovina (the rate is 0%), it is important to understand how the calculation process works and what is formally recorded. The calculation is simple: the amount of dividend paid is also the total amount received by the owner, with no additional tax obligations.
Description of the calculation process
- The company adopts a decision on profit distribution.
- The amount to be paid to each owner is determined.
- Since there is no withholding tax, the paid amount = the final dividend amount.
- The company records the payment in its financial documentation.
There is no tax rate calculation, tax return filing, or additional charges related to dividends.
Practical example 1: Dividend payment of 10,000 KM
The company decides to pay the owner a dividend of 10,000 KM.
- Dividend tax: 0%
- Payment amount: 10,000 KM
- Final amount received by the owner: 10,000 KM
Dividend tax is only one form of income taxation, but by its nature it differs significantly from other tax categories in Bosnia and Herzegovina.
Corporate Income Tax (Company Profit Tax)
Corporate income tax is paid by the company itself on the profit generated before dividend distribution. The key difference:
- corporate income tax is an obligation of the company,
- dividend tax applies to the owner who receives a share of the profit.
In Bosnia and Herzegovina, particularly in the Brčko District, the corporate income tax rate is clearly prescribed, while the dividend tax rate is 0%, making this type of income more favorable compared to other forms of payment.
Capital Income Tax
Capital income includes:
- sale of ownership shares,
- interest,
- income from property rentals,
- gains from financial assets.
These types of income are subject to specific rules and often different tax rates, depending on the entity in Bosnia and Herzegovina. The difference compared to dividends:
- a dividend refers exclusively to the distributed profit of a company,
- while capital income relates to the value of assets or investments that change over time.
Salary Tax (Employee Income Tax)
This tax applies to income earned by employees through employment — salary, benefits, and other types of personal income. The main differences compared to dividend tax:
- salary tax is a regular monthly expense,
- employment income includes strictly defined contributions (pension, health insurance, social security),
- a dividend is a distribution of profit to owners, is not treated as employment income, and does not include social contributions.
Self-Employment Income Tax
This category includes all types of income earned by entrepreneurs, freelancers, and other individuals who work independently. Unlike dividends:
- business income is taxed based on the achieved business result,
- the taxpayer is a self-employed entrepreneur,
- earnings are treated as active income, while dividends are considered passive income.
In the company’s financial statements, the decision on profit distribution is recorded, but there is no reduction of the amount based on tax.
Practical Example 2: Dividend Payment to a Non-Resident Individual
The company owner lives and operates in another country (e.g., Serbia or Germany).
- Dividend Tax Rate in Bosnia and Herzegovina: 0%
- Payment Amount (Example): 15,000 BAM
- Final Amount Received by the Non-Resident: 15,000 BAM
Note: A non-resident may have tax obligations in their country of residence, depending on local regulations. From the perspective of Bosnia and Herzegovina, the payment is not subject to taxation.
When a Company Is Allowed to Pay Dividends
The existence of profit in the financial statements does not automatically mean that there is a right to distribute it. Before a decision on profit allocation is made, the conditions prescribed by company law must be fulfilled. A payment made without meeting these conditions may be challenged, and in certain cases, the owner may be required to return the amount received to the company.
Conditions That Must Be Met
Covered losses from previous years. If the company has carried forward losses from previous periods, current profit must first be used to cover those losses. Only the remaining amount may be distributed.
Allocated legal reserves. If the company is required to establish reserves, these amounts must also be allocated before determining the amount available for distribution.
Ability to settle obligations. The payment must not place the company in a position where it is unable to meet its due obligations. This condition is often overlooked in practice because attention is focused only on the balance sheet, rather than the company’s actual liquidity in the following months.
Approved financial statements. The decision on profit distribution must be based on approved financial statements, not on a working version or an accountant’s estimate.
Dividend Payment Before the Annual Financial Statements
Owners often want to withdraw funds during the year without waiting for the annual financial statements. This is possible only if the available profit is determined based on interim financial statements and if the same conditions as for regular profit distribution are fulfilled.
The risk is specific: if, at the end of the year, the actual profit turns out to be lower than the amount already paid, the difference is treated as an unjustified payment. The consequence is not only the obligation to return the funds — the tax treatment of the entire amount also changes, because it is no longer considered a profit distribution.
What Documentation Must Specifically Exist
For every dividend payment, the following must exist:
- a decision of the shareholders’ assembly or founder, including the date and amount allocated to each owner,
- approved financial statements referred to in the decision,
- a record of the decision in the company’s accounting books,
- proof of the completed payment.
