The tax obligations of business entities in Bosnia and Herzegovina — including obligations related to Value Added Tax (VAT), corporate income tax, employee salary contributions, and other direct taxes — represent a significant portion of public revenue. Managing these obligations falls under the responsibility of the company’s leadership, particularly the director, who, as the responsible person, may bear both criminal and civil (material) liability in cases of tax evasion, non-compliance, or other tax-related offenses.
Criminal Laws – Basis for Liability
- Bosnia and Herzegovina (state level)
At the state level, the Criminal Code of Bosnia and Herzegovina (“Official Gazette of BiH”, Nos. 3/03, 32/03, 37/03, 54/04, etc.) is applicable. Article 210 stipulates the criminal offense of “Tax or Contribution Evasion”, which states:
“Whoever, with the intention of partially or fully evading the payment of taxes, contributions, or other legally prescribed dues, provides false information on lawfully acquired income, expenses, or items relevant to determining the amount of tax liability or fails to report such data, and the amount of dues being evaded exceeds 10,000 KM, shall be punished with imprisonment from six months to five years and a fine.”
In this case, criminal liability may extend to the company director as the responsible person within the legal entity (Article 124, paragraph 2), if they exercised control over tax obligation management.
- Federation of Bosnia and Herzegovina
In the Federation of BiH, the relevant legislation is the Criminal Code of the Federation of BiH (“Official Gazette of FBiH”, Nos. 36/03, 37/03, etc.). Article 273 also defines the criminal offense of tax and contribution evasion with elements similar to the state-level law.
Additionally, Article 31 outlines the responsibility of responsible persons in legal entities, with the director being the most prominent representative.
- Republika Srpska
In Republika Srpska, the Criminal Code (“Official Gazette of RS”, No. 64/17, etc.) addresses the offense of tax and contribution evasion in Article 224:
“Whoever, with the intent to evade the payment of taxes, contributions, or other legally prescribed dues, provides false data on income, expenses, or fails to report data, thereby evading payment exceeding 10,000 KM, shall be punished with imprisonment from six months to five years.”
Here too, the director is considered responsible as the individual making financial decisions on behalf of the legal entity (Article 122 of the Criminal Procedure Code of RS).
Director as the Responsible Party
Under the entity-level laws on business companies, the director is accountable for the legal operation of the company. This includes the timely fulfillment of tax obligations, proper revenue reporting, and accurate tax calculation, including:
- VAT
- Corporate income tax
- Salary contributions (pension, health, unemployment insurance)
If the director:
- knowingly conceals income,
- submits false financial reports,
- fails to calculate and pay taxes and contributions,
- signs false VAT returns,
they may be criminally prosecuted as an individual responsible for the offense. The legal entity may also face penalties under corporate criminal liability laws.
Conclusion (Criminal Responsibility)
Under criminal legislation, a company director in BiH bears direct criminal responsibility for failure to meet tax obligations if it is proven that they acted knowingly to evade tax or contributions. Legal frameworks in Republika Srpska, the Federation of BiH, and at the state level are harmonized in recognizing these offenses and prescribing penalties. The director’s criminal liability is essential in ensuring fiscal discipline, combating the grey economy, and protecting public revenue.
But what about civil (material) liability if no criminal offense is proven?
Basic Rule – Separation of Legal and Natural Persons
A company (in any legal form) is a separate legal entity, with its own assets and rights. The director, as a natural person, is not automatically liable for the company’s debts — including tax debts — unless their actions caused harm to the company or third parties.
Hence, criminal liability and civil (material) liability are two separate concepts:
- Criminal liability: Determination of whether the director committed a criminal offense (e.g., tax evasion)
- Civil liability: Whether the director, through action or inaction, caused harm to the company or a third party (e.g., the state as a creditor), regardless of whether it was a criminal act
Legal Grounds for Civil Liability of Directors
a) Company Law of Republika Srpska, Article 220 – Director Liability
“Members of the management are obliged to conduct the affairs of the company with the care of a prudent businessperson and to compensate the company for any damage they cause intentionally or through gross negligence.”
A similar provision is found in Article 248 of the Federation’s Company Law.
🔹 Meaning: If the director intentionally failed to pay taxes, ignored legal obligations, or through improper conduct pushed the company into debt, they may be personally liable to the company or creditors, including the tax authorities.
Special Cases: “Piercing the Corporate Veil” and Personal Liability
In legal theory and practice, there is the concept of “piercing the corporate veil”, whereby an individual (e.g., director or owner) may be held personally liable for the company’s obligations. This applies in exceptional cases when conditions are met, such as:
- abuse of the company for personal gain,
- fictitious or fraudulent business activity,
- asset transfers to avoid liabilities,
- intentional harm to creditors (including the tax authority).
🔹 In such cases, the director may face civil liability even without a criminal conviction.
Tax Laws and Liability of Responsible Persons
a) Tax Administration Law of RS (Official Gazette RS, No. 102/11, etc.), Article 65
If the company fails to settle its tax debt, recovery procedures may be initiated against the property of responsible individuals if their actions led to tax evasion.
Similar provisions exist in:
b) Value Added Tax Law of BiH, Article 63, which holds individuals personally liable if they intentionally participated in VAT evasion.
However, none of these laws automatically presume director liability. The director’s role and level of responsibility must always be proven, including whether the financial difficulties arose due to their fault, gross negligence, or another form of misconduct.
These provisions allow the director (or another responsible person) to be held personally – civilly liable, provided that they:
- knowingly approved false tax filings,
- enabled VAT evasion,
- abused authority as the company’s legal representative
Related Provisions – Civil Law and Company Law
The general principles of liability and the director’s duty of care are stipulated in:
- Law on Obligations (RS), Article 154: liability for damages caused intentionally or through negligence
- Company Law (RS), Article 220: obligation for directors to act with due care; liable for damages to the company or third parties
Thus, a director who — through negligence or intent — causes damage to the state (e.g., non-payment of VAT) may be civilly liable, regardless of criminal liability.
Final Conclusion
A director can be held civilly liable for a company’s tax obligations even without a criminal conviction, in cases where:
- damage was caused to the company intentionally or through gross negligence,
- powers were abused and creditors (e.g., the tax authority) suffered harm,
- conditions for “piercing the corporate veil” are met,
- the Tax Authority proves the director’s actions led to tax evasion.
The mere fact that the company cannot meet its obligations, including taxes, due to poor financial standing does not automatically justify collection from the director. The director’s individual responsibility must be established — not necessarily criminal — but proven nonetheless.
Author: Nataša Krejić, Attorney
Email: natasa@afsajic.com
