Kosovo
Corporate taxes and other direct taxes
Resident companies are subject to corporate income tax on their worldwide income, while the object of taxation for a non-resident taxpayer is only the taxable income generated from a source in Kosovo. The Corporate Income Tax (CIT) system in Kosovo adheres to the principles of worldwide taxation.
The annual turnover threshold for taxation has been reduced from an annual turnover of EUR 50,000 to EUR 30,000. Resident companies and sole traders whose gross annual income exceeds EUR 30,000 are subject to CIT. Below the threshold, taxpayers can opt for a special quarterly payment on their gross income.
The CIT rate on annual turnover is 10%. This tax is paid every three months depending on annual turnover. Taxable income for the CIT period is the difference between gross income received or accrued during the tax period and the deductions allowable with respect to such gross income. The tax period for CIT is the calendar year. Losses can be carried forward for six consecutive tax periods.
Withholding tax is also levied on income from interest, royalties, rents, lotteries, and games of chance earned by Kosovo residents or non-residents. Reflecting the change in the corporate income tax rate, except for the withholding tax on rent (9%), all other income is taxed at 10%.
Withholding tax will be levied even in cases where the recipient of the income is subject to corporate income tax and such income is included in the recipient's taxable profits. The withholding tax is offset against the corporate income tax payable by the recipient on the annual tax return.
Transfer pricing (TP) effective from 2017 regulates the intra-company pricing arrangement between affiliated business entities. Controlled taxation comes into effect whenever there is a minimum 50% ownership or voting right condition exists for the transaction. Controlled transactions include all types of transactions that may affect the taxable income of a taxpayer.
Taxpayers performing controlled transactions above the amount of EUR 300,000 within a calendar year must submit an annual controlled transactions form to the tax authorities by March 31 of the following year.
The regulation excludes internal controlled transactions (it applies only to cross border transactions) and provides for certain safe harbors to prove that the arm’s length principle is respected. Safe harbors involve calculating the total costs of all group members for the low value-adding intra-group services on an annual basis. For such services, there is no need to prepare a transfer pricing study, but instead a profit mark-up to a maximum 7% on costs is allowable.
Level of attention paid by Tax Authority:
VAT and other indirect taxes
A transaction is subject to VAT taxation in Kosovo if it is for the supply of goods or services against payment made within the territory of Kosovo by a taxable person acting as such. Furthermore, the import of goods pursuant to the law is subject to VAT taxation.
A taxable person is any person, whether natural or legal, or organized in any other form recognized by law in Kosovo, who independently carries out an economic activity pursuant to the law, regardless of the place, purpose, or result of this activity. In line with EU and VAT principles, exports are exempt from VAT with the right of deduction of input VAT. VAT on imports is collected at the state borders of Kosovo. The holder of the transaction pays VAT on the basis of the customs value and any other import duty (customs and excise tax, if applicable) regardless of their origin. VAT is levied on imports and any supply of goods or services, except those which are considered as exempt by law.
The VAT rate has increased to two fixed rates: the standard rate of 18% and the reduced rate of 8% of the value of supplies of imported and domestic taxable supplies, except for exempt supplies and supplies treated as exports.
| VAT options in Kosovo |
Applicable / limits |
| Distance selling |
 |
| Call-off stock |
|
| VAT group registration |
|
| Cash accounting - yearly amount in EUR (approx.)* |
|
| Import VAT deferment |
 |
| Local reverse charge |
Supply of construction and construction-related works; construction activities. |
| Option for taxation |
| - letting of real estate |
|
| - supply of used real estate |
|
| VAT registration threshold* |
EUR 30,000/year |
Personal income tax / Social security system
The object of taxation for a resident taxpayer is taxable income from a source in Kosovo and from a foreign source. The object of taxation for a non-resident taxpayer is taxable income from a source in Kosovo.
With the exception of income exempt from tax under the law, gross income is all income received or accrued from any source, including: wages, rent, business activity, the use of intangible assets, interest, capital gains, lotteries and other games of chance, pensions paid by an employer, or in line with the Law on Pensions in Kosovo and any other income that increases the taxpayer’s net worth.
Taxpayers are natural persons, resident and non-resident, personal businesses, partnerships, and companies who receive or create gross income from all sources, including wages, business activities, rents, lottery winnings, interest, dividends, capital gains, use of intangible property, pensions, and any other income that increases the taxpayers’ net worth. The taxable period for Personal Income Tax is the calendar year. Personal Income Tax is applied at progressive rates (rates from 0% to 10%).
The Kosovo Pension Savings Fund is responsible for administering and managing individual pension saving accounts. This fund obliges the employee and the employer to contribute to financing the employee’s pension at the rate of 5% from the employee’s salary and 5% from the employer.
Wage related taxes
in Kosovo |
Minimum wage
|
Average wage
in private sector |
| |
in EUR |
|
in EUR |
|
| |
170 |
|
400 |
|
| Total wage cost |
179 |
105% |
420 |
105% |
| Vocational training contribution |
- |
0% |
- |
0% |
| Social contribution tax |
9 |
5% |
20 |
5% |
| Gross salary |
170 |
100% |
400 |
100% |
| Personal income tax |
4 |
2% |
17 |
4% |
| Employees' contributions |
9 |
5% |
20 |
5% |
| Net salary |
158 |
93% |
363 |
91% |