One of the most common questions in VAT practice relates to the so-called recharging of costs. Although this term is used daily in the business environment, its tax treatment often causes dilemmas and is a frequent subject of tax audits.

Although the term „re-invoicing“ is often used in business practice, it is important to emphasize that it has no formal basis in the legislation of Bosnia and Herzegovina. Essentially, these are situations in which one taxpayer transfers a certain cost to another person. However, for VAT purposes, it is crucial to determine the legal and economic nature of such a claim – whether it represents consideration for the supply of goods or services, or exclusively the refund of a previously paid amount.

In cases where costs are directly related to delivery (e.g., logistics, subcontractor engagement, administrative fees), their reinvoicing to the client does not change their nature – they become part of the total consideration and as such are subject to VAT. In other words, there is no „neutral“ reinvoicing if the cost was incurred within the framework of one's own business activity. Even when the initial cost was exempt from VAT, its inclusion in the price of the main service results in a taxable supply.

On the other hand, there are situations of so-called pure pass-through costs. These are expenses that a taxpayer pays in the name and on behalf of another person, without any added value or intermediation in terms of providing a service.

Key elements are: the existence of evidence that the ultimate beneficial owner is a third party, appropriate accounting records, and the absence of any markup. In such cases, there is no taxable supply.

Certain specific situations in the practice of BiH are particularly significant:

• Purchase of business premises – if the lessor invoices utility costs together with the rent, they are considered a single service and are subject to VAT, even when individual items are originally tax-exempt.
• Construction sector – additional and unforeseen works, as well as material costs that are subsequently charged to the investor, are almost always treated as part of the taxable consideration.
• International services - when recharging costs to foreign clients, the VAT treatment depends on the place of taxation of the main service, which can lead to reverse charge or the absence of VAT in BiH.
• Employee expenses (per diem, travel) – if they are transferred to the client as part of the service, they are included in the VAT base, whereas otherwise they can have the character of an internal reimbursement without VAT implications.

Additionally, in practice, the risk of improper documentation is often overlooked. Inadequate record-keeping can lead tax authorities to treat every reimbursement as a taxable transaction. Therefore, it is advisable to clearly define relationships with clients and precisely separate one's own expenses from expenses paid on behalf of others.

In conclusion, reinvoicing is not a technical, but a substantive tax issue. A proper understanding of the relationship between cost and supply is crucial for regulatory compliance and minimizing tax risks.