Doing Business 2020 Bosnia and Herzegovina Economy Profile Bosnia and Herzegovina Page 1 Doing Business 2020 Bosnia and Herzegovina Economy Profile of Bosnia and Herzegovina Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Bosnia and Herzegovina About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Bosnia and Herzegovina Ease of Doing Business in DB RANK DB SCORE Region Europe & Central Asia Bosnia and Herzegovina Income Category Upper middle income Population 3,323,929 90 65.4 City Covered Sarajevo Rankings on Doing Business topics - Bosnia and Herzegovina 27 37 67 74 88 96 93 141 173 184 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 60.0 48.6 79.0 63.6 65.0 56.0 60.4 95.7 57.8 68.2 Starting a Business (rank) 184 Getting Credit (rank) 67 Trading across Borders (rank) 27 Score of starting a business (0-100) 60.0 Score of getting credit (0-100) 65.0 Score of trading across borders (0-100) 95.7 Procedures (number) 13 Strength of legal rights index (0-12) 7 Time to export Time (days) 80 Depth of credit information index (0-8) 6 Documentary compliance (hours) 4 Cost (number) 13.7 Credit registry coverage (% of adults) 47.1 Border compliance (hours) 5 Paid-in min. capital (% of income per capita) 10.2 Credit bureau coverage (% of adults) 14.0 Cost to export Documentary compliance (USD) 22 Dealing with Construction Permits (rank) 173 Protecting Minority Investors (rank) 88 Border compliance (USD) 70 Score of dealing with construction permits (0-100) 48.6 Score of protecting minority investors (0-100) 56.0 Time to export Procedures (number) 17 Extent of disclosure index (0-10) 3.0 Documentary compliance (hours) 8 Time (days) 180 Extent of director liability index (0-10) 6.0 Border compliance (hours) 6 Cost (% of warehouse value) 20.3 Ease of shareholder suits index (0-10) 5.0 Cost to export Building quality control index (0-15) 13.0 Extent of shareholder rights index (0-6) 4.0 Documentary compliance (USD) 27 Extent of ownership and control index (0-7) 5.0 Border compliance (USD) 109 Getting Electricity (rank) 74 Extent of corporate transparency index (0-7) 5.0 Score of getting electricity (0-100) 79.0 Enforcing Contracts (rank) 93 Procedures (number) 5 Paying Taxes (rank) 141 Score of enforcing contracts (0-100) 57.8 Time (days) 69 Score of paying taxes (0-100) 60.4 Time (days) 595 Cost (% of income per capita) 289.0 Payments (number per year) 33 Cost (% of claim value) 36.0 Reliability of supply and transparency of tariff index (0-8) 6 Time (hours per year) 411 Quality of judicial processes index (0-18) 9.5 Total tax and contribution rate (% of profit) 23.7 Registering Property (rank) 96 Postfiling index (0-100) 47.7 Resolving Insolvency (rank) 37 Score of registering property (0-100) 63.6 Score of resolving insolvency (0-100) 68.2 Procedures (number) 7 Recovery rate (cents on the dollar) 39.7 Time (days) 35 Time (years) 3.3 Cost (% of property value) 5.1 Cost (% of estate) 9.0 Quality of the land administration index (0-30) 16.5 Outcome (0 as piecemeal sale and 1 as going 0 concern) Strength of insolvency framework index (0-16) 15.0 Page 4 Doing Business 2020 Bosnia and Herzegovina Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is -Has between 10 and 50 employees one month after the commencement of operations, all of them received domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Bosnia and Herzegovina Starting a Business - Bosnia and Herzegovina Standardized Company Legal form Limited Liability Company Paid-in minimum capital requirement BAM 1,000 City Covered Sarajevo Indicator Bosnia and Europe & Central OECD high Best Regulatory Herzegovina Asia income Performance Procedure – Men (number) 13 5.2 4.9 1 (2 Economies) Time – Men (days) 80 11.9 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 13.7 4.0 3.0 0.0 (2 Economies) Procedure – Women (number) 13 5.2 4.9 1 (2 Economies) Time – Women (days) 80 11.9 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 13.7 4.0 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 10.2 0.7 7.6 0.0 (120 Economies) Figure – Starting a Business in Bosnia and Herzegovina – Score 29.4 20.1 93.2 97.5 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Bosnia and Herzegovina and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 96.0: Greece (Rank: 11) 90.5: Regional Average (Europe & Central Asia) 86.7: Montenegro (Rank: 101) 85.3: Croatia (Rank: 114) 82.1: Czech Republic (Rank: 134) 60.0: Bosnia and Herzegovina (Rank: 184) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Bosnia and Herzegovina Figure – Starting a Business in Bosnia and Herzegovina – Procedure, Time and Cost Time (days) Cost (% of income per capita) 80 8 70 7 Cost (% of income per capita) 60 6 Time (days) 50 5 40 4 30 3 20 2 10 1 0 0 1 2 3 4 5 6 7 8 9 * 10 11 * 12 * 13 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Bosnia and Herzegovina Details – Starting a Business in Bosnia and Herzegovina – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Stipulate a founding act and have it notarized by a notary 1 to 5 days BAM 350 Agency : Notary's Office The Law on Registration of Business Entities requires that the Founding Act and Statute of the Company are certified by the public notary. The Decision of the Constitutional Court of FB&H (“Official Gazette of FB&H”, no. 30/16) has declared unconstitutional several provisions of the Law on Notaries, including provisions related to the founding act and statute, which created multiple ways of interpreting the legal requirements. While the municipal court in Sarajevo started accepting non-notarized founding acts for companies registration, it is common to notarize the founding acts in compliance with the Law on Registration of Business Entities. Under the Notary Tariffs of Federation of BiH (Official Gazette of Federation of BiH No. 57/13) the fees for a notary processing of the Founding Act and Statute of the Company notary depend on the value of the company's share capital as follows: 1.Fee in the amount of BAM 300 if the share capital amount does not exceed BAM 50.000; 2.Fee in the amount of BAM 350 if the share capital amount is between BAM 50.000 and BAM 100.000 and 3.If the value of the concerned legal or any other activity exceeds BAM 100.000, notary is obliged to calculate the fee (in addition to the award of BAM 350) in the amount of BAM 50 for each started BAM 100.000 but not in the amount exceeding BAM 2.000. 2 Obtain a statement from commercial bank that full amount of the capital has been paid in; 1 day no charge pay the registration fee to the budget account of the cantonal court Agency : Commercial Bank The founder should pay the amount of the capital to a temporary account at one of the local banks, to be subsequently transferred to the company transaction account after its opening. 3 Obtain the statement of tax authorities that the founders have no tax debts 1 day BAM 15 Agency : Tax Bureau Statement of tax authorities, which confirms that the entrepreneur does not have any unpaid pecuniary fines, is provided to the court upon application for incorporation. The statement costs BAM 15 according to art. 18 of the Tariff on fees and charges of notaries of FB&H (Official Gazette of FB&H no. 57/13, available at http://www.notaribih.ba/sites/default/files/tarifa_o_nagradama_i_naknadama_notara_snfbih_57_1 3.pdf ). The new Rulebook on Awarding Identification Numbers, Registration, Identification and Evidence on Taxpayers in Territory of Federation of Bosnia and Herzegovina (Official Gazette of FBIH, No. 69/17) abolished the requirement to submit the statement from tax authorities, as the registration court ex officio electronically checks whether the founders and the persons authorized for representation have any outstanding tax debts or fines for offences. The requirement was abolished since October 1, 2017. However, the companies continue obtaining and submitting the certificate in practice. 4 Court registration with Municipal Courts 10 days BAM 35 (registration fee) + Agency : Municipal Court BAM 5 (filing fee) + BAM By law, regulated forms must be completed. Forms are available free of charge online at the 150 (publishing fee) website of Municipal Court of Sarajevo (http://www.oss.ba/?jezik=bos&x=1&y=73) or alternatively can be purchased at a stationery shop or at the court (BAM 15). After the court registration of the new company, the court informs the Official Gazette to announce the prepared notice. Companies are automatically registered for membership in the chambers of economy at the state, entity, canton, and regional levels. Since 2004, membership in the Chamber of Economy of the Federation of Bosnia and Herzegovina and the Chamber of Economy of the Republica Srpska is voluntary. 5 Buy a company stamp 1 day BAM 40 Agency : Official stamp maker After obtaining the Court's Decision on the commencement of the business activities, new company will need to make a company stamp. The stamp must contain data identical to the data in the Decision. Depending on the desired stamp design, price can range between BAM 30 and BAM 50. 