Pristina GMT +1
EY
Pashko Vasa 16/7 — Pejton
10000 Pristina Kosovo
Executive and immigration contacts
Nevena Kovacheva +359 (2) 817-7146 (resident in Sofia, Bulgaria) Email: nevena.kovacheva@bg.ey.com
Anisa Jasini +355 (4) 454-2408 (resident in Tirana, Albania) Email: anisa.jasini@al.ey.com
Kosovo declared its independence from Serbia on 17 February 2008. This chapter provides information on taxation in the Republic of Kosovo only. Because of the rapidly evolving economic situation in Kosovo, read ers should obtain updated information before engaging in transactions.
A. Income tax
Who is liable. Individuals who are resident in Kosovo are subject to tax on their worldwide income. Nonresidents are subject to tax on income derived from Kosovo sources only.
The following are considered resident for tax purposes in Kosovo:
• An individual who has a principal residence in Kosovo
• An individual who is physically present in Kosovo for at least 183 consecutive or non-consecutive days in any 12-month period
• A personal business enterprise, partnership or association of persons that is established in Kosovo or has its place of effective management in Kosovo
Income subject to tax. Individuals are subject to tax on the fol lowing types of income:
• Employment income
• Rental income
• Income from the use of intangible property
• Income from interest
• Capital gains derived from sales of capital assets including movable and immovable property and securities
• Income derived from lottery gains
• Pensions paid according to the Law on Pensions in Kosovo
• Income from economic activity
• Other income, including other capital gains
Employment income. Employed persons are subject to income tax on remuneration and all benefits received from employment. Employment income includes the following:
• Salaries, bonuses, per diems and other forms of compensation; income from temporary work performed by an employee; and income from prospective employment, such as a transition bonus
• Health and life insurance premiums paid by an employer for the employee
• Forgiveness of an employee’s debt or obligation to the employer
• Payment of an employee’s personal expenses by an employer
• Benefits in kind granted by an employer to an employee that exceed the amount of EUR65
Gross income from employment does not include the following:
• Reimbursement of travel expenses in accordance with the Instruction of the Personal Income Tax Law
• Indemnity for accidents at work
• Benefits in kind in the form of meal and transport
Self-employment and business income. Self-employment income consists of income generated, in cash or in goods, by a natural person who works for personal gain and who is not covered by the definition of an employee under the personal income tax law, including a personal business enterprise and a partner engaged in an economic activity.
Business income consists of income generated from economic activities, which include the following:
• Activities of producers, traders or other persons supplying goods or services, including mining and agricultural activities
• Activities of the professions
• Exploitation of tangible or intangible property for the purposes of obtaining income on a continuing basis
Taxpayers with gross income from business activities must make quarterly payments no later than 15 days after the close of each calendar quarter. The amounts of the quarterly payments are described below.
Taxpayers with annual gross income from business activities of up to EUR30,000 who are not required and do not opt to keep books and records must make the following quarterly payments:
• 3% of each quarter’s gross income from trade, transport, agri culture and similar economic activities, but not less than EUR37.50 per quarter
• 9% of each quarter’s gross income from professional, voca tional and entertainment services and similar activities, but not less than EUR37.50 per quarter
Taxpayers with annual gross income in excess of EUR30,000 and taxpayers who are required or opt to keep books and records (including partnerships and groupings of persons) must make the following advance payments for each calendar year:
• For the first quarter, 25% of the total tax liability for the current tax period based on estimated taxable income, reduced by any amount of tax withheld
• For the second and subsequent tax quarters, one-fourth of 110% of the total tax liability for the tax period immediately preced ing the current tax period, reduced by any amount of tax withheld
Rental income. Rental income includes any periodic compensa tion realized from the rental of real estate and other kinds of movable property.
Income from the use of intangible property. Income from the use of intangible property includes income from the following:
• Patents, inventions, formulas, processes, designs, patterns, trade secrets and know-how
• Copyrights including rights relating to literary, musical or artis tic compositions
• Trademarks, trade names or brand names
• Franchises, licenses or contracts
• Methods, programs, systems, procedures, campaigns, surveys, studies, forecasts and estimates
Customer lists
Technical data
Computer software
Other similar rights
Taxpayers who receive income from intangible property must make quarterly payments of 10% of the taxable income received from intangible property in the calendar quarter.
