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Energy Biomass business development potential in Bosnia and Herzegovina mr. Sanjin Avdić, dipl.ing.mas., MBA Head of energy department „Biomasse in Serbien und Bosnien-Herzegowina“, 21. Juni 2012, München www.german-renewable-energy.com

Biomass business development potential in Bosnia and ... · Energy Biomass business development potential in Bosnia and Herzegovina mr. Sanjin Avdić, dipl.ing.mas., MBA Head of energy

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Energy

Biomass business development potential in

Bosnia and Herzegovina

mr. Sanjin Avdić, dipl.ing.mas., MBA

Head of energy department

„Biomasse in Serbien und Bosnien-Herzegowina“, 21. Juni 2012, München

www.german-renewable-energy.com

INTRODUCTION

• BiH‘s legal framework/system

• Setting up a business in BiH

• Taxes in BiH

• Status and incentives for foreign investors in BiH

• Biomass feed-in-tariffs

• Co-financing opportunities (credit lines, CDM, TAM BAS

programme...)

• Association „Biomass in Bosnia and Herzegovina“ina“

Biomass business development potential in BiH

BiH LEGAL SYSTEM

Business related Laws and Regulations in BiH:

• Law on Value Added Tax of BiH

• Law on Corporate Income Tax of F BiH

• Law on Corporate Income Tax of RS

• Framework Law on Registration of Business Entities in BiH

• Law on Registration of Business Entities of FBiH

• Law on Registration of Business Entities of RS

• Customs Tariff of BiH

• Customs Policy Law of BiH

• Decision on Implemental Regulations of the Customs Policy Law of BiH

• Decision on Harmonizing and Establishing Customs Tariffs of BiH

Foreign investors related Laws and Regulations in BiH:

• Law on the Policy of Foreign Direct Investment of BiH

• Law on Foreign Investment of FBiH

• Law on Foreign Investment of RS

Biomass business development potential in BiH

BiH LEGAL SYSTEM

Biomass business development potential in BiH

SETTING UP A BUSINESS IN BiH

• According to the law in BiH a company can be organized in one of the following forms:

1. Unlimited Joint Liability Company (d.n.o.)

2. Limited partnership (k.d.)

3. Joint Stock Company (d.d.)

4. Limited liability company (d.o.o.)

Biomass business development potential in BiH

SETTING UP A BUSINESS IN BiH

• Equity capital: 2.000 KM (1.000 €)

• Registration costs: cca 1.000 KM (500 €)

• Place of registration: Municipal Court with the economic/commercial department

• Required registration time: 40 days

(theoretically)

Registration facts (FBiH)

Q: REGISTRATION PROCESS ?

Biomass business development potential in BiH

SETTING UP A BUSINESS IN BiH

Establishment

Contract (made by notary)

Payment of initial capital

Registration at the competent court

Making a company stamp

Opening a bank account in a

commercial bank

Registration of the company and staff at

Pension and Disability Funds, TAX

administration

Obtain permission for beginning of activity

Start business

Biomass business development potential in BiH

SETTING UP A BUSINESS IN BiH

Establishment

Contract (made by notary)

Payment of initial capital

Registration at the Ministry of Foreign Trade and Economic

Relations of BiH

Registration at the competent court

Making a company stamp

Opening a bank account in a

commercial bank

Registration of the company and staff at

Pension and Disability Funds, TAX

administration

Obtain permission for beginning of activity

Start business

Biomass business development potential in BiH

TAX RATES

• Corporate income tax rate: 10% (no progressive rate in function of profit)

• Dividends tax rate: 5%

• Value added tax rate: 17%

• Property tax rate: depending on the location (FBiH 8%, Ze-Do Canton 3%, RS and Brčko District 5%)

• Personal income tax: 10% in FBiH and Brčko District, 8% in RS

Biomass business development potential in BiH

TAX RATES

• Bosnia and Herzegovina has signed 32 Agreements on Avoidance of Double Taxation with the following

countries:

Albania, Austria, Belgium, Croatia, Czech,Rep.Cyprus, Denmark, Egypt, Finland, France, Germany,

Greece, Hungary, Iran, Italy, Jordan, Kuwait, Moldova, Malesya, Netherlands, Norway, Pakistan, Poland,

Romania, Serbia, Slovakia, Slovenia, Spain, Sweden, Turkey, United Arab Emirates and United Kingdom

• Initiated but not signed with:

Algeria, Belarus, Ireland, Latvia, Macedonia, Malta, Qatar, Russia, Syria and Singapore

Biomass business development potential in BiH

TAX INCENTIVE

• 3 tax exemptions way:

1. The Federation Law on the Corporate Income Tax enables the taxpayer, who in the year for which the

corporate income tax is being determined, has achieved 30% of their total revenue by export to be

exempted from the tax payment for that year.