6 Obtain the Certificate of the business premises 10 days BAM 4 Agency : Municipalities The 4 municipalities making up the City of Sarajevo charge BAM 2(Centar), BAM 4 (Novi Grad, Stari Grad) or BAM 10 (Novo Sarajevo) or for this procedure. The Company founder goes to the municipality, fills out a request form and attaches all required documents (proof of company's court registration, statement confirming that all business premises fulfill conditions mandated by the law, and notification about the date when the company will start with operations) and the proof of payment of the administrative fee. Then, the time necessary to obtain the resolution on intended activities takes about 10 calendar days. Page 8 Doing Business 2020 Bosnia and Herzegovina 7 Apply for company tax identification number and register main activities 5 days no charge Agency : Tax Bureau and Federal Bureau for Statistics When filing an application for statistical and taxpayer numbers simultaneously with the competent tax authorities (according to Regulations on Obtaining ID Numbers [Official Gazette No. 39/02]), the newly incorporated company must submit: - ID number application form (available at http://www.pufbih.ba/v1/public/upload/obrasci/b8a31- ppl1_rpo_bs_int2.pdf) - a photocopy of the court resolution (registration); - the contract on the lease of the business premises; - resolution of the competent municipality on the intended activities (this resolution must confirm that certain activities may be exercised at a certain address); - copy of the Director of the company's ID card; - copy of the agreement on providing the accountant services. In the application form for the ID number, it is asked to provide the information on the accountant or a company which will perform accounting activities. The Rulebook (published in the OG FBiH 02/10) regulates tax registration procedures. In accordance with the Article 8a of Rulebook, respective court and tax administration initiate tax registration by mutual official correspondence and legal entities are obliged to submit required documents (copy of court registry, 2 copies of application form including company's stamp, and copies of ID cards) after the court registration is completed. Additionally, the company will submit an application for the classification based on the activities it will perform. The following documents have to be submitted submitted: - two filled copies of Form PPL-1 (available at http://www.pufbih.ba/v1/public/upload/obrasci/574ca-ppl1_bs_inter2.pdf); - photocopy of a certificate issued by the registration authority (court, ministry); - JMBG (resident's ID number) of the director and the owner(s). 8 Open a company account with commercial bank 1 day no charge Agency : Commercial Bank According to the Article 6 of the Law on Internal Payment System "Official Gazette of BiH", No. 48/15 / 06.24.2015. all legal entities are obliged to open transaction account within authorized organizations (banks) and use the funds on that account for their payments in accordance with the above mentioned law. Link for the legal basis: http://www.pufbih.ba/v1/public/upload/zakoni/de252-zakon-o-unutrasnjem-platnom-prometu- sl.nov.br.48-15.pdf. Due to the anti-money laundering requirements, opening account in commercial bank has to be done by the company's authorized representative in person. 9 VAT registration 30 days BAM 10 (Tax on the Agency : Indirect Taxation Authority request for VAT Per article 57 of the Bosnia and Herzegovina Law on Value Added Tax, VAT registration is registration) + BAM 10 (tax obligatory for companies whose annual supply of goods and services subject to VAT exceeds or for issuing the Decision on will exceed BAM 50.000. It is necessary to submit the Request for registration into the competent registration in the VAT VAT registry. The request is accompanied by the following documents: register) + BAM 20 (tax for - Certified copy of the registration into the court registry; issuing the Certificate on - Certified copy of the certificate of registration from the Tax Administration of FB&H; registration in the VAT - Certified copy of the notification of the Bureau for Statistics; register) - Certified copy of the Directors ID; - Certified copy of the card of deposited signatures from the bank in which the transaction account is opened; - Statement about the goods to be imported or exported by the firm; - Statement about the feasibility of estimated turnover and a the evidence on the realization of the same in terms of concluded business contracts; - Copy of the contract of the lease of business premises for the company seat or evidence of the ownership registered in the land registry; - Personal ID number for the responsible accountant. Notify the commencement of the business activities to the Cantonal Inspection Authority 1 day no charge 10 Agency : Ministry of Commerce The company submits the notification on commencement of business activities to the Cantonal Inspection Authority and the inspectors may subsequently make supervision in terms of fulfillment of all conditions for conducting of business activities. The Law on Internal Trade (Official Gazette of FB&H, no.40/10) regulates that the notification on commencement of business activities should be submitted by the company no later than 5 days before starting to work. The following document should be submitted: court resolution on registration in the registry, statement that the company meets all legal requirements for performing trade activities and notice of the date of commencement of work. Page 9 Doing Business 2020 Bosnia and Herzegovina 11 Acquire and register the fiscal device 18 days on average BAM 700 Agency : Tax Bureau Article 4 of the Law on Fiscal Systems in Federation of Bosnia and Herzegovina ("Official Gazette of BiH", number 81/09) defines obligation of companies to record their entire turnover by using the fiscal device, regardless of the method of payment. The law is available at http://www.fbihvlada.gov.ba/bosanski/zakoni/2009/zakoni/50bos.htm . Based on Article 29, paragraph (2) and Article 51, paragraph (3) point p) of the Law on Fiscal Systems ("Official Gazette of BiH", number 81/09), Federal Minister of Finance has adopted the Rulebook. The Rulebook lays down procedures and obligations in the process of registering the fiscal device with the fiscal system for authorized manufacturers /dealers, authorized services, authorized repairers, Tax Administration of the Federation of Bosnia and Herzegovina, authorized persons of the Tax Administration, Commission for the Federal Ministry of Finance, competent authorities and taxpayers, the process of initialization, receipt of the fiscal devices by taxpayers, installation of the fiscal system, as well as other technical and technological procedures regarding this process. In order to acquire and register the fiscal device, it is necessary to submit the request and enclose the documentation such as: - certificate of Tax Registration, - copy of the ID card of the owner or authorized person, - ID number, VAT number (if a VAT payer), - copy of the ID card of the owner of the space (if the space is rented), - company bank account number and name of bank linked to this bank account (in connection with contract with telecom operator). This procedure is conducted by companies that are engaged in fiscalization. Enroll the employees in health insurance with Health Insurance Institute and in the pension 1 day no charge 12 insurance Agency : Tax administration According to the Article 14 of the Law on Unified System of Registration, Control and Collection of Contributions (Official Gazette of FB&H, no. 42/09 and 109/12, as amended by "Official Gazette of FB&H", no. 30/16), the company is obliged to register each employee at the Tax Administration one day before the commencement of work at the latest. The following document should be submitted: - court resolution on registration in the registry, - Certificate of the Identification and Statistic number, - Form JS 3100. Adopt and publish a rule book on matters of salary, work organization, discipline, and other 1 day no charge 13 employee regulations. Agency : Labor Department An employer who employs more than 30 employees issues and publishes a rule book which regulates salaries, organization of work, systematization of jobs, the special conditions of employment and other issues important for the workers and the employer, in accordance with the law and collective agreement. The obligation of issuing the Rulebook is based on Article 118 of the Labour Law in the Federation of Bosnia and Herzegovina (Official Gazette of the Federation of Bosnia and Herzegovina, number 26/16) Takes place simultaneously with previous procedure. Page 10 Doing Business 2020 Bosnia and Herzegovina Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures The warehouse: that can be fully completed online are an exception to this rule - Will be used for general storage activities, such as storage of books or stationery. • Procedure is considered completed once final document is received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control after construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 11 Doing Business 2020 Bosnia and Herzegovina Dealing with Construction Permits - Bosnia and Herzegovina Standardized Warehouse Estimated value of warehouse BAM 490,426.50 City Covered Sarajevo Indicator Bosnia and Europe & Central OECD high Best Regulatory Herzegovina Asia income Performance Procedures (number) 17 16.2 12.7 None in 2018/19 Time (days) 180 170.1 152.3 None in 2018/19 Cost (% of warehouse value) 20.3 4.0 1.5 None in 2018/19 Building quality control index (0-15) 13.0 12.1 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Bosnia and Herzegovina – Score 52.0 55.6 0.0 86.7 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Bosnia and Herzegovina and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 76.1: Montenegro (Rank: 40) 69.5: Greece (Rank: 86) 69.0: Regional Average (Europe & Central Asia) 57.8: Croatia (Rank: 150) 56.2: Czech Republic (Rank: 157) 48.6: Bosnia and Herzegovina (Rank: 173) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 12 Doing Business 2020 Bosnia and Herzegovina Figure – Dealing with Construction Permits in Bosnia and Herzegovina – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 180 8 160 7 Cost (% of warehouse value) 140 6 120 Time (days) 5 100 4 80 3 60 2 40 20 1 0 0 1 2 3 4 5 *6 *7 8 *9 10 11 * 12 13 * 14 15 16 17 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 13 Doing Business 2020 Bosnia and Herzegovina Figure – Dealing with Construction Permits in Bosnia and Herzegovina and comparator economies – Measure of Quality 14 13.0 12.0 12.0 12.1 12 10.0 Index score 10 8.0 8 6 4 2 0 Bosnia Croatia Czech Greece Montenegro Europe and Republic & Herzegovina Central Asia Details – Dealing with Construction Permits in Bosnia and Herzegovina – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain excerpt from the cadastre plan showing status of the land plot 1 day BAM 10 Agency : Municipality (Cadastre Department) To obtain a copy of the cadastre plan, BuildCo must submit a request form which is available at the Municipality. Due to internal reorganization and automation of the process in the Cadastre Department of the Municipality, the process can be completed in 1 day. 2 Obtain excerpt from the land registry book showing proper registration 1 day BAM 5 Agency : Municipal Court (Land Registry Department) The excerpt is available from the Land Registry Department of the Municipal Court. The company representative must take a queue number at the office counter in the morning and make a written or oral request. The excerpt will be provided on the same day (usually within 1 hour). 3 Obtain soil test and topographic survey of the land 14 days BAM 3,600 Agency : Private Licensed Company A private licensed company will conduct a soil test and a topographic survey of the land plot. Both of these have to be completed in order to develop the project. A soil test is a necessary step for development of the project. The soil investigation helps to determine the bearing capacity of the land, which helps to determine the load capability, the type and depth of foundation, in order to make sure to select a suitable construction technique. 4 Obtain urban planning consent 30 days BAM 30 Agency : Municipality (Urban Planning Department) BuildCo submits a request to the Municipality for an urban planning consent with the following required documents: • Reason for the request, including the project data and documentation required for the Urban Planning Department’s assessment • Program sketch • Preliminary (or first draft) project design, two examples (or depending on the level of construction complexity, project proposal or program sketch) • General schemes for power installations, heating installations, fire prevention and security systems, water supply and sewage systems • Excerpt from the cadastre plan, showing right to build and ownership of plot (not older than 6 months) • Excerpt from the land registry book, showing proper registration • Environmental consent, if requested • Other data, if requested • For insurance purposes, consent for fire and explosion protection, issued by a competent company • Consent for the heating installations, issued by a competent company Once issued, the urban planning consent is effective for one year, during which time BuildCo may submit a construction permit request. 5 Obtain initial electric power permit from Elektroprivreda BiH 30 days BAM 30 Agency : JP Elektroprivreda BiH dd The customer has to go to the utility and request the issuance of initial electric power permit which are basic technical conditions to check if the requested capacity is available and if there is a possible collision with existing users. Documents required are: cadastre extract, urban planning consent in certified copies and a rough design. 6 Obtain preliminary consent of water supply and sewage system projects 28 days BAM 117 Agency : Vodovod i Kanalizacije Once the urban planning consent is issued, BuildCo must submit the description of the main project plan to the municipal water and sewage authority (Vodovod i Kanalizacija). 7 Obtain preliminary consent of study on fire and explosion prevention 4 days BAM 900 Agency : Private Licensed Company BuildCo must submit electronically the description of the main project plan to the Public Institute for Fire Protection, an independent agency. Page 14 Doing Business 2020 Bosnia and Herzegovina 8 Obtain validation of the technical audit of the main project 5 days BAM 28,180 Agency : Auditing Entity Once the preliminary verification of the study on fire prevention and explosion is obtained, BuildCo must undergo a technical audit, showing that the project was designed in compliance with the urban permit and the provisions of the Law on Spatial Planning. The auditing entity must have at least one engineer who passed the state exam and has 5 years of experience. The signature of an authorized auditor is required to confirm that the project has been revised in its entirety. The total fee for technical audits varies across municipalities, according to Municipal Decisions on the Fee Schedule for the Technical Audit of Construction. The above-stated fee applies to the Sarajevo Municipality. 9 Pay the rent fee and shelter construction fee at a commercial bank 1 day BAM 32,867 Agency : Municipality (Construction Department) The rent fee and shelter construction fee are paid at a commercial bank to the account of the Municipality's Urban Planning Department. 10 Apply for building permit 30 days no charge Agency : Municipality (Urban Planning Department) Once the fees are paid, the company must submit a request to the Urban Planning Department with the following documents: • Valid urban planning consent • Cadastre excerpt: land plot and proof of right to build • Proof of payment for purchase of the construction land • Proof of rent payments for the paid rent compensation • Consents obtained during the issuing of the urban planning permit • Consent for stated building; any other enclosures as requested by the authorities • Verified development project (two copies) and consents for the project documentations (Project Books 1 and 2, including the preliminary verifications applied for in Procedures 4 to 7) There is no fee associated with the application. 11 Request and receive marking out of the land plot 7 days BAM 15 Agency : Municipality (Urban Planning Department) The request for marking out the land plot must be submitted to the Municipality's Urban Planning Department with the construction permit and the urban planning consent. The municipal authorities mark out the land plot. The request fee depends on the annual municipal pricing decisions and on the on-site assessment. An average price is BAM 15.00. This is considered the official commencement of construction works. Hire an external supervising engineer 1 day BAM 5,640 12 Agency : Licensed Engineer BuildCo hires a third party inspector who conducts technical inspections during different phases of construction. 13 Request water and sewage connection 30 days BAM 500 Agency : Vodovod i Kanalizacije BuildCo must contact the municipal water and sewage authority (Vodovod i Kanalizacije) to obtain water and sewage connection. The request should include the preliminary verification and Project Books 1 and 2. Request and receive a final inspection from the Municipality 30 days BAM 19,617 14 Agency : Municipality (Urban Planning Department) No later than the final inspection date, BuildCo must present the following documentation to the Board: • Excerpt from the Commercial Court Register, showing that BuildCo is properly registered • Details on the each work phase of the construction • Building permit (copy) • Performance reports verified by the designer of the main project plan to validate compliance with the main project plan as well as terms and conditions specified in the building permit • Construction diary and construction book • Proof of testing the quality of materials and equipment received from suppliers at the time of purchase • Construction mark-out plan and minutes on the performed mark out • Construction-site organization scheme • Decision on the appointed construction engineers and the supervisors • Cadastre plan The relevant municipal department must appoint an independent professional inspection board for a technical inspection within 15 days of receiving the duly submitted request for issuance of an occupancy permit. The number of board members appointed depends on the type and the complexity of the building; the board will consist of one professional for each type of construction work to be inspected (architectural/engineering, electrical, mechanical, water and sewage system, and so forth). Page 15 Doing Business 2020 Bosnia and Herzegovina 15 Request occupancy permit 15 days BAM 7,804 Agency : Municipality (Urban Planning Department) After the technical review of completed construction, BuildCo must submit a request for the occupancy permit and include the following documents: • Building permit (copy) • Cadastre plan (copy), including an exact plan of the marked final building position • Written statements from each contractor, stating the work has been properly performed according to the project design and future maintenance plans • A written report (by the construction supervisor) that all materials were of standard quality (certified as such by the suppliers) BuildCo submits these documents to the Urban Planning Department of the relevant municipality (the same municipal department that issued the building permit). The occupancy permit is issued upon completion of the technical inspection. It is only after the issuance of the occupancy permit that the building may be used. 16 Register the building with the Municipality's Cadastre Department 15 days BAM 180 Agency : Municipality (Cadastre Department) BuildCo must submit a request to register the building in the cadastre books at the Municipality's Cadastre Department. Along with the request, BuildCo must submit the occupancy permit, the building permit, the certificate proving the marking out of the property construction site and other documents showing ownership over the property. During the technical review of the completed construction, the designated authority checks whether there have been any additional changes in the construction and whether the construction was built in accordance with the urban planning consent. If there were any changes, then it would be necessary to obtain a new geodetic image of the plot. Upon registration of the property in the cadastre records, the cadastre forwards an extract to the Land Registry, which will ensure that the property gets registered in the land registry books. 