Income from interest. Income from interest includes interest from loans, bonds or other securities and from bank deposits or saving accounts in other financial institutions except for interest from the assets of the Kosovo Pension Savings Trust or any other pen sion fund defined under the legislation on pension savings in Kosovo.
Capital gains. Capital gains income is discussed in Capital gains and losses
Income derived from lottery gains. The organizer of a lottery must withhold a 10% tax from each payment to the winner and remit it to the tax authorities by the 15th day of the month follow ing the month of payment.
Other income. Other income consists of all other types of income not identified in the categories mentioned above, including but not limited to gifts received by residents, if the value of such gifts exceeds EUR5,000 in a tax period (see Section B), and income from debt forgiveness.
Exempt income. The following types of income are exempt from personal income tax:
• Wages of foreign diplomatic and consular representatives and foreign personnel of embassies and foreign liaison offices in Kosovo and of specified representatives of the United Nations (UN) and certain other international governmental organiza tions
• Compensation for the damage or destruction of property
• Proceeds of life insurance policies payable as the result of the death of the insured person
• Replacement income, such as reimbursement or compensation for medical treatment and expenses, including hospitalization and medication, other than wages paid during periods of absence from work as a result of sickness or injury
• Wages of persons with disabilities as provided by the relevant laws for these categories
• Interest paid to resident or nonresident taxpayers on financial instruments that are issued or guaranteed by a public authority of Kosovo
• Income of a prime contractor or subcontractor, other than a resident, generated from contracts for the supply of goods and services to the UN and certain other international organizations in support of programs and projects for Kosovo
• Dividends received by resident and nonresident taxpayers
• Pensions and social welfare payments paid by the government
• Value of assets received as a result of inheritance if the heir is a spouse, biological or adopted child or parent of the deceased, if the inheritance value does not exceed EUR5,000
• Educational expenses paid by an employer on behalf of an employee provided that such expenses are paid directly to an educational institution that is legally recognized and that the employee remains employed by the employer for at least 24 months after the completion of the education
• Scholarships received by an individual to attend an institution of higher learning, trade school or vocational school, provided that the scholarship is paid directly to the institution and is not refundable to the student
• Training expenses paid by an employer for an employee to attend formal job-related training
• Subsistence expenses while attending a formal training pro gram, up to a maximum specified in the relevant act
• Other training expenses, not including amounts equivalent to wages and salaries that are paid to beginners or apprentices
• Income received, including income in cash or in kind for nonbusiness natural persons, for expropriations made by the state for public interest
• Mandatory contributions paid by employers for health insur ance for employees
• Compensation received through final decisions by courts and certain compensation for court costs
• Income in the form of remuneration from state institutions for achievements in science, sports and culture
• Income in the form of financial compensation to former politi cal prisoners and other compensation for similar categories
• Income in the form of grants, subsidies and donations in accor dance with the terms and conditions of the benefits
• Income subject to tax holidays and other special facilities for new businesses
Taxation of employer-provided stock options. No specific rules in Kosovo govern the tax treatment of employer-provided stock options. Stock options are subject to personal income tax at the moment of exercise.
Capital gains and losses. Income is realized through the sale or disposition of capital assets including real estate and securities. The tax base equals the amount by which the sale price exceeds the acquisition cost. The sales price of the capital asset is the sum of money received, plus any other compensation received for the sale, and is adjusted to the open market value if the parties are related persons and if the sale price is lower than the open market price. The cost of the capital asset is the amount that the taxpayer paid for the acquisition of the asset, increased for the cost of improvements and reduced by depreciation and other allowable expenditures.
Capital gains are recognized as business income and capital losses as business losses.
A capital gain is not recognized on the involuntary alienation of property to the extent that the consideration received for the alienation consists of either property of the same character or nature or that money is invested in property of the same character or nature within a replacement period of two years.
Gross income from capital gains does not include capital gains realized from the sale of assets of the Kosovo Pension Savings Trust or any other pension fund defined under the legislation on pensions in Kosovo.
If the price of a capital asset is to be paid in installments and if ownership is retained until the settlement of the price, the capital gain must be amortized on a straight-line basis over the life of the installment agreement. The amount of the gain attributable to a tax year must be reported on the tax declaration as income in that tax year.