A payment made without a written decision is not considered a profit distribution during an audit, but rather another type of income — with a different tax base and different tax obligations than what the owner expected.
The conditions for profit distribution differ between the Brčko District, the Federation of Bosnia and Herzegovina, and the Republika Srpska.
Where the company is registered also determines how simple the process will be — and this is a decision made at the beginning that affects every subsequent payment.
How Does Dividend Tax Differ Compared to Other Types of Taxation?
Dividend tax is only one form of income taxation, but by its nature it significantly differs from other tax categories in Bosnia and Herzegovina.
Corporate Income Tax (Company Profit Tax)
Corporate income tax is paid by the company itself on the profit generated before dividend distribution. The key difference:
- corporate income tax is an obligation of the company,
- dividend tax applies to the owner who receives a share of the profit.
In Bosnia and Herzegovina, particularly in the Brčko District, the corporate income tax rate is clearly prescribed, while the dividend tax rate is 0%, making this type of income more favorable compared to other forms of payment.
Capital Income Tax
Capital income includes:
- sale of ownership shares,
- interest,
- income from property rentals,
- gains from financial assets.
These types of income are subject to specific rules and often different tax rates, depending on the entity in Bosnia and Herzegovina. The difference compared to dividends:
- a dividend refers exclusively to the distributed profit of a company,
- while capital income relates to the value of assets or investments that change over time.
Salary Tax (Employee Income Tax)
This tax applies to income earned by employees through employment — salary, benefits, and other types of personal income. The main differences compared to dividend tax:
- salary tax is a regular monthly expense,
- employment income includes strictly defined contributions (pension, health insurance, social security),
- a dividend is a distribution of profit to owners, is not treated as employment income, and does not include contributions.
Self-Employment Income Tax
This category includes all types of income earned by entrepreneurs, freelancers, and other individuals who work independently. Unlike dividends:
- business income is taxed based on the achieved business result,
- the taxpayer is a self-employed entrepreneur,
- earnings are treated as active income, while dividends are considered passive income.
Dividend Tax and Company Ownership Structure (What Owners Need to Know)
Although the dividend tax rate in Bosnia and Herzegovina is 0%, the method of profit distribution and the obligations of owners depend on the company structure and the relationships between founders. Understanding these elements is important to ensure that dividend payments are properly recorded and carried out in accordance with applicable regulations.
Obligations of Majority and Minority Owners
Regardless of whether someone owns a majority or minority share, the tax treatment of dividends is the same — dividends are taxed according to the applicable tax rate of the jurisdiction where the company is registered. However, differences may arise in:
- the right to participate in profit distribution,
- decisions regarding dividend payments,
- voting methods at the company assembly,
- the order of payments when there are multiple owners.
It is important to emphasize that profit distribution must always comply with the company’s founding act and the official ownership records.
How Profit Distribution Among Owners Works
Frequently asked questions
Regardless of whether someone owns a majority or minority share, the tax treatment of dividends is the same — dividends are taxed according to the applicable tax rate of the jurisdiction where the company is registered. However, differences may arise in:
- the right to participate in profit distribution,
- decisions regarding dividend payments,
- voting methods at the company assembly,
- the order of payments when there are multiple owners.
It is important to emphasize that profit distribution must always comply with the company’s founding act and the official ownership records.
Is a Dividend the Same as Profit Distribution?
In practice, the terms are often used as synonyms. Legally speaking, a dividend is a form of profit distribution to company members after a formal decision has been adopted.
How Is Reinvested Profit Taxed?
Reinvested profit is not subject to additional taxation at the moment of reinvestment. The tax obligation arises only when the profit is distributed to the owners.
Does a Non-Resident Pay Dividend Tax in Bosnia and Herzegovina?
Federation of Bosnia and Herzegovina (FBiH): Dividends paid to a non-resident are subject to a withholding tax of 5%.
Brčko District: No withholding tax is paid on dividends (effectively 0%).
Republika Srpska: Dividends and profit shares are subject to a 10% withholding tax, unless a double taxation avoidance agreement provides for a lower rate.
When Does the Tax Obligation Arise If a Dividend Is Not Paid Immediately?
The tax obligation arises at the moment the decision on profit distribution is adopted. It is not decisive whether the dividend has actually been paid at that same moment.
Can a Dividend Be Paid in Something Other Than Money?
It can — through the transfer of equipment, real estate, or the forgiveness of receivables owed by the owner. In such cases, the taxable base is determined according to the market value of the transferred asset, not its book value.
Does the Tax Rate Change in 2026?
For now, there are no confirmed changes to the tax rates for 2026.