Resident companies are subject to corporate income tax on their worldwide income, while the object of taxation for a non-resident taxpayer is taxable only income generated from a source in Kosovo. The Corporate Income Tax (CIT) system in Kosovo adheres to the principles of worldwide taxation.
Resident companies and sole traders whose gross annual income exceeding EUR 50,000 are subject to CIT. Below the threshold taxpayers can opt for a special quarterly payment on their gross income.
The CIT rate for annual turnover is 10%. This tax is paid every three months depending on the annual turnover. Taxable Income for 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. Tax Period for CIT is the calendar year. Losses can be carried forward for six consecutive tax periods.
Transfer pricing (TP) effective from 2017 regulated the intra-companies pricing arrangement between related business entities. A controlled taxation is considered to be whenever a minimum 50% ownership or voting right test exist 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 with the tax authorities an annual controlled transactions form by 31 March of the following year.
The regulation excludes internal controlled transactions (it applies only to cross border transactions) and has provided for certain safe harbors to prove that the arm’s length principle is respected. The safe harbors involve calculating, on an annual basis, total costs of all group members for the low value-adding intra-group services. 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.
|Transfer pricing in KOSOVO|
|Arm's length principle||since 2017|
|Documentation liability||since 2017|
|Country-by-Country liability||from FY 2017 (with transitional rules)|
|Master file-local file (OECD BEPS 13) applicable||from FY 2018 on|
|- lack of documentation||A maximum of EUR 2,500|
|- tax shortage||N/A|
|Related parties||50% <||direct or indirect control or common managing director|
|Safe harbours||"Low value added services: mark-up to a maximum 7%"|
Level of attention paid by Tax Authority:
A transaction is subject to VAT taxation in Kosovo, if the supply of goods or supply of services, against the payment made within the territory of Kosovo by a taxable person acting as such. Further on, the import of goods pursuant to the Law is subject to VAT taxation.
Taxable person is any person regardless if this person is natural or legal person, or organized in any other form recognized by law in Kosovo, which independently carries out an economic activity pursuant to the law, regardless of the place, purpose, or result this activity. In line with EU and VAT principles, exports are exempted from VAT with the right of deduction of input VAT. VAT on imports is collected in state borders of Kosovo. Holder of 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 by law are considered as exempted supplies.
VAT rate has escalated into 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 exempted supplies and supplies treated as exports.
|VAT options in Kosovo|
|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|
|Option for taxation - supply of used real estate|
|VAT registration threshold**||EUR 30,000/year|
* Available only for related parties
** Special VAT exemption applies for small businesses
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 that is exempted from tax under the law, gross income shall mean all income received or accrued from any source, including: wages, rent, business activity, the use of the intangible asset, 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 activity, 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 applicable at the progressive rates (rates from 0% to 10%).
|Wage taxation in Kosovo||Minimum wage||Average wage in private sector|
|EUR||in EUR||in EUR|
|Total wage cost*||179||104,76%||420||104,76%|
|Social contribution tax||9||4,76%||20||4,76%|
|Personal income tax||4||2,12%||19||4,70%|
Kosovo Pension Savings Fund is responsible for administering and managing the individual pension saving accounts. This fund obliges the employee and the employer to contribute in financing the employee’s pension at the rate of 5% from the employee’s salary and 5% from the employer.