Deductions
Personal deductions and allowances. Individuals may deduct pension contributions.
Business deductions. The following are considered to be business deductions:
• Expenses paid or incurred during the tax period that are wholly, exclusively and directly related to the generation of gross income from intangible property, rents or business activities, including premiums for health insurance paid on behalf of an employee and those dependents eligible to be included on the insurance policy of the employee
• Pension contributions paid by an employer provided they do not exceed the amount of pension contributions allowed by the applicable law
• Bad debts provided that certain criteria provided in the law are met
• For businesses with annual gross income of EUR50,000 or more and businesses that have opted to maintain books and records, expenses that are allowed and paid or accrued during the tax period
• Expenses, including the expenses of depreciation, related to operations and financial leasing
• Representation costs, limited to 1% of annual gross income
• Costs of advertising and promotion made through different forms of media
• Expenses for travel, meals, lodging and transportation limited to the amounts specified in a normative act by the Minister of Finance
• Compensation or emoluments paid to a related person, limited to the lesser of the actual salary or the open market value
• Interest, rent and other expenses paid to a related person, lim ited to the lesser of the actual amount and the open market value
• Depreciation expenditures, other than expenditures for land, works of art and certain other assets, owned by the taxpayer and used for the taxpayer’s economic activity
• Depreciation of livestock, only if such animals are used in the course of economic activity
• Repair or improvement expense of EUR1,000 or less for any asset (may be deducted as an expense in the year that it is paid or incurred)
• Amortization of expenditures on intangible assets that have a limited useful life, including but not limited to patents, copy rights, licenses for drawings and models, contracts, and fran chises (if the term of use is not defined by an agreement, amortization expenses are allowed up to 20 years)
• Amortization of research and development costs with respect to natural reserves of minerals and other natural resources and interest on amounts borrowed to finance such research and development, if they are added to a capital account
Deduction for charitable contributions. Contributions that are made for humanitarian, cultural, health, religious, scientific, sport and environmental purposes are allowed as deductions up to a maximum of 10% of taxable income computed before the chari table contributions are deducted.
Rates. Taxable income is subject to tax at the following rates.
Annual taxable income Tax rate Tax due Cumulative tax due EUR % EUR EUR
First 960 0 0 0
Next 2,040 4 81.6 81.6
Next 2,400 8 192 273.6
Above 5,400 10
Credits. Resident taxpayers may credit the foreign income tax paid in other countries on the income realized in such countries. The amount of the foreign tax credit may not exceed the amount of Kosovo tax calculated on the foreign income. Relief for losses. Business losses may be carried forward for up to six successive years and claimed as a deduction against any income in those years. If the business has an ownership change of more than 50% or if a personal business enterprise is changed to any other form of business (for example, legal entity or part nership), the tax loss is forfeited.
B. Other taxes
Property tax. Annual property tax is imposed on land and con struction. The property tax is assessed every year and is deter mined by multiplying the taxable value of the property by the applicable tax rate. The tax rate ranges from 0.05% to 0.1% of the taxable value of the property. The taxable value is the appraised value of property after the principal residence deduction. The appraised value is determined every three to five years through a survey and is affected by the building area in square meters, value category, value zone and quality. An individual may deduct EUR10,000 from the appraised value if the property is estab lished as the principal residence. The annual property tax rates for principal residences in Pristina and Peja are 0.11% and 0.09%, respectively.
Taxation of gifts. Kosovo does not impose estate, specific inheri tance or gift taxes. However, as described below, gifts may be included in income.
The amount of monetary gifts or gifts in kind that exceed a value of EUR5,000 in a tax period is included in income and is subject to income tax. Gifts between spouses, from a parent to a child, or from a child to a parent are exempt from income tax, regardless of the amount or value of the gift. In addition, gifts given for educational purposes are exempt from tax if the gift is in the form of tuition paid directly to an educational institution recognized by the law, regardless of the relationship between the donor and recipient.
C. Social security
Employers and employees must each make pension contributions at a rate of 5% of the gross monthly salary, which cannot be lower than the minimum salary. The minimum base for the calculation of the pension contribution is the minimum national wage set by the Social Council of Kosovo. Currently, the minimum wage is EUR130 for employees under the age of 35 and EUR170 for other employees. Employers must pay the total amount of the contribution by the 15th day of the month following the month of the salary payment.
