3 August 2020

Possibility Of Acquiring Title To Real Estate By Foreign Persons In Bosnia And Herzegovina

Bosnia and Herzegovina is a country situated in South-eastern Europe, bordered by the Republic of Croatia, Serbia and Montenegro.
Bosnia Herzegovina Real Estate and Construction
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  1. Introduction

Bosnia and Herzegovina is a country situated in South-eastern Europe, bordered by the Republic of Croatia, Serbia and Montenegro. By the state organization, Bosnia and Herzegovina is a complex federal state with elements of confederation composed of two Entities (the Federation of Bosnia and Herzegovina - FBiH and the Republika Srpska - RS) and one independent unit called Brčko District. Bosnia and Herzegovina is characterised by multi-nationality - Bosniacs, Croats and Serbs are three constituent peoples. Total surface area of the country is about 50 000 square km and major part of the territory consists of high mountains covered in forests and pastures. There are also many lakes and rivers that make the country very rich in natural resources. Town Neum, being the only one coastal Bosnia and Herzegovina town, has a strategic importance through which Bosnia and Herzegovina has an access to the Adriatic Sea. Also, the religious tourism is well developed especially in a place of Medjugorje which has become one of the most popular shrines for Catholics in the world and which is visited by more than a million guests every year. Considering the attractive position and the abundance of natural beauties, foreigners are becoming more and more interested in acquisition of ownership of real estate in Bosnia and Herzegovina and therefore in this article we shall explain the conditions under which they can become owners of land and other real estate.

  1. The term ‘foreign person'

A foreigner is any natural person who does not have the citizenship of Bosnia and Herzegovina. If we speak about foreign legal persons, than we refer all those companies which are not registered in the territory of Bosnia and Herzegovina, that is, the companies with their headquarters located abroad. It is important to mention that within the meaning of the Law on Property Rights the following persons are not considered to be foreigners:

  • The one who had citizenship of Bosnia and Herzegovina in earlier period of time,
  • Who were born in Bosnia and Herzegovina,
  • Who are the descendants of the citizens of Bosnia and Herzegovina.

This arrangement aims to facilitate the purchase of real estate for the persons closely connected with Bosnia and Herzegovina because of their descent.

Also, there is one additional option for any foreigner within this topic, which comes in form of obtaining the citizenship of Bosnia and Herzegovina, if all the legal requirements are met. That ultimately implies full rights like any other citizen of Bosnia and Herzegovina, including the acquiring title to real estate, all set up by Law on citizenship of Bosnia and Herzegovina and Law on foreigners of Bosnia and Herzegovina.

  1. Acquiring title to real property for foreign person in Bosnia and Herzegovina

The Law on Property Rights in Bosnia and Herzegovina from 2014 prescribed the possibility for foreign legal and foreign natural persons in Bosnia and Herzegovina to become real estate owners but with the rule of reciprocity. The term reciprocity means that the foreign persons in Bosnia and Herzegovina shall have the same rights if the country they come from grants the citizens of Bosnia and Herzegovina such rights. After seeking the opinion of the Ministry of Foreign Affairs of Bosnia and Herzegovina, every year Federation Bosnia and Herzegovina Ministry of Justice and the Republika Srpska Ministry of Justice publish the list of the countries which Bosnia and Herzegovina doesn't have a reciprocity in acquiring real estate titles with, or the reciprocity is restricted by special conditions. According to the list of the countries whose both the citizens and legal persons are allowed to acquire title to real estate in Bosnia and Herzegovina, it appears that the foreigners from almost all European countries are allowed to acquire real estate without major obstacles. In the list there are also many countries out of Europe whose persons are allowed to acquire title to real estate in Bosnia and Herzegovina. Never the less, the Law on Property Rights provides certain restrictions in acquiring the ownership of real property for the foreigners. It is provided that a foreigner may not own a real estate property in the territory which had been declared by the Law to be the territory where the foreigners are not allowed to acquire land title, in order to protect the interests and security of both the Federation and the RS.

  1. Process of buying and selling of real estate in Bosnia and Herzegovina

After having selected a real estate, the first step necessary to take is to check the condition in the public registries in which the real property had been entered, that is the cadastre and the land registers, which you can get familiar with going here. Land registers are kept for the area of every municipality and town in Bosnia and Herzegovina separately and regardless of their legal interest, any person is entitled to have insight into those registers. That is of utmost importance in order to check if the real property had been registered in the name of the seller who a buying and selling contract is concluded with, and that such real property has not been mortgaged or encumbered. The next step is a conclusion of the buying and selling contract between the seller and the buyer in notary. After the contract has been concluded, the buyer should be obligated to pay the tax on real estate transactions considering that only after the mentioned tax has been paid, the buyer is allowed to be registered in the land registry as the new owner of the real estate. The rate of property tax is various at the level of Bosnia and Herzegovina. In Federation Bosnia and Herzegovina (FBiH) the tax rate amounts to 5% while in the Republika Srpska (RS) the rate is up to 0.20%. In the territory of Brčko District the rate varies from 0.10 to 0.20%. The base of tax on real estate transactions is real estate market value. The final step leading to the registration of the buyer as a new real estate owner is an application for registration in the Land Registry office where such real estate was registered. The practice shows that those applications are resolved within a few days, after which the buyer receives a final decision on registered transfer of ownership.

Originally published 30 July, 2020

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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