Kosovo’s tax policies are streamlined and efficient. Unlike many other countries in the region, Kosovo has laid out a taxation system that is simple and that reduces the tax burden for individuals and businesses. Compliance is straightforward and taxes are few. Furthermore, the Government is introducing tax incentives to support domestic production.
Corporate tax
Depending on annual income, domestic legal entities and permanent establishments of foreign legal entities are taxed as follows (Law Nr. 03/L-113):
| Annual income € 0 - € 5,000 |
37.5 € / quarter |
| Annual income € 5,001 - €50,000 |
3-10% of income |
| Annual income € 50,000 |
10% of income |
Corporate income tax is paid quarterly in advance, based on quarterly net income predictions.
Value added tax
Value added tax (Law Nr. 03/L-114) is applied to all importers and businesses with an annual turnover in excess of 50,000 Euro. The common VAT rate is 16 percent on all goods and services, with exemption for certain agricultural and capital goods on which VAT is zero percent. Exporters receive full VAT reimbursement for goods exported.
Personal income tax
Personal income tax (Law Nr. 03/L-115) applies to natural persons receiving income from Kosovo sources and also to foreign incomes, received by Kosovo residents. The rate of personal income tax depends on annual income and ranges from zero percent to 10 percent.
| Annual income €0 - € 960 |
0% |
| Annual income €960 - € 3,000 |
4% of the amount over € 960 |
| Annual income €3,001 - € 5,400 |
€ 81.6 + 8% of the amount over € 3,000 |
| Annual income > €5,401 |
€ 273,6 + 10% of the amount over € 5,400 |
Specific tax code on depreciation
According to section 14.5 of the Law Nr. 03/L-113 on Corporate Income Tax the amount allowed as a depreciation deduction for the tax period is to be determined by applying the following percentages to the capital accounts under the reducing balance method:
(a) Category 1: Buildings; five percent (5%);
(b) Category 2: Vehicles and office equipment; twenty percent (20%); and
(c) Category 3: Machinery and heavy transport vehicles; fifteen percent (15%)
Repatriation of profits
The transfer of profits and invested capital in foreign currency outside Kosovo is free and unrestricted. The law states that subject to tax and other business liabilities, foreign investment may freely transfer lawfully acquired funds, regardless of their source and without delay to and out of Kosovo..
Property tax was introduced in 2002 and is collected at local government level by the Municipal Assemblies.
The Municipal Assembly of each municipality defines tax rates on property on an annual basis. The tax rates range between 0.05 percent to one percent of the market value of the property for each of the following property categories:
- Residential property
- Commercial property
- Industrial property
- Agricultural property
- Immovable abandoned property and uninhabited buildings
Accounting practices
Kosovo has a modern financial reporting system based on the International Accounting Standards. In 2001, with the UNMIK Regulation No.2001/30, the Board on Standards for Financial Reporting was established and to date 18 accounting standards in conformity with IAS have been issued. According to this regulation, all business organisations with annual turnover in excess of 100.000 EUR or total assets worth in excess of 50.000 EUR are obliged to prepare four statutory financial statements on an annual basis (Balance sheet, income statement, cash flow statement, and changes in equity, and accompanying notes, along with a tax return). Businesses with a turnover below 100,000 EUR are required only to prepare a tax return.
The overview of the comparison of the Kosovo tax system with its neighbouring countries is shown in the table 8.