2. Taxpayer who in the period of five consequent years invests into production in the value of minimum

20 million KM, on the territory of the Federation of Bosnia and Herzegovina, is being exempted from

the payment of corporate income tax for the period of five years beginning from the first investment

year, in which minimum 4 million KM must be invested.

3. In the Federation of BiH, the taxpayer who employs more than 50% of disabled persons and persons

with special needs longer than one year is being exempted from the payment of corporate income tax

for the year in which more than 50% disabled persons and persons with special needs were employed.

Biomass business development potential in BiH

SOCIAL SECURITY CONTRIBUTIONS

• In the BiH there are contributions paid by the employer and those paid by the employee (on gross wage

amount in addition to contributions and taxes).

Employee’s Share:

• FBiH: 17% for pension insurance, 12.5% for health insurance, 1.5% for unemployment insurance

(in total: 31% on gross wage)

• RS: 17% for pension insurance, 11,5% for health insurance, 0,7% for unemployment insurance, 1,4% for

child protection

(in total: 30,6 % on gross wage)

• Brčko District: 17% for pension insurance, 12% for health insurance

(total: 29% on gross wage)

Employer’s Share:

• FBiH: 6% for pension insurance, 4% for health insurance, 0.50% for unemployment insurance

(in total: 10.50% on gross wage)

• Brčko District: Brčko District: 6% for pension insurance

(in total: 6% on gross wage for employers who apply FBiH Law).

• In RS no such contributions are paid

Biomass business development potential in BiH

SOCIAL SECURITY CONTRIBUTIONS

• In the BiH there are contributions paid by the employer and those paid by the employee (on gross wage

amount in addition to contributions and taxes).

0%

5%

10%

15%

20%

25%

30%

35%

FBiH RS Brčko D.

child protection

unemployment insurance

health insurance

pension insurance

0%

2%

4%

6%

8%

10%

12%

FBiH RS Brčko D.

Employer’s Share Employee’s Share

Biomass business development potential in BiH

STATUS AND INCENTIVES FOR FOREIGN INVESTORS

• 2 basic facts:

1. Company with foreign investment enjoys equal legal status and carries on its business under equal

conditions and in an equal manner as do domestic companies

2. Foreign citizens in BiH exercise the same rights and freedoms as citizens of BiH exercise in the

country of the foreign citizen

Biomass business development potential in BiH

STATUS AND INCENTIVES FOR FOREIGN INVESTORS

• One of the incentives is the Foreign Investor Support Fund, provided by the Government of BiH (projects in

production, research and development sectors) - 2 million KM annualy

• Central Bank of Bosnia and Herzegovina maintains monetary stability by issuing domestic currency according to

the Currency Board arrangement - 1 KM: 0.51129 EUR

• Bosnia and Herzegovina has ratified/signed 39 Agreements on Promotion and Protection of Investments with

the following countries:

Albania Austria Belgium and Luxembourg Belarus China Croatia Czech Republic Denmark Egypt Finland France

Germany Greece Hungary India Iran Italy Jordan Kuwait Lithuania Macedonia Malaysia Moldova Netherlands

OPEC Fund Pakistan Portugal Qatar Romania Serbia Slovakia Slovenia Spain Switzerland Sweden Turkey

Ukraine United Kingdom USA (OPIC)

• Risk insurance is guaranteed by:

- European Union Investment Guarantee Trust Fund for Bosnia and Herzegovina

- US Overseas Private Investment Corporation (OPIC)

Biomass business development potential in BiH

FOREIGN TRADE

Biomass business development potential in BiH

FOREIGN TRADE

• Bosnia and Herzegovina signed the Central European Free Trade Agreement (CEFTA) with the

following countries:

Albania, Serbia, Moldova, Montenegro, Croatia, Macedonia, UNMIK/Kosovo.

• Free Trade Agreement with Turkey.

• BiH has preferential export regimes with:

all EU countries, Australia, Canada, Japan, New Zealand, Norway, Russia, Switzerland, USA and Iran

• BiH is a member of the WIPO Convention

Biomass business development potential in BiH

• Guaranteed purchase price for biomass generated electricity (feed

into the national grid)!

