Dividend Tax – Everything You Need to Know in 2026

Q: Does a non-resident pay dividend tax in BiH?

Federation of BiH: Dividends paid to non-residents are subject to a 5% withholding tax.Brčko district: No withholding tax is applied on dividends (effectively 0%).Republika Srpska: Dividends and profit shares are subject to a 10% withholding tax, unless a double taxation avoidance agreement stipulates a lower rate.

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 focus on business transparency and the alignment of tax systems across 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 accessible overview of how dividend tax works in Bosnia and Herzegovina, what constitutes a taxable distribution, and the key differences for residents and non-residents — without complex legal language.

What Is Dividend Tax? (Basic Definitions)

How Is Dividend Tax Calculated? (Calculation Examples)

When Does the Dividend Tax Obligation Arise?

When Is It Possible to Reduce or Avoid Double Taxation?

What Constitutes a Dividend Payment?

How Does Dividend Tax Differ from Other Types of Taxation?

Who Pays Dividend Tax?

Dividend Tax and Company Ownership Structure (What Owners Need to Know)

What Is the Dividend Tax Rate in BiH?

What Is Dividend Tax? (Basic Definitions)

Dividend tax is a form of taxation on profits that company owners receive upon the distribution of earnings. It is a distinct income category, different from wages, income from service contracts, or self-employment income, because it does not arise from work but from ownership interest in a business. Countries prescribe specific rates and rules for this type of income, and the calculation method can vary depending on whether the dividend is paid to a resident, a non-resident, or a legal entity.

For company owners and investors, it is important to understand the difference between dividend income and other tax categories, as different deadlines, rates, and potential reliefs apply. A clear understanding of these rules enables precise profit distribution planning and avoidance of double taxation — particularly in international business.

For entrepreneurs considering an international business structure, more information on how an offshore company works can be found here.

When Does the Dividend Tax Obligation Arise?

The dividend tax obligation arises at the moment the company makes a decision to distribute profits and the dividend becomes available to the owner. This can occur even before the actual payment of funds, since it is the right to income that is taxed, not merely the physical transfer of money.

Who is the taxpayer?

The taxpayer is the person receiving the dividend — whether an individual or a legal entity. In some cases, the company paying the dividend calculates and remits the tax through withholding.

Multiple owners

When a company has multiple members, tax is calculated proportionally to their ownership shares or according to an internal profit-sharing agreement.

What Constitutes a Dividend Payment?

A dividend is considered paid when it has been:

The tax obligation therefore arises when the dividend is “available,” even without an actual cash transfer.

Who Pays Dividend Tax?

Dividend tax applies to various categories of taxpayers, regardless of whether the income is earned domestically or abroad. Below are the main groups subject to taxation.

1. Individuals

All individuals receiving a dividend — whether as company shareholders or equity holders — are taxpayers. The tax rate depends on the regulations of the country where the income is earned.

2. Legal entities

When another company receives a dividend, it may also be subject to taxation. Some jurisdictions provide exemptions (e.g., for parent companies or certain holding structures), but application varies by country.

3.Residents and non-residents

4. A simple example

If a company pays out profits to owners who include a person from BiH, a person from the EU, and a legal entity from another country — all are subject to dividend tax according to the rules applicable to residents and non-residents, with the potential application of double taxation avoidance agreements.

Колика је стопа пореза на дивиденду у БиХ?

Unlike many countries in the region, Bosnia and Herzegovina does not tax dividend distributions. This means the dividend tax rate is 0%, regardless of whether the dividend is paid to residents or non-residents. Due to this taxation model, BiH represents an attractive jurisdiction for company owners seeking a simpler financial framework and a lower tax burden.

Uniform rules in both entities and in Brčko District

Regardless of where the company is registered:

dividends are not taxed and there is no withholding tax obligation.

This rule applies to both individuals and legal entities, including foreign investors.

Why does this matter for company owners?

The taxation model in BiH enables:

For these reasons, many entrepreneurs considering an international business structure explore the opportunities BiH has to offer in greater detail. For an overview of models that support global business, see our guide on offshore companies.

Country	Income tax	Dividend Tax	Total
BIH (Brcko)	10%	0%	10%
Serbia	15%	15%	25%
Croatia	10–18%	12%	22–30%
Montenegro	9%	9%	18%
Cyprus	12.5%	17%	29.5%
Luxembrug	21.84%	0%	21.84%
Malta	35%	0%	35%
Ireland	12.5–25%	10%	22.5–35%

How is the effective rate calculated?

The effective rate is not a simple sum of the income tax and the dividend tax, because the dividend is taxed on net profit (after income tax paid).

General formula

Effective rate =
CIT + (1 i CIT) x dividend tax*CIT = corporate income tax

Example

If the profit tax is 10% and the dividend tax is 10%, the total burden is not 20%, but 19%, because the second tax is calculated on the remaining 90%.

In Numbers

Profit: €100,000
Corporate tax (10%) → €10,000
Remaining → €90,000
Dividend tax (10%) → €9,000
Total taxes paid: €19,000
Effective rate: 19%

How Is Dividend Tax Calculated? (Calculation Examples)

Although dividend tax is not paid in Bosnia and Herzegovina (rate is 0%), it is important to understand what the calculation process looks like and what is formally recorded. The calculation is straightforward: the disbursed dividend amount is also the total amount the owner receives, with no additional tax obligations.