17 Register the building with the Land Registry Department at the District Court of Sarajevo 1 day BAM 30 Agency : Land Registry Department at the District Court Sarajevo BuildCo must submit a request to register the warehouse in the land registry books at the District Court of Sarajevo. The request form can be found in the Land Registry Department. Other required documents include: • Purchasing agreement or other document as a proof of building and land ownership • Occupancy permit • Rent and shelter fee payment certificate BuildCo must pay BAM 60.00 for administrative expenses The Land Registry Department will register the property upon receiving the excerpt from the cadastre. Takes place simultaneously with previous procedure. Page 16 Doing Business 2020 Bosnia and Herzegovina Details – Dealing with Construction Permits in Bosnia and Herzegovina – Measure of Quality Answer Score Building quality control index (0-15) 13.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge; In official gazette. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by in- 1.0 house engineer. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency; Yes, in-house engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 1.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use Architect or engineer; 1.0 (Latent Defect Liability or Decennial Liability)? (0-1) Construction company. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 4.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans Minimum number of 2.0 or drawings are in compliance with existing building regulations? (0-2) years of experience; University degree in architecture or engineering; Passing a certification exam. What are the qualification requirements for the professional who supervises the construction on the ground? (0- Minimum number of 2.0 2) years of experience; University degree in engineering, construction or construction management; Passing a certification exam. Page 17 Doing Business 2020 Bosnia and Herzegovina Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours • Tools to monitor power outages (0–1) (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. - Tariffs effective in January of the current year are used for calculation of the price of electricity for • Regulatory monitoring of utilities’ performance (0–1) the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 18 Doing Business 2020 Bosnia and Herzegovina Getting Electricity - Bosnia and Herzegovina Standardized Connection Name of utility JP Elektroprivreda BiH Price of electricity (US cents per kWh) 11.6 City Covered Sarajevo Indicator Bosnia and Europe & Central OECD high Best Regulatory Herzegovina Asia income Performance Procedures (number) 5 5.1 4.4 3 (28 Economies) Time (days) 69 99.6 74.8 18 (3 Economies) Cost (% of income per capita) 289.0 271.9 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 6 6.2 7.4 8 (26 Economies) Figure – Getting Electricity in Bosnia and Herzegovina – Score 66.7 77.8 96.4 75.0 Reliability of supply and transparency of Procedures Time Cost tariff index Figure – Getting Electricity in Bosnia and Herzegovina and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 95.6: Czech Republic (Rank: 11) 86.8: Croatia (Rank: 37) 84.7: Greece (Rank: 40) 79.0: Bosnia and Herzegovina (Rank: 74) 75.6: Regional Average (Europe & Central Asia) 61.2: Montenegro (Rank: 134) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Bosnia and Herzegovina – Procedure, Time and Cost Time (days) Cost (% of income per capita) 300 60 Cost (% of income per capita) 250 50 200 Time (days) 40 150 30 100 20 50 10 0 0 1 2 3 4 5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 19 Doing Business 2020 Bosnia and Herzegovina reflected here, see the summary below. Figure – Getting Electricity in Bosnia and Herzegovina and comparator economies – Measure of Quality 9 8 8 7 7 7 6.2 Index score 6 6 5 5 4 3 2 1 0 Bosnia Croatia Czech Greece Montenegro Europe and Republic & Herzegovina Central Asia Page 20 Doing Business 2020 Bosnia and Herzegovina Details – Getting Electricity in Bosnia and Herzegovina – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Request electro-energetic consent from JP Elektroprivreda BiH and await site inspection 14 calendar days BAM 50 Agency : JP Elektroprivreda BiH The customer has to request the issuance of electro-energetic consent at the utility. The purpose is to specify more detailed technical conditions for the electricity connection. Documents required are: Building permit, company registration and schemes of electrical installation (project plan). 2 Receive external site inspection by Elektroprivreda and await electro-energetic consent 17 calendar days BAM 0 Agency : JP Elektroprivreda BiH An authorized person of the customer has to be present during the site inspection to agree with the utility on the location of the facilities (cables etc). After the site visit, the electro-energetic consent and the estimate of costs are sent to the customer. 3 Submit connection application, sign contract and await external works from 31 calendar days BAM 27,300 Elektroprivreda BiH Agency : JP Elektroprivreda BiH Once customer receives message that all documents for consent after inspection are cleared, customer visits Elektoprivreda to submit application for connection, makes payment at branch office counter and then signs supply contract. Customer has choice of suppliers, but Eletroprivreda has upto 80% of customers for supply. The utility is planning and executing the external connection works. The utility needs to request an excavation permit from the municipality to execute the external works. 4 Hire electrician to issue certificate of compliance for internal wiring 4 calendar days BAM 1,000 Agency : Specialized electrician The client is required to obtain a certificate of compliance (CoC) for the internal wiring of the warehouse. For that, he/she hires a specialized electrician to issue CoC. 5 Receive visit by Elektroprivreda BiH to energize the connection 3 calendar days BAM 0 Agency : JP Elektroprivreda BiH Once the works are completed and after the site visit of the commission of the municipality, the utility will come and energize the connection and install the meter. Takes place simultaneously with previous procedure. Page 21 Doing Business 2020 Bosnia and Herzegovina Details – Getting Electricity in Bosnia and Herzegovina – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 6 Total duration and frequency of outages per customer a year (0-3) 2 System average interruption duration index (SAIDI) 2.2 System average interruption frequency index (SAIFI) 0.5 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? No Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://www.elektroprivreda .ba/stranica/tarifni-stavovi https://www.epbih.ba/stra nica/tarifni-stavovi#javno- snadbijevanje Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 22 Doing Business 2020 Bosnia and Herzegovina Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. - Has no occupants, and no other party holds a legal interest in it. • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 23 Doing Business 2020 Bosnia and Herzegovina Registering Property - Bosnia and Herzegovina Indicator Bosnia and Europe & Central OECD high Best Regulatory Herzegovina Asia income Performance Procedures (number) 7 5.5 4.7 1 (5 Economies) Time (days) 35 20.8 23.6 1 (2 Economies) Cost (% of property value) 5.1 2.7 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 16.5 20.4 23.2 None in 2018/19 Figure – Registering Property in Bosnia and Herzegovina – Score 50.0 83.7 65.8 55.0 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Bosnia and Herzegovina and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 79.7: Czech Republic (Rank: 32) 77.4: Croatia (Rank: 38) 75.8: Regional Average (Europe & Central Asia) 65.8: Montenegro (Rank: 83) 63.6: Bosnia and Herzegovina (Rank: 96) 46.9: Greece (Rank: 156) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 24 Doing Business 2020 Bosnia and Herzegovina Figure – Registering Property in Bosnia and Herzegovina – Procedure, Time and Cost Time (days) Cost (% of property value) 35 6 30 5 Cost (% of property value) 25 4 Time (days) 20 3 15 2 10 1 5 0 0 1 *2 3 4 5 6 7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 25 Doing Business 2020 Bosnia and Herzegovina Figure – Registering Property in Bosnia and Herzegovina and comparator economies – Measure of Quality 30 25.0 25 23.5 20.4 Index score 20 16.5 17.5 15 10 4.5 5 0 Bosnia Croatia Czech Greece Montenegro Europe and Republic & Herzegovina Central Asia Details – Registering Property in Bosnia and Herzegovina – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain the court extract certifying that company representatives are authorized to act on 5 days BAM 50; (BAM 5 (each behalf of each company request) + BAM 10 per Agency : Municipal Court in Sarajevo (Companies Registry) page (Court Extract, about Both the seller and the buyer submit the request for obtaining the court extract to the court that 4-5 pages each)) keeps the registry of commercial companies. The extract certifies the person authorized to act on behalf of each company. The parties have to provide the set of registration documents, which prove that the person who will sign on behalf of the company is authorized to do it. 2 Obtain the land registry extract as proof of ownership 1 day BAM 5 Agency : Municipal Court in Sarajevo (Land Registry Office) The seller requests and obtains the land registry excerpt from a competent court land registry office as proof of ownership and to check the property against encumbrances. In practice, the excerpt must be obtained by the seller before starting the transaction. This information needs to be obtained in hard copy and be sealed to have legal validity. 