Employers and employees may each make voluntary contributions up to a total of 10% of monthly salary, resulting in a total maximum contribution of 15% of salary.
If wages are paid substantially in kind, employers and employees must each pay 5% of the market value of the payments in kind.
Self-employed individuals must make a contribution of 10% to 30% of the net amount of income (gross income less allowable deductions). Self-employed individuals must file quarterly state ments of individual pension contributions and make quarterly payments of contributions within 15 days after the end of each calendar quarter.
D. Tax filing and payment procedures
The tax year in Kosovo is the calendar year.
Employers must submit a statement of tax withholding to the tax authorities by the 15th day of the month following the month of withholding. Each employer must provide to each employee a certificate of tax withholding in the form specified in a norma tive act issued by the Minister of Finance by 1 March of the tax year following the year of the withholding.
All taxpayers, including partnerships and groupings of persons, must submit an annual tax declaration on or before 31 March of the following tax year. Taxpayers who receive or accrue income from only the following sources are not required but may opt to submit an annual tax declaration:
• Wages
• Interest
• Rent if full payment of quarterly tax on rent has been made
• Lottery gains
• Income from intangible property
• Economic activities for which tax is paid quarterly
• Income for special categories (farmers, collectors of recycling materials, berries, herbs and similar categories)
E. Double tax relief and tax treaties
Kosovo has entered into double tax treaties with the following jurisdictions.
Albania Hungary Switzerland Austria Luxembourg Turkey Belgium (a) Malta United Arab Croatia North Macedonia Emirates Finland (a) Saudi Arabia (b) United Germany (a) Slovenia Kingdom
(a) Kosovo is applying these treaties, which were entered into by the former Republic of Yugoslavia.
(b) The agreement entered into force on 1 January 2021.
Kosovo has signed double tax treaties with the Czech Republic, Ireland, Italy, Latvia and Lithuania, but these treaties have not yet been ratified by the parties to the treaties and, therefore, are not yet effective. Kosovo is negotiating a double tax treaty with Ireland.
The Kosovo government has introduced temporary international measures. Under these measures, if the existing laws relating to the international taxation of income and capital of persons in Kosovo do not address such taxation, they must be supplemented by application of the principles the Organisation for Economic Co-operation and Development Model Tax Convention of Income and Capital to avoid double taxation. However, after Kosovo enters into a mutual tax convention with another state, such tem porary measures no longer apply.
F. Entry visas
In general, foreigners must obtain a visa before entering Kosovo. The government has provided a list of jurisdictions that are exempt from the visa requirements for entry into and travel and stay in Kosovo for up to 90 days for every six months. Citizens of European Union (EU) states, the Schengen area, Albania, Andorra, Monaco, Montenegro, San Marino, Serbia and Vatican City may enter into and travel and stay in Kosovo by presenting a valid biometric identification card.
Citizens who hold diplomatic and service passports issued by China Mainland, Egypt, Indonesia, the Russian Federation and Ukraine may enter Kosovo and stay for up to 15 days.
Citizens of jurisdictions subject to the Kosovo visa regime who hold a valid residence permit or multi-entry visa issued by juris dictions of the EU, the Schengen area, Australia, Canada, Japan, New Zealand and the United States can enter into or travel or stay in Kosovo for up to 15 days.
Holders of travel documents issued by Taiwan are exempt from the visa obligation if they preliminarily notify the Diplomatic or Consular Mission of the Republic of Kosovo at least two weeks in advance.
Holders of valid travel documents issued by Hong Kong and Macau are exempt from the obligation to obtain a visa to enter Kosovo.
Holders of travel documents issued by EU member states, Schengen zone states, Australia, Canada, Japan and the United States, based on the 1951 Convention on Refugee Status or the 1954 Convention on the Status of Stateless Persons, as well as holders of valid travel documents for foreigners, may enter, pass through the territory and stay in Kosovo for up to 15 days without a visa.
Holders of travel permits issued by the Council of Europe, the EU, the North American Treaty Organization, the Organization for Security and Co-operation in Europe or UN organizations are exempt from the visa requirement, regardless of nationality.