Gc = Rc x C

• Gc - Guaranteed purchase price

• Rc – reference price (for 2011. – 12,26 pf/kWh)

• C – tariff coeficient (depending on installed capacity and biomass

source)

• Increase for biomass within the last legistlation update (about 7%)

Biomass feed-in-tariffs in FBiH

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 18/33

Biomass business development potential in BiH

Biomass feed-in-tariffs in FBiH

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 19/33

Gc = Rc x C

C - tariff coeficient

Gc = 16,79 pf/kWh – 18,02 pf/kWh

Solid biomass from

forestry and

agriculture

Solid biomass from

wood-processing

industry

Micro (1kw – 150 kW) 1,47 1,43

Mini (>150 kW - 1MW) 1,45 1,41

Small (>1 MW – 10 MW) 1,43 1,39

Large (>10MW) 1,41 1,37

Biomass business development potential in BiH

Biomass feed-in-tariffs in Republica Srpska

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 20/33

Two prices:

• Guaranteed purchase price for biomass generated electricity (feed into the

national grid)

• Premium price

Biomass business development potential in BiH

Biomass feed-in-tariffs in Republica Srpska

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 21/33

Biomass generated electricity Guaranteed

price

[KM/kWh]

Refernt price

[KM/kWh]

Premium price

[KM/kWh]

1 MW 0,1988 0,0541 0,1447

1 MW – 10 MW 0,1730 0,0541 0,1189

Company needs to qualify for the premium price!

Biomass business development potential in BiH

Co-financing opportunities

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 22/33

EE/RES credit lines

CDM projects (emission trading)

Other possibilities

Biomass business development potential in BiH

Co-financing opportunities

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 23/33

EE/RES credit lines

Raiffeisen Bank d.d. Bosna i Hercegovina (via EBRD)

NLB Razvojna a.d. Banja Luka (FiM GGF)

Biomass business development potential in BiH

Co-financing opportunities

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 24/33

CDM projects (emission trading)

Kyoto protocol financing mechanism

Developed

countries

BiH

(transition

country) Investing in projects

CER

Biomass business development potential in BiH

Co-financing opportunities

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 25/33

CDM projects (emission trading)

BiH is a non-Annex 1 country

No obligations for emission reduction

DNA in BiH (since december 2010.)

1 tCO2 = 1 CER (grid emission factor of BiH 0,70 tCO2/MWh -

conservative)

Biomass business development potential in BiH

CDM projects (emission trading)

- CO2

- 40 GWh/godišnje

- EF = 0.7 t CO2/MWh

- sedmogodišnji ugovor

n CER = n MWh * EF t CO2/MWh n CER = 40,000 MWh * 0.7 t CO2/MWh

28,000 t CO2/a

1 CER = 3,55 €

= 28,000 CER/a

Co-financing opportunities

Biomass business development potential in BiH

CDM projects (emission trading)

• Market volatility

• 20 €/CER (2008.)

• 12€/CER (midd2011.)

• 3,55 €/CER (25.05.2012.)

Biomass business development potential in BiH

Co-financing opportunities

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 28/33

Other possibilities

EBRD TAM-BAS (private company, 51% domestic ownership)

Development Bank of FBiH and RS (4% interest rate, 1 year grace period)

International development organisations and institutions

Biomass business development potential in BiH

Association „Biomass in Bosnia and Herzegovina“

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 29/33

Supported by UNDP GEF in BiH

22 founders of which 18 legal entities

State level

Members:

Equipment producers, energy carrier producers, ESCO companies, consulting

companies, Thermal energy and electricity producers, project developers,

private persons

Biomass business development potential in BiH

Association „Biomass in Bosnia and Herzegovina“

“Pouke za prelazak na privredu s manjom emisijom ugljika,, Sarajevo – Hotel Europa 30/33

Contact information:

Udruzenje Biomasa u BiH

Vilsonovo setaliste 9.

71000 Sarajevo

Bosnia and Herzegovina

Association Secretary - Mrs. Dragana Ristić

[email protected]

00387 33 613 193

www.biomass-association.ba

Biomass business development potential in BiH

CONCLUSION

31/33

BiH‘s legal framework/system

Tax exemptions

Biomass feed-in-tariffs

Co-financing opportunities (credit lines, CDM, TAM BAS programme...)

Association „Biomass in Bosnia and Herzegovina“

Biomass business development potential in BiH

THANK YOU FOR YOUR ATTENTION! mr. Sanjin Avdić, dipl.ing.maš, MBA

Voditelj odjela energije/ Head of energy department

CETEOR d.o.o. Sarajevo TEL: +387 33 563 587

MOB: +387 62 558 598 [email protected]

www.ceteor.ba

Biomass business development potential in BiH