Kosovo: Corporate Tax 2017 - Kosovo

Last Updated: 15 December 2016
Article by Andi Pacani and Fitore Mekaj

1 Tax Treaties and Residence

1.1 How many income tax treaties are currently in force in your jurisdiction?

As an independent country, Kosovo has concluded seven new tax treaties. They were entered into with the Republic of Albania (2016), the Republic of Macedonia (2014), the Republic of Turkey (2016), Slovenia (2015), the Czech Republic (published in the Official Gazette on 27 March 2015), the United Kingdom (2016) and Hungary (2015). Kosovo has also acceded to other tax treaties on the avoidance of double taxation with respect to taxes on income and capital from the former Yugoslavia (with Germany, Belgium, the Netherlands and Finland, as well as with the Czech Republic for the avoidance of double taxation on inheritance tax).

1.2 Do they generally follow the OECD Model Convention or another model?

Kosovo tax treaties generally follow the OECD model.

1.3 Do treaties have to be incorporated into domestic law before they take effect?

The new tax treaties must be ratified by Parliament. A treaty ratified by Parliament becomes part of the Kosovo legal system after publication in the Official Gazette and prevails over any law which differs from the treaty's provisions.

1.4 Do they generally incorporate anti-treaty shopping rules (or "limitation on benefits" articles)?

The treaties do not incorporate anti-treaty shopping rules.

1.5 Are treaties overridden by any rules of domestic law (whether existing when the treaty takes effect or introduced subsequently)?

A treaty prevails over domestic law regardless of whether the domestic legislation existed previously or is introduced subsequently to it.

1.6 What is the test in domestic law for determining corporate residence?

The test of corporate residence is whether a company: (i) is established in Kosovo; or (ii) has its place of effective management in Kosovo.

2 Transaction Taxes

2.1 Are there any documentary taxes in your jurisdiction?

No, there are no documentary taxes in Kosovo.

2.2 Do you have Value Added Tax (or a similar tax)? If so, at what rate or rates?

Kosovo introduced VAT in 2001. A new Law "On VAT" entered into force on 1 September 2015. The standard rate of VAT is 18%; the reduced rate of VAT is 8%; and exports are zero-rated. The turnover threshold for registration purposes is set to EUR 30,000.

2.3 Is VAT (or any similar tax) charged on all transactions or are there any relevant exclusions?

The following activities are VAT-exempt:

  • insurance and reinsurance transactions;
  • financial services;
  • the supply of postage stamps;
  • the supply at face value of fiscal stamps and other similar stamps;
  • betting, lotteries and other forms of gambling;
  • the supply of land;
  • the supply of houses, apartments or other accommodation used for residential purposes; and
  • the leasing or letting of immovable property.

2.4 Is it always fully recoverable by all businesses? If not, what are the relevant restrictions?

Generally, taxpayers registered for VAT are entitled to recover the input VAT, provided that the VAT is charged in relation to their taxable activity. When taxpayers perform both taxable and exempt supplies, VAT may be partially reclaimed. VAT cannot be reclaimed on certain recreation expenses and representation costs, and it is limited on expenses for passenger vehicles which are not used solely for business purposes.

2.5 Does your jurisdiction permit "establishment only" VAT grouping, such as that applied by Sweden in the Skandia case?

No, Kosovo does not permit "establishment only" VAT grouping.

2.6 Are there any other transaction taxes payable by companies?

There is an excise tax which applies to a limited number of goods such as coffee, tobacco, alcoholic drinks, soft drinks, derivatives of petroleum, and motor vehicles used mainly for the transport of passengers.

2.7 Are there any other indirect taxes of which we should be aware?

Except for VAT and excise, there are no other indirect taxes.

3 Cross-border Payments

3.1 Is any withholding tax imposed on dividends paid by a locally resident company to a non-resident?

No, there is no withholding tax on dividends distributed from a Kosovo-resident company.

3.2 Would there be any withholding tax on royalties paid by a local company to a non-resident?

Yes. There is a 10% withholding tax on royalties paid by a Kosovo company to a non-resident.

3.3 Would there be any withholding tax on interest paid by a local company to a non-resident?

Yes. There is a 10% withholding tax on interest paid by a Kosovo company to a non-resident.

3.4 Would relief for interest so paid be restricted by reference to "thin capitalisation" rules?

No, there are no "thin capitalisation" rules or any similar rules.

3.5 If so, is there a "safe harbour" by reference to which tax relief is assured?

No, there is no such provision.

3.6 Would any such rules extend to debt advanced by a third party but guaranteed by a parent company?

There are no "thin capitalisation" rules in place.

3.7 Are there any other restrictions on tax relief for interest payments by a local company to a nonresident?

No, there are not any other restrictions on tax relief for interest payments by a local company to a non-resident.

3.8 Is there any withholding tax on property rental payments made to non-residents?

Yes. There is a 9% withholding tax on property rental payments made to non-residents.

3.9 Does your jurisdiction have transfer pricing rules?

The Corporate Income Tax Law provides that the prices between related parties should be set at open market value. Such value should be determined under the uncontrolled price method, and when this is not possible, under the resale price method or the cost-plus method. Additional rules are provided for by an administrative instruction.

4 Tax on Business Operations: General

4.1 What is the headline rate of tax on corporate profits?

The Kosovo Corporate Income Tax Law provides for a rate of 10%.

4.2 Is the tax base accounting profit subject to adjustments, or something else?

The taxable base is calculated starting from the profit shown in the financial statements, and is adjusted in accordance with the limitations provided in the Corporate Income Tax Law.