G. Work permits
Foreigners can work in Kosovo on the basis of a work registration certificate if the work period does not exceed 90 days within a one-year period. Foreigners who intend to stay for work purposes for a longer period also need a residence permit. The competent authority responsible for the issuance of work registration cer tificates is the Department of Labor and Employment within the Ministry of Labor and Social Welfare.
To obtain a work registration certificate, the applicant must sub mit the following documentation:
• Application form
• Employment contract
• Certificates of education and other training
• Business registration certificate of the employer
• Evidence of payment of the relevant administrative fee
H. Residence permits
Foreigners may stay in Kosovo for up to three months in a sixmonth period without a residence permit. If the individual intends to stay for more than three months in Kosovo, an applica tion for a residence permit must be made at the Department of Citizenship, Asylum and Migration under the Ministry for Internal Affairs of Kosovo. Temporary residence permits are issued for a period of up to one year. Foreigners who have been residents of Kosovo for an uninterrupted five-year period may obtain a permanent residence permit. For a permanent residence permit for the purpose of family reunification on the grounds of marriage, an uninterrupted three-year stay is required. The appli cant’s presence is required at the moment of application, registra tion and obtaining the residence permit. To obtain a temporary or permanent residence permit, the applicant must submit the fol lowing documentation:
• Application form
• Passport
• Bank account statement or other evidence certifying the posses sion of sufficient means for living
• Evidence of appropriate housing such as a lease contract or property-ownership certificate
• Health insurance policy
• Criminal record certificate issued from the last place of resi dence
• Employment contract and certificates of education and training or certificate of enrollment from the relevant educational insti tution
• Family or marriage certificate, as applicable
• Business extract from the commercial register
• Certificate issued by the Kosovo tax administration that certi fies the settlement of tax liabilities by the company
Notification of the approval or rejection of a temporary or per manent residence permit request is given 30 days or 60 days, respectively, from the application date.
I. Family and personal considerations
Work visas for family members. A foreigner resident in Kosovo on the basis of a temporary residence permit for the purpose of fam ily reunification may apply for a work permit.
Marital property regime. The marital property regime in Kosovo is based on the principle of the joint ownership of subsequently acquired property. In accordance with this principle, property acquired after the marriage is deemed to be jointly owned by the spouses in equal parts, unless otherwise stated in a written agree ment complying with the formal requirements of the property law. The law distinguishes separate properties from the joint property of spouses even after a civil marriage.
The following are considered to be the separate property of spouses:
• Property that belonged to the spouse before entering into mar riage and that remains his or her property
• Property acquired during marriage through inheritance, dona tion or other forms of legal acquisition
• Product of art, intellectual work or intellectual property, which is the separate property of the spouse who created the product
• Property belonging to the spouse based on the proportion of common property
Each spouse independently administers and possesses his or her separate property during the course of the marriage.
The following are considered to be the joint property of the spouses:
• Property acquired through work during the course of the mar riage and income derived from the property
• Intangible and obligatory rights of the spouses
• Property acquired jointly through gambling games
The apportioning of joint property can be carried out when spouses determine or request a determination of their shares in their joint property. In the absence of an agreement between the spouses, the share of each spouse is decided by the court. The decision is based on an evaluation of all circumstances, including the personal income and other revenues of each spouse and assis tance provided by one spouse to the other spouse, such as chil dren’s care, conduct of housework, care and maintenance of property and other forms of work and cooperation pertaining to the administration, maintenance and increase of the joint property.
Forced heirship. Kosovo succession law provides for forced heir ship with respect to compulsory heirs. The following are compul sory heirs:
• Decedent’s spouse, parents, descendants and adopted children
• Descendants of decedent’s descendants and adopted children
• Decedent’s grandparents and siblings, but only if they suffer from permanent and total disability that prevents them from working and if they lack means for living
The compulsory heirs have the right to the part of the hereditary property that the decedent cannot dispose of. This is called the compulsory share. The compulsory share of the descendants and of the spouse is one-half, and the compulsory share of other compulsory heirs is one-third of the share that the compulsory heir would have obtained as heir at law, according to the provi sions on inheritance by rank.
Driver’s licenses. Foreign citizens may drive legally in Kosovo with their valid home-country driver’s licenses for a term of one year from their date of entry into Kosovo.