3 Notarization of the sale-purchase agreement 1 day BAM 550; (When the value Agency : Notary of the subject of a legal Parties provide the notary with the land registry excerpt (obtained in Procedure 1) as well as with transaction or other official the court excerpt (obtained in Procedure 2). The presence of both parties is necessary at the action is over 100,000 notary's office, or verifications of the signatures should be based on a power of notary. The notary BAM, notary is, besides needs to obtain the following documents from the parties: (1) The land registry excerpt as well as the copy of the cadastre plan proving the ownership of the the fee of 350,00 BAM, property; obliged to charge an (2) The extract from the company’s court registry certifying the person is authorized to act on additional fee of 50,00 behalf of the company and to sign the purchase agreement; BAM for every started (3) The approval of the founder (i.e. the General Assembly or Supervisory Board if applicable) for 100.000,00 BAM in the selling the property in the case that the value of the property exceeds the amount of 1/3 of the part in which the value of company’s book value. the official action exceeds 100.000,00 BAM, but in the amount not greater than 2.000,00 BAM.) 4 Submit the request for an evaluation of the property for tax purposes 1 day no charge Agency : Municipal Tax Authority This Procedure can be done by a lawyer or by the buyer and the seller. The documentation shall include a copy of the sale-purchase agreement (obtained after Procedure 3). Parties file the request for the evaluation of the real estate for the payment of the tax for the transfer of the ownership on real estates at the competent municipal Tax Authority. The deadline for filing the request is 15 days from the verification of signatures on the sale-purchase agreement. 5 On-site inspection of a property 21 days no charge Agency : Tax Office Commission Upon the submission of the sale-purchase agreement, the tax office commission performs an on- site inspection of the property and takes notes from the inspection. Based on the notes, the tax office adopts an official decision on tax duty of the buyer. 6 Payment of the transfer tax at the commercial bank 1 day BAM 24,521.32; (5% of Agency : Commercial Bank property value (transfer The transfer tax of 5% is paid by the buyer at a commercial bank in favor of the municipal budget. tax)) The tax has to be paid within 30 days from receiving payment instructions from the tax authority. 7 Apply for registration at the Land Registry 6 days BAM 30; ( Agency : Municipal Court of Sarajevo (Land Registry Office) ) Parties submit the registration application and other documents for the transfer of the ownership to the competent court land registry office. The procedure can take less time when the party sends the urgency letter. All data on companies is stored in electronic forms, so the issuing of the court extract requires only printing of the stored data. The land registry forwards this information to the Cadastre. The documentation shall include (1) purchase agreement, and (2) certificate of the tax payment. Page 26 Doing Business 2020 Bosnia and Herzegovina Takes place simultaneously with previous procedure. Page 27 Doing Business 2020 Bosnia and Herzegovina Details – Registering Property in Bosnia and Herzegovina – Measure of Quality Answer Score Quality of the land administration index (0-30) 16.5 Reliability of infrastructure index (0-8) 5.0 Type of land registration system in the economy: Dual system (Title & Deed) What is the institution in charge of immovable property registration? Municipal Court Sarajevo-Land Registry Office In what format are past and newly issued land records kept at the immovable property registry of the largest Computer/Scanned 1.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Cadastre registry (for each Municipality in Sarajevo Canton) In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Computer/Fully digital 2.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information Yes 1.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Separate databases 0.0 kept in a single database, in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same identification No 0.0 number for properties? Transparency of information index (0–6) 4.0 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Freely accessible by 1.0 in the largest business city? anyone Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, online 0.5 and if so, how? Link for online access: http://eregistar.centar. ba/registar/05-06- promjena-upisa- posjedovnog-stanja/ Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable Yes, online 0.5 property registration in the largest business city made publicly available–and if so, how? Link for online access: http://eregistar.centar. ba/registar/05-06- promjena-upisa- posjedovnog-stanja/ Does the agency in charge of immovable property registration agency formally commit to deliver a legally Yes, online 0.5 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: http://eregistar.centar. ba/registar/05-06- promjena-upisa- posjedovnog-stanja/ Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency No 0.0 in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property Yes 0.5 registration agency? Number of property transfers in the largest business city in 2018: 36996.0 Who is able to consult maps of land plots in the largest business city? Freely accessible by 0.5 anyone Page 28 Doing Business 2020 Bosnia and Herzegovina Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, online 0.5 Link for online access: http://www.fgu.com.b a/sr/492.html Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and No 0.0 if so, how does it communicate the service standard? Link for online access: Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 2.0 Are all privately held land plots in the largest business city formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? No 0.0 Are all privately held land plots in the largest business city mapped? Yes 2.0 Are all privately held land plots in the economy mapped? No 0.0 Land dispute resolution index (0–8) 5.5 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Law on Property Rights 2013 and Law on Land Registry Books Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Type of guarantee: State guarantee Legal basis: Law on Property Rights 2013 and Law on Land Registry Books Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who Yes 0.5 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: The Law on Land Registry Books and the Law on Bounding Relations Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Lawyer; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Is there a national database to verify the accuracy of government issued identity documents? No 0.