4.3 If the tax base is accounting profit subject to adjustments, what are the main adjustments?

The Corporate Income Tax Law provides a list of expenses that are non-deductible for tax purposes, consisting of:

  • fines, penalties and interest imposed by any public authority and expenses related to them;
  • income tax paid or accrued for the current or previous tax period and any interest or late penalty incurred for its late payment;
  • any loss from the sale or exchange of property between related persons;
  • pension contributions above the maximum amount allowed by the Kosovo Pension Law;
  • bad debts that do not meet the specified conditions;
  • contributions made for humanitarian, health, education, religious, scientific, cultural, environmental protection and sports purposes, which exceed 5% of taxable income (before the deduction of such expenses);
  • representation costs (these include publicity, advertising, entertainment and representation) which exceed 2% of the total gross income; and
  • accrued expense for which the withholding tax should be paid, unless such expense is paid on or before 31 March of the subsequent tax period.

4.4 Are there any tax grouping rules? Do these allow for relief in your jurisdiction for losses of overseas subsidiaries?

No, there are no tax grouping rules.

4.5 Do tax losses survive a change of ownership?

As a general rule, the losses may be carried forward for 6 (six) years, but they do not survive a change of more than 50% in ownership or a change in the legal form of the entity.

4.6 Is tax imposed at a different rate upon distributed, as opposed to retained, profits?

No, there is no difference in this regard.

4.7 Are companies subject to any significant taxes not covered elsewhere in this chapter – e.g. tax on the occupation of property?

Yes, there is a property tax in Kosovo. All persons who own, use or occupy immovable property are subject to tax on real estate. The Municipal Assembly of each municipality sets the property tax rates on an annual basis at the rate of 0.15% to 1% of the market property value.

5 Capital Gains

5.1 Is there a special set of rules for taxing capital gains and losses?

The Corporate Income Tax Law indicates the rules applicable to capital gains. As a general rule, capital gains and losses are treated as ordinary income/losses from economic activity. Capital gains are not recognised for fixed assets which are depreciated in a pool and purchased prior to 1 January 2010.

5.2 Is there a participation exemption for capital gains?

No, there is no participation exemption for capital gains.

5.3 Is there any special relief for reinvestment?

No, there is no relief for reinvestment.

5.4 Does your jurisdiction impose withholding tax on the proceeds of selling a direct or indirect interest in local assets/shares?

There is no withholding tax on the proceeds of selling a direct or indirect interest in local assets/shares.

6 Local Branch or Subsidiary?

6.1 What taxes (e.g. capital duty) would be imposed upon the formation of a subsidiary?

There are no taxes payable upon the formation of a subsidiary.

6.2 What is the difference, if any, between the taxation of a locally formed subsidiary and the branch of a nonresident company?

There is no difference between the taxation of a locally formed subsidiary and the branch of a non-resident company.

6.3 How would the taxable profits of a local branch be determined in its jurisdiction?

Branches are taxed only on the taxable income from a Kosovo source of income. The taxable income is determined in the same manner as for resident companies. Taxable income of branches is subject to Corporate Income Tax at the same rate of 10%.

6.4 Would such a branch be subject to a branch profits tax (or other tax limited to branches of non-resident companies)?

There is no branch profits tax.

6.5 Would a branch benefit from double tax relief in its jurisdiction?

Branches have the same treatment under the local legislation.

6.6 Would any withholding tax or other similar tax be imposed as the result of a remittance of profits by the branch?

No, there is no withholding tax or other tax with regard to the remittance of profits by the branch.

7 Overseas Profits

7.1 Does your jurisdiction tax profits earned in overseas branches?

Foreign-sourced income is taxable in Kosovo. However, tax credit is allowable for the amount of income tax paid overseas for the income derived abroad.

7.2 Is tax imposed on the receipt of dividends by a local company from a non-resident company?

No, dividends distributed by a non-resident to a local company are considered as exempt income.

7.3 Does your jurisdiction have "controlled foreign company" rules and, if so, when do these apply?

No, there are no "controlled foreign company" rules.

8 Taxation of Real Estate

8.1 Are non-residents taxed on the disposal of real estate in your jurisdiction?

Non-residents are taxed on the disposal of real estate in Kosovo, at a rate of 10% of the realised profit.

8.2 Does your jurisdiction impose tax on the transfer of an indirect interest in real estate located in your jurisdiction and, if so, what constitutes an indirect interest?

No, there is no tax on the transfer of an indirect interest in real estate located in Kosovo.

8.3 Does your jurisdiction have a special tax regime for Real Estate Investment Trusts (REITs) or their equivalent?

No, Kosovo does not have any special regime for REITs.

9 Anti-avoidance

9.1 Does your jurisdiction have a general anti-avoidance or anti-abuse rule?

The Tax Procedure Law provides for the right of tax authorities to disregard and re-characterise a transaction or element of the transaction that does not have a substantial economic effect, where the form of the transaction does not reflect its economic substance and where it was entered into as part of a scheme to avoid a tax liability.

9.2 Is there a requirement to make special disclosure of avoidance schemes?

No, there are no requirements to disclose avoidance schemes.

10 BEPS and Tax Competition

10.1 Has your jurisdiction introduced any legislation in response to the OECD's project targeting Base Erosion and Profit Shifting (BEPS)?

Kosovo has not introduced any legislation in response to the OECD's project targeting BEPS.

10.2 Does your jurisdiction intend to adopt any legislation to tackle BEPS which goes beyond what is recommended in the OECD's BEPS reports?

No, Kosovo does not intend to adopt any legislation to tackle BEPS.

10.3 Does your jurisdiction support public Country-by- Country Reporting (CBCR)?

No, Kosovo does not support public Country-by-Country Reporting (CBCR).

10.4 Does your jurisdiction maintain any preferential tax regimes such as a patent box?

No, Kosovo does not maintain any preferential tax regimes such as a patent box.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions