Proposed reduction of the contribution rate and changes to the Law in order to relieve the obligations of employers

Proposed reduction of the contribution rate and changes to the Law in order to relieve the obligations of employers

At today’s session, the Government of the Federation of Bosnia and Herzegovina, at the proposal of the Federal Ministry of Finance, established the Draft Law on Amendments to the Law on Contributions and referred it to the parliamentary procedure for adoption by abbreviated procedure.

The proposed amendment changes the prescribed condition for the application of the preferential basis for the calculation of contributions for workers in coal mines, textile, leather and footwear industries and low-accumulation activities of traditional, old, crafts. As explained, this leaves the possibility of paying a higher amount of wages to these workers (from the current amount of the lowest wage to the amount of 85 percent of the average net wage). Also, the amount of the preferential monthly basis for the calculation of contributions for these workers is adjusted, in order to maintain approximately the same percentage of the privilege (with the proposed change, this percentage is slightly higher).

The reasons for the adoption of this change are the strengthening of competitiveness on the foreign market, primarily in the textile, leather and footwear industry as a predominantly export-oriented activity through determining the payment of contributions on a lower preferential basis if the employee is paid a monthly salary of up to 85 percent of the average monthly net salary in the Federation BiH. In this way, the price competitiveness of products from BiH that are intended for export is achieved, thus ensuring the prerequisites for significant investments in this sector. This law, upon adoption, would enter into force the following day from the day of its publication in the Official Gazette of FBiH.

Also, today the Government determined the amendments to the text of the Draft Law on Contributions that it previously sent to the parliamentary procedure, which makes them an integral part of this draft law.

With the amendments, among other things, with the aim of further relieving the employer’s obligations and creating a more favorable business environment, the contribution rate for pension and disability insurance is reduced by one additional index point, that is, from 17.50 percent to 16.50 percent. This represents a total contribution rate of 31.5 percent, i.e. a decrease of a full 10 percent compared to the currently valid rate.

The definition of the average monthly net salary in the Federation is also being expanded, in order to make it easier to understand and apply it. The concept of parent-caregiver is also defined, as a new category of insured in accordance with the special regulations that regulated this area. The contribution obligation is prescribed for this new category of obligees in accordance with the Law on foster parents.

The approved amendments stipulate that persons employed abroad, if they are not necessarily insured according to the regulations of that country, are liable to contribute to the base. Additional stimulation of investments in voluntary pension funds is established in such a way that income from pension contributions, on which contributions are not paid, is increased from 80 KM to 100 KM per month and is harmonized with the non-taxable amount from the Draft Law on Income Tax.

It is also foreseen to prescribe the obligation to pay a special contribution for health insurance for persons undergoing professional training for work without employment and volunteers, only if they are not insured for health insurance as determined by the regulations for unemployed persons.

According to one of the established amendments, this law will apply from January 1, 2024.