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local The Municipal Court businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located in Sarajevo in the largest business city? How long does it take on average to obtain a decision from the first-instance court for such a case (without Between 1 and 2 2.0 appeal)? years Are there publicly available statistics on the number of land disputes at the economy level in the first instance No 0.0 court? Number of land disputes in the economy in 2018: Equal access to property rights index (-2–0) 0.0 Page 29 Doing Business 2020 Bosnia and Herzegovina Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 30 Doing Business 2020 Bosnia and Herzegovina Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral. Credit registry coverage (% of adults) • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 31 Doing Business 2020 Bosnia and Herzegovina Getting Credit - Bosnia and Herzegovina Indicator Bosnia and Europe & Central OECD high Best Regulatory Herzegovina Asia income Performance Strength of legal rights index (0-12) 7 7.8 6.1 12 (5 Economies) Depth of credit information index (0-8) 6 6.7 6.8 8 (53 Economies) Credit registry coverage (% of adults) 47.1 24.0 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 14.0 41.7 66.7 100.0 (14 Economies) Figure – Getting Credit in Bosnia and Herzegovina – Score 65.0 Score - Getting Credit Figure – Getting Credit in Bosnia and Herzegovina and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 85.0: Montenegro (Rank: 15) 72.2: Regional Average (Europe & Central Asia) 70.0: Czech Republic (Rank: 48) 65.0: Bosnia and Herzegovina (Rank: 67) 50.0: Croatia (Rank: 104) 45.0: Greece (Rank: 119) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 32 Doing Business 2020 Bosnia and Herzegovina Figure – Legal Rights in Bosnia and Herzegovina and comparator economies 14 12 12 Index Score 10 7.8 8 7 7 6 5 4 2 2 0 Bosnia Croatia Czech Greece Montenegro Europe and Republic & Herzegovina Central Asia Page 33 Doing Business 2020 Bosnia and Herzegovina Details – Legal Rights in Bosnia and Herzegovina Strength of legal rights index (0-12) 7 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents Yes to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description Yes of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the No original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; Yes and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? Yes Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third Yes party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? No Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? No Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell No the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Bosnia and Herzegovina and comparator economies 8 7 7 6.7 7 6 Index Score 6 5 5 5 4 3 2 1 0 Bosnia Croatia Czech Greece Montenegro Europe and Republic & Herzegovina Central Asia Page 34 Doing Business 2020 Bosnia and Herzegovina Details – Credit Information in Bosnia and Herzegovina Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? No Yes 1 Are both positive and negative credit data distributed? Yes Yes 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes Yes 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes Yes 1 By law, do borrowers have the right to access their data in the credit bureau or No No 0 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help No No 0 banks and financial institutions assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 0 1,051,377 Number of firms 321,004 26,717 Total 321,004 1,078,094 Percentage of adult population 14.0 47.1 Page 35 Doing Business 2020 Bosnia and Herzegovina Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James appointed 60% of the shareholder-elected members. • Ease of shareholder suits index (0–10): Access to internal - Has not adopted bylaws or articles of association that go beyond the minimum requirements. corporate documents; Evidence obtainable during trial and allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0–20): Sum of the - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and extent of shareholders rights, extent of ownership and control directors that approved the transaction. and extent of corporate transparency indices • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 36 Doing Business 2020 Bosnia and Herzegovina Protecting Minority Investors - Bosnia and Herzegovina Stock exchange information Stock exchange Sarajevo Stock Exchange Stock exchange URL http://www.sase.ba Listed firms with equity securities 32 City Covered Sarajevo Indicator Bosnia and Europe & Central OECD high Best Regulatory Herzegovina Asia income Performance Extent of disclosure index (0-10) 3.0 7.5 6.5 10 (13 Economies) Extent of director liability index (0-10) 6.0 5.0 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 5.0 6.8 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 4.0 3.4 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 5.0 3.7 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 5.0 4.1 5.7 7 (13 Economies) Figure – Protecting Minority in Bosnia and Herzegovina – Score 56.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Bosnia and Herzegovina and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 70.0: Greece (Rank: 37) 70.0: Croatia (Rank: 37) 62.0: Czech Republic (Rank: 61) 62.0: Montenegro (Rank: 61) 61.0: Regional Average (Europe & Central Asia) 56.0: Bosnia and Herzegovina (Rank: 88) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 37 Doing Business 2020 Bosnia and Herzegovina Figure – Protecting Minority Investors in Bosnia and Herzegovina and comparator economies – Measure of Quality Bosnia and Herzegovina 5 6 3 5 4 5 Croatia 5 6 5 7 6 6 Czech Republic 4 6 2 5 5 9 Greece 6 4 9 6 5 5 Montenegro 6 8 5 3 3 6 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 Europe & Central Asia 4.1 4.8 7.2 3.6 3.4 6.8 0 5 10 15 20 25 30 35 40 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 38 Doing Business 2020 Bosnia and Herzegovina Details – Protecting Minority Investors in Bosnia and Herzegovina – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 3.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of directors 2.0 excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Existence of a conflict 1.0 without any specifics Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) No disclosure 0.0 obligation Must Buyer immediately disclose the transaction to the public? (0-2) No disclosure 0.0 obligation Extent of director liability index (0-10) 6.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to No 0.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if unfair or 2.0 prejudicial Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) Yes 1.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) Yes 1.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of fraud 0.0 or bad faith Ease of shareholder suits index (0-10) 5.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Documents that the 1.0 defendant relied on Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) No 0.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) No 0.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 4.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? No 0.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? Yes 1.0 Do shareholders elect and dismiss the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? No 0.0 Extent of ownership and control index (0-7) 5.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? Yes 1.0 Page 39 Doing Business 2020 Bosnia and Herzegovina Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? Yes 1.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? Yes 1.0 Must Buyer pay declared dividends within a maximum period set by law? No 0.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0.0 Extent of corporate transparency index (0-7) 5.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and directorships in other No 0.0 companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? Yes 1.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? Yes 1.0 Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Page 40 Doing Business 2020 Bosnia and Herzegovina Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the second year of operation (calendar year 2018). Taxes and mandatory contributions are measured • Collecting information, computing tax payable at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output • Social contributions, labor taxes paid by employer VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 41 Doing Business 2020 Bosnia and Herzegovina Paying Taxes - Bosnia and Herzegovina Indicator Bosnia and Europe & Central OECD high Best Regulatory Herzegovina Asia income Performance Payments (number per year) 33 14.4 10.3 3 (2 Economies) Time (hours per year) 411 213.1 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 23.7 31.7 39.9 26.1 (33 Economies) Postfiling index (0-100) 47.7 68.2 86.7 None in 2018/19 Figure – Paying Taxes in Bosnia and Herzegovina – Score 50.0 44.0 100.0 47.7 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Bosnia and Herzegovina and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 81.8: Croatia (Rank: 49) 81.4: Czech Republic (Rank: 53) 77.9: Regional Average (Europe & Central Asia) 77.1: Greece (Rank: 72) 76.7: Montenegro (Rank: 75) 60.4: Bosnia and Herzegovina (Rank: 141) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 42 Doing Business 2020 Bosnia and Herzegovina Figure – Paying Taxes in Bosnia and Herzegovina and comparator economies – Measure of Quality 100 90.5 90 80 76.7 70.5 68.2 Index score 70 66.7 60 47.7 50 40 30 20 10 0 Bosnia Croatia Czech Greece Montenegro Europe and Republic & Herzegovina Central Asia Page 43 Doing Business 2020 Bosnia and Herzegovina Details – Paying Taxes in Bosnia and Herzegovina Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Social security 1.0 online 81.0 10.5% gross salaries 11.84 contributions Corporate 12.0 68.0 10% taxable profits 8.40 income tax Forestry tax 5.0 0.07% turnover 1.24 Contribution for 0.0 jointly 25% for every average net 0.95 professional disabled person salary in FBiH rehabilitation and that must have employment of been employed disabled persons Local property 1.0 4 BAM per square meter 0.46 tax Contribution for 0.0 jointly 0.5% net salaries 0.39 protection against natural and other disasters Water protection 0.0 jointly 0.5% net salaries 0.39 Signage fee 1.0 200 BAM 0.02 Fuel tax 1.0 included into fuel 0.00 small amount price Employee paid - 0.0 jointly 31% gross salaries 0.00 withheld Social security contributions VAT 12.0 262.0 17% value added 0.00 not included Totals 33 411 23.7 Page 44 Doing Business 2020 Bosnia and Herzegovina Details – Paying Taxes in Bosnia and Herzegovina – Tax by Type Taxes by type Answer Profit tax (% of profit) 8.4 Labor tax and contributions (% of profit) 13.6 Other taxes (% of profit) 1.7 Page 45 Doing Business 2020 Bosnia and Herzegovina Details – Paying Taxes in Bosnia and Herzegovina – Measure of Quality Answer Score Postfiling index (0-100) 47.7 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? Yes Restrictions on VAT refund process none Percentage of cases exposed to a VAT audit (%) 75% - 100% Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) 40.0 20.0 Time to obtain VAT refund (weeks) 19.0 69.5 Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 75% - 100% Time to comply with a corporate income tax correction (hours) 30.0 47.7 Time to complete a corporate income tax correction (weeks) 14.9 53.6 Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 46 Doing Business 2020 Bosnia and Herzegovina Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about • Inspections by other agencies (if applied to more than 20% of exchange rates. shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 47 Doing Business 2020 Bosnia and Herzegovina Trading across Borders - Bosnia and Herzegovina Indicator Bosnia and Europe & Central OECD high Best Regulatory Herzegovina Asia income Performance Time to export: Border compliance (hours) 5 16.1 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 70 150.0 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 4 25.1 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 22 87.6 33.4 0 (20 Economies) Time to import: Border compliance (hours) 6 20.4 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 109 158.8 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 8 23.4 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 27 85.9 23.5 0 (30 Economies) Figure – Trading across Borders in Bosnia and Herzegovina – Score 97.4 93.4 98.0 94.6 98.2 91.0 97.1 96.2 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Bosnia and Herzegovina and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 95.7: Bosnia and Herzegovina (Rank: 27) 93.7: Greece (Rank: 34) 91.9: Montenegro (Rank: 41) 87.3: Regional Average (Europe & Central Asia) 100: Czech Republic (Rank: 1) 100: Croatia (Rank: 1) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 48 Doing Business 2020 Bosnia and Herzegovina Figure – Trading across Borders in Bosnia and Herzegovina – Time and Cost Time (hours) Cost (USD) 9 109 120 8 8 100 7 Time (hours) 6 Cost (USD) 6 70 80 5 5 4 60 4 3 40 27 2 22 20 1 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 49 Doing Business 2020 Bosnia and Herzegovina Details – Trading across Borders in Bosnia and Herzegovina Characteristics Export Import Product HS 94 : Furniture; bedding, mattresses, mattress HS 8708: Parts and accessories of motor vehicles supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated signs, illuminated name­plates and the like; prefabricated buildings Trade partner Germany Germany Border Slavonski Brod border crossing Slavonski Brod border crossing Distance (km) 215 215 Domestic transport time (hours) 4 4 Domestic transport cost (USD) 296 296 Details – Trading across Borders in Bosnia and Herzegovina – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 3.7 70.0 customs authorities Export: Clearance and inspections required by 0.0 0.0 agencies other than customs Export: Port or border handling 1.5 0.0 Import: Clearance and inspections required by 4.3 85.0 customs authorities Import: Clearance and inspections required by 0.5 23.5 agencies other than customs Import: Port or border handling 1.5 0.0 Page 50 Doing Business 2020 Bosnia and Herzegovina Details – Trading across Borders in Bosnia and Herzegovina – Trade Documents Export Import Commercial invoice Commercial invoice Packing list Packing list CMR Waybill CMR Waybill Customs export declaration Customs import declaration EUR 1 - Certificate of Origin EUR 1 - Certificate of origin Export License Market inspection certificate Page 51 Doing Business 2020 Bosnia and Herzegovina Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. - The value of the dispute is 200% of the income per capita or the equivalent in local currency of • Court costs USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. • Alternative dispute resolution (0-3) Page 52 Doing Business 2020 Bosnia and Herzegovina Enforcing Contracts - Bosnia and Herzegovina Standardized Case Claim value BAM 17,996 Court name Sarajevo Municipal Court, Commercial Division City Covered Sarajevo Indicator Bosnia and Europe & Central OECD high Best Regulatory Herzegovina Asia income Performance Time (days) 595 496.4 589.6 120 (Singapore) Cost (% of claim value) 36.0 26.6 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 9.5 10.3 11.7 None in 2018/19 Figure – Enforcing Contracts in Bosnia and Herzegovina – Score 61.1 59.6 52.8 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Bosnia and Herzegovina and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 70.6: Croatia (Rank: 27) 66.8: Montenegro (Rank: 44) 65.5: Regional Average (Europe & Central Asia) 57.8: Bosnia and Herzegovina (Rank: 93) 56.4: Czech Republic (Rank: 103) 48.1: Greece (Rank: 146) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 53 Doing Business 2020 Bosnia and Herzegovina Figure – Enforcing Contracts in Bosnia and Herzegovina – Time and Cost Time (days) Cost (% of claim value) 1800 1711 40 Cost (% of claim value) 36.0 1600 33.8 35 1400 30 26.6 Time (days) 25.7 1200 22.4 21.5 25 1000 20 800 650 15.2 678 595 545 589.6 15 600 496.4 400 10 200 5 0 0 Bosnia Croatia Czech Europe Greece Montenegro OECD and Republic & high Herzegovina Central income Asia Page 54 Doing Business 2020 Bosnia and Herzegovina Figure – Enforcing Contracts in Bosnia and Herzegovina and comparator economies – Measure of Quality Bosnia and Herzegovina 2 2.5 0 5 Croatia 2.5 3.5 2 5 Czech Republic 2 3 3 1.5 Greece 2.5 5 2 3 Montenegro 2 3.5 1 5 OECD high income 2.5 3.2 2.4 3.6 Europe & Central Asia 2.3 2.8 1.3 3.6 0 2 4 6 8 10 12 14 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Bosnia and Herzegovina Indicator Time (days) 595 Filing and service 30 Trial and judgment 385 Enforcement of judgment 180 Cost (% of claim value) 36.0 Attorney fees 25 Court fees 8 Enforcement fees 3 Quality of judicial processes index (0-18) 9.5 Court structure and proceedings (-1-5) 5.0 Case management (0-6) 2.5 Court automation (0-4) 0.0 Alternative dispute resolution (0-3) 2.0 Page 55 Doing Business 2020 Bosnia and Herzegovina Details – Enforcing Contracts in Bosnia and Herzegovina – Measure of Quality Answer Score Quality of judicial processes index (0-18) 9.5 Court structure and proceedings (-1-5) 5.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 2.5 1. Time standards 0.5 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? No 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? Yes 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? No 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) Yes 1.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? No 0.0 5. Are there any electronic case management tools in place within the competent court for use by judges? Yes 1.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? No 0.0 Court automation (0-4) 0.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? No 0.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? No 0.0 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public No through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made No available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.0 1. Arbitration 1.0 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— Yes that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 56 Doing Business 2020 Bosnia and Herzegovina 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 57 Doing Business 2020 Bosnia and Herzegovina Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have been implemented in each economy covered. • Assessors’ and auctioneers’ fees • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 58 Doing Business 2020 Bosnia and Herzegovina Resolving Insolvency - Bosnia and Herzegovina Indicator Bosnia and Europe & Central OECD high Best Regulatory Herzegovina Asia income Performance Recovery rate (cents on the dollar) 39.7 38.5 70.2 92.9 (Norway) Time (years) 3.3 2.3 1.7 0.4 (Ireland) Cost (% of estate) 9.0 13.3 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 0 .. .. .. Strength of insolvency framework index (0-16) 15.0 11.2 11.9 None in 2018/19 Figure – Resolving Insolvency in Bosnia and Herzegovina – Score 42.7 93.8 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Bosnia and Herzegovina and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 80.1: Czech Republic (Rank: 16) 68.2: Bosnia and Herzegovina (Rank: 37) 66.1: Montenegro (Rank: 43) 56.5: Croatia (Rank: 63) 55.7: Regional Average (Europe & Central Asia) 53.1: Greece (Rank: 72) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 59 Doing Business 2020 Bosnia and Herzegovina Figure – Resolving Insolvency in Bosnia and Herzegovina – Time and Cost Time (years) Cost (% of estate) 4 17.0 18 3.5 3.5 3.3 14.5 16 Cost (% of estate) 3.1 13.3 3 14 Time (years) 2.3 12 2.5 2.1 9.0 9.0 9.3 10 2 8.0 1.7 1.4 8 1.5 6 1 4 0.5 2 0 0 Bosnia Croatia Czech Europe Greece Montenegro OECD and Republic & high Herzegovina Central income Asia Page 60 Doing Business 2020 Bosnia and Herzegovina Figure – Resolving Insolvency in Bosnia and Herzegovina and comparator economies – Measure of Quality Bosnia and Herzegovina 6 3 3 3 Croatia 4 3 2 3 Czech Republic 5.5 2.5 3 3 Greece 5.5 2.5 1 2.5 Montenegro 6 2.5 1 3 OECD high income 5.3 2.8 2.1 1.9 Europe & Central Asia 4.5 2.5 2.3 1.7 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Bosnia and Herzegovina and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 80 70 67.5 60 50.3 50 39.7 38.5 40 35.2 32.0 30 20 10 0 Bosnia and Herzegovina Croatia Czech Republic Greece Montenegro Europe & Central Asia Page 61 Doing Business 2020 Bosnia and Herzegovina Details – Resolving Insolvency in Bosnia and Herzegovina Indicator Answer Score Proceeding foreclosure It is very likely that, based on information provided in case study assumptions, BizBank will initiate foreclosure, as Mirage can neither obtain a new loan from any other financial institution nor renegotiate its current loan with BizBank. Additionally, Mirage expects to have negative net worth and operating losses in both following years. Having these facts in mind, it is unlikely that any reorganization plan could be approved by the court. Therefore, the proceedings will be continued as foreclosure which will result with the sale of the hotel. Outcome piecemeal sale If BizBank initiates foreclosure, the hotel will be sold in order to settle the Mirages obligation toward BizBank. Time (in years) 3.3 It takes 3.3 years to finish foreclosure proceedings in Bosnia and Herzegovina. Most delays in the proceeding are due to the sale of the immovable property. Steps for sale of movable property are simpler. Generally, movable property could be sold by bankruptcy administrator either directly in negotiations with the third party or at a public auction. The main steps in the foreclosure proceedings (for sale of immovable property) are: 1. assessment of the immovable property value; 2. sale of the immovable property. The sale of the property is conducted by the court. 3. payment of the price and transfer of the immovable property to the buyer. There are 3 main reasons for delay during the sale of immovable property: • the slowness of the courts that lead the sale procedure; • the complexity of the court procedure for sale of the immovable property, which slows the sale procedure. For example, the immovable property cannot be sold below 1/2 of the assessed value at the first court hearing for the sale, respectively below 1/3 of the assessed value at the second court hearing for the sale of the property. Only at the third court hearing for the sale, the immovable property might be sold without any limitations regarding the assessed value. • potential objections of the secured creditor’s claim by a third party. In this case third party initiates separate litigation proceeding where he/she proves that the creditor does not have secured claim. This litigation might take a year or more. Cost (% of estate) 9.0 Most of the expenses will be used to pay fees. Recovery rate 39.7 (cents on the dollar) Page 62 Doing Business 2020 Bosnia and Herzegovina Details – Resolving Insolvency in Bosnia and Herzegovina – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 15.0 Commencement of proceedings index (0-3) 3.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for 1.0 both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor 1.0 may file for both liquidation and reorganization What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (a) Debtor is 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value generally unable to of its assets pay its debts as they mature Management of debtor's assets index (0-6) 6.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the Yes 1.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0 Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of Yes 1.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (b) Yes over ordinary 1.0 unsecured creditors but not over secured creditors Reorganization proceedings index (0-3) 3.0 Which creditors vote on the proposed reorganization plan? (b) Only creditors 1.0 whose rights are affected by the proposed plan Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as Yes 1.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote Yes 1.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 3.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency Yes 1.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? Yes 1.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting Yes 1.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 63 Doing Business 2020 Bosnia and Herzegovina Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 64 Doing Business 2020 Bosnia and Herzegovina Employing Workers - Bosnia and Herzegovina Details – Employing Workers in Bosnia and Herzegovina Answer Hiring Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) 36.0 Maximum length of fixed-term contracts, including renewals (months) 36.0 Minimum wage applicable to the worker assumed in the case study (US$/month) 231.3 Ratio of minimum wage to value added per worker 0.3 Maximum length of probationary period (months) 6.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 25.0 Premium for work on weekly rest day (% of hourly pay) 15.0 Premium for overtime work (% of hourly pay) 25.0 Restrictions on night work? No Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 20.0 Paid annual leave for a worker with 5 years of tenure (working days) 20.0 Paid annual leave for a worker with 10 years of tenure (working days) 20.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 20.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? No Priority rules for reemployment? Yes Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 2.0 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 2.0 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 2.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 2.0 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 0.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 7.2 Page 65 Doing Business 2020 Bosnia and Herzegovina Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 14.4 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 7.2 Unemployment protection after one year of employment? Yes Page 66 Doing Business 2020 Bosnia and Herzegovina Business Reforms in Bosnia and Herzegovina From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2018 Getting Electricity: Bosnia and Herzegovina made getting electricity faster by internal reorganization at the utility and by deploying more resources into the distribution and connection process, which facilitated issuance of electro-energetic consent. Registering Property: Bosnia and Herzegovina made registering property easier by increasing the transparency of the land administration system. Employing Workers: Bosnia and Herzegovina adopted legislation that decreased wage premiums for overtime, weekly holiday, night work, and increased minimum wage. DB2017 Starting a Business: Bosnia and Herzegovina made starting a business easier by reducing the paid-in minimum capital requirement for limited liability companies and increasing the efficiency of the notary system. Paying Taxes: Bosnia and Herzegovina made paying taxes easier by abolishing the tourist community fee. DB2014 Paying Taxes: Bosnia and Herzegovina introduced a penalty for failure to employ the required minimum number of people with disabilities—though it also temporarily abolished the forestry tax. DB2013 Registering Property: Bosnia and Herzegovina made it easier to transfer property between companies by computerizing the commercial registry. Getting Credit: Bosnia and Herzegovina made access to credit information more difficult by stopping the private credit bureau’s collection of credit information on individuals. Paying Taxes: Bosnia and Herzegovina eased the administrative burden of filing and paying social security contributions by implementing electronic filing and payment systems. DB2012 Starting a Business: Bosnia and Herzegovina made starting a business easier by replacing the required utilization permit with a simple notification of commencement of activities and by streamlining the process for obtaining a tax identification number. Dealing with Construction Permits: Bosnia and Herzegovina made dealing with construction permits easier by fully digitizing and revamping its land registry and cadastre. DB2011 Registering Property: Bosnia and Herzegovina reduced delays in property registration at the land registry in Sarajevo. Paying Taxes: Bosnia and Herzegovina simplified its labor tax processes, reduced employer contribution rates for social security and abolished its payroll tax. DB2010 Dealing with Construction Permits: Bosnia and Herzegovina improved its construction permitting system by reducing the time needed to register a new building at the courts and land cadastre. DB2009 Dealing with Construction Permits: Bosnia and Herzegovina made dealing with construction permits easier by speeding up procedures at the cadastre and land book registry and reducing the cost of a new telephone connection. Registering Property: Bosnia and Herzegovina speeded up property registration by computerizing files at the land registry in Sarajevo. Paying Taxes: Bosnia and Herzegovina made paying taxes easier and less costly for companies by reducing the corporate income tax rate, exempting profit distributions (including dividends) from taxes and allowing tax losses to be carried forward for 5 years. Resolving Insolvency: Bosnia and Herzegovina improved the insolvency process by strengthening professional requirements for bankruptcy trustees. DB2008 Trading across Borders: Bosnia and Herzegovina made trading across borders easier by enacting a new customs law, establishing a new customs administration and implementing an electronic data interchange system. Page 67 Doing Business 2020 Bosnia and Herzegovina Page 68