KOSOVO Law and Practice Contributed by: Ardian Rexha, Nora Grajcevci Mehmeti and Vjollca Hiseni, Rex Law Partners
Payroll Obligations Employers are required to comply with payroll-relat - ed obligations, including the withholding personal income tax and pension contributions defined in 5.1 Taxes Applicable to Employees/Employers . OECD Pillar Two Pillar Two of the OECD’s Two Pillar Solution has not been implemented in Kosovo. 5.3 Available Tax Credits/Incentives Dividend income received by resident and non-resi - dent persons is exempt from taxation. Strategic Investments Investments that meet national objectives or fall within priority sectors benefit from additional facilita - tions, including simplified or preferential treatment for imports used in manufacturing or processing (such as machinery, raw materials, semi-products or other inputs), as well as exemption from export duties. Temporary VAT Exemption on Raw Materials As per the Law on Economic Recovery, raw materials that are produced from registered and active busi - nesses in Kosovo, regardless of whether they are exported or internally traded, are exempt from charge -
income tax to a foreign country are entitled to a tax credit in Kosovo for the amount paid. This credit acts as a deduction on their owed Kosovo income tax. The deduction cannot go over the amount of tax Kosovo would have originally charged on that specific foreign income. Customs Duties Exemption Manufacturers are granted exemption from customs duties on imports of raw materials, semi-finished goods, production machinery and IT equipment. This is limited to approval entities, as authorised by TAK, and is implemented through a unique customs dec - laration, which must include the manufacturer’s fiscal number. Kosovo Customs records relevant data in the automated system for customs data (ASYCUDA) and informs TAK for compliance. Free Trade Kosovo also applies free trade agreements (FTAs), which eliminate or reduce customs tariffs on certain goods traded with partner countries. For more infor - mation, please refer to 5.8 Tariffs . 5.4 Tax Consolidation Tax consolidation is not available in Kosovo 5.5 Thin Capitalisation Rules and Other Limitations There are no applicable thin capitalisation rules in Kosovo. 5.6 Transfer Pricing Transfer pricing rules are set out in the Law on Cor - porate Income Tax and Administrative Instruction No 02/2017 on Transfer Pricing, and apply to all con - trolled transactions with related parties. Controlled transactions arise where there is a special relationship between the parties that could influence the terms and conditions of the transaction, making them potentially non-compliant with the arm’s length principle. “Related parties” refers to the following situations: • one party holds or controls 50% or more of the shares or voting rights in another entity; • one party directly or indirectly controls another party;
able VAT until 31 December 2028. Tax Reduction for New Assets
A one-time 10% deduction applies for corporate income tax purposes for taxpayers that purchase and first put into use new heavy machinery classified under the 10% depreciation category. This deduction is not available if the taxpayer already benefits from
other tax exemptions or incentives. VAT Exemption for Certain Imports
Article 29 of Law No 05/L-037 on Value Added Tax provides that production lines, production machinery and raw materials used in the manufacturing process qualify for VAT-exempt import. The specific categories of machinery are not listed, and communication with TAK is required to ensure compliance. Tax Credits For the avoidance of double taxation, Kosovo resi - dents who earn business income abroad and pay
544 CHAMBERS.COM
Powered by FlippingBook