Description of the calculation process

The company makes 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 rate calculation, tax filing, or additional dividend-related charges.

Practical example 1: Dividend payment of 10,000 BAM

The company decides to pay the owner a dividend of 10,000 BAM.

The company records the profit distribution decision in its books, but there is no reduction of the amount on tax grounds.

Practical example 2: Dividend payment to a non-resident

The company owner lives and operates in another country (e.g., Serbia or Germany).

Note: The non-resident may have tax obligations in their country of residence, depending on local regulations. From BiH’s perspective, the payment is tax-free.

When Is It Possible to Reduce or Avoid Double Taxation?

Although dividend tax is not paid in Bosnia and Herzegovina, the issue of double taxation remains important for owners who live or operate in other countries. The country in which the dividend recipient is a resident may have its own regulations, and in such situations international treaties are applied to prevent the same income from being taxed twice.

Double taxation avoidance agreements BiH has signed double taxation avoidance agreements with numerous countries, including Serbia, Croatia, Montenegro, Germany, Austria, and others.

These agreements regulate:

how dividend income is treated,
which country has the right to tax it,
when a reduced rate or full exemption can be applied.

In practice, since BiH does not tax dividends (rate of 0%), the agreement typically prevents the same income from being taxed again by the other country.

Proving residency

To apply a double taxation avoidance agreement, the dividend recipient must provide:

This document serves as the basis for the other country not treating the income as subject to double taxation, or for applying a lower tax rate under the agreement.

Practical example with treaty application

A non-resident living in Germany receives a dividend from BiH amounting to 20,000 BAM.

Tax in BiH: 0%
Germany normally taxes dividends (e.g., at a rate of 25%)
Under the BiH–Germany treaty, the recipient can:
provide proof that the income source is in BiH,
apply the double taxation avoidance mechanism (credit or exemption).

In many cases, this means that in Germany only the difference up to their effective rate is paid, or the income is treated more favorably.

How Does Dividend Tax Differ from Other Types of Taxation?

Dividend tax is just 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)

Corporate income tax is paid by the company itself on earned income before dividend distribution. Key difference: corporate income tax is the company’s obligation, while dividend tax applies to the owner receiving a share of the profits. In BiH, particularly in Brčko District, the corporate income tax rate is clearly prescribed, while the dividend tax rate is 0%, making this form of income more favorable compared to other payout structures.

Capital gains tax

Capital income includes proceeds from selling ownership shares, interest, rental income, and gains from financial assets. These are subject to specific rules and often different tax rates depending on the entity in BiH. Difference from dividends: dividends relate exclusively to distributed company profit, while capital income relates to the value of assets or investments that change over time.

Payroll tax (employee income)

This tax applies to earnings received by employees through employment — salaries, allowances, and other forms of personal income. Main differences from dividend tax: payroll tax is a regular monthly expense; employment income is subject to strictly defined contributions (pension, health, social); dividends are a distribution of profit to owners, are not treated as employment, and do not include contributions.

Tax on self-employment income

This category covers all types of income earned by entrepreneurs, freelancers, and other individuals working independently. Unlike dividends: self-employment income is taxed based on the achieved business result; the taxpayer is the independent entrepreneur; such income is treated as active income, while dividends are 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 owners’ obligations 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 regulations.

Obligations of Majority and Minority Owners

Regardless of whether someone holds a majority or minority stake, the tax treatment of dividends is the same — dividends are taxed according to the applicable rate in the jurisdiction where the company is registered.

However, differences may arise in:

It is important to note that profit distribution must always be in accordance with the founding act and the company’s ownership record.

How Profit Distribution Among Owners Works

Profit distribution is carried out proportionally to ownership shares, unless the founding act provides for a different model.

Typical situations include:

Regardless of the ownership structure, the tax treatment remains the same — dividends are considered passive income of the owner.

If you are planning to incorporate a company and want to understand how tax obligations apply from the start of operations, see the guide on opening a company in BiH.

Frequently Asked Questions (FAQ)

Is a dividend the same as a profit distribution?

In practice, the terms are often used interchangeably. Legally speaking, a dividend is a form of profit distribution to company members following a formal decision.

How is reinvested profit taxed?

Reinvested profit is not subject to additional taxation at the time of reinvestment. The tax obligation only arises when the profit is distributed to owners.

Does a non-resident pay dividend tax in BiH?

Federation of BiH: Dividends paid to non-residents are subject to a 5% withholding tax.
Brčko district: No withholding tax is applied on dividends (effectively 0%).
Republika Srpska: Dividends and profit shares are subject to a 10% withholding tax, unless a double taxation avoidance agreement stipulates a lower rate.

When does the tax obligation arise if the dividend is not paid immediately?

The tax obligation arises at the moment the decision on profit distribution is made. It is not decisive whether the dividend has actually been paid at that same moment.

How can double taxation be avoided?

Double taxation is avoided by applying the double taxation avoidance agreements that BiH has concluded with other countries. The prescribed conditions and documentation must be fulfilled.

Is the tax rate changing in 2026?

There are currently no confirmed changes to tax rates for 2026.