According to Law no.06/L-016 on Business Organizations (“Law on Business Organizations”), the following corporate structures are described:
Capital requirements: There is no requirement for an initial capital when incorporating an LLC in Kosovo. Additionally, no proof of payment of initial founding capital needs to be provided.
Capital requirements: The Initial founding capital of Joint Stock Companies is EUR 10,000.00.
Incorporation requirements (registration, capital and management requirements)
General and limited partnerships are not that common in Kosovo due to the unlimited liability of shareholders for the debts of the company, whereas the incorporation procedure for joint stock company is rather complex and time-consuming and requires minimum share capital in the amount of EUR 10,000, which also makes this legal form rarely used in practice.
The limited liability company is by far the most common used legal form in practice. This is due to the rather straightforward incorporation procedure, no requirements in relation to the share capital of the company, and the fact that the shareholders are not liable for the debts of the company (except in specific circumstances, e.g. if there are grounds for the piercing of the corporate veil). For this reason, below are outlined incorporation requirements and permitted activities related to the limited liability companies.
The initial registration procedure of a new business in Kosovo is comprised of submitting the necessary specific documentation for the different type of business to the relevant authority i.e. the Kosovo Business Registration Agency (“KBRA”), including submitting the specific application form by the applicant or authorized representative, and accompanying documents. For a company to become operational, there are a few other registrations and formalities that have to be made following the registration – opening of a bank account. Required time for post-registration procedures is approximately two weeks (provided all the documents are collected in a timely manner).
There are no applicable fees when registering a new business, though subsequent amendments are subject to fees in accordance with the applicable administrative instruction.
A business may be established and registered for any lawful purpose and may engage in any lawful activity provided with the relevant list of activities provided. If a business is established and registered for the conduct of an activity that is subject to a license or permit requirement established by another primary normative act, the registration of such business shall not constitute or be interpreted as constituting any kind of authorization for such a business to engage in such activity. It shall be the sole responsibility of the business, after registration, to identify, apply for and obtain any and all required permits and licenses from the responsible public authority before engaging in the concerned activity. A list of permitted activities may be found here.
A business may engage in all legally permitted activities, but its predominant business activity (taken from an exhaustive list of business activities provided by Kosovo laws) must be defined in the Memorandum of Association and registered with the Kosovo companies’ registry. There are certain activities (e.g. financial services and insurance services), that may only be performed by an entity incorporated in a certain legal form (e.g. joint-stock company), and certain activities (e.g. trade in poisonous goods, medicines or weapons) that may be subject to licensing requirements.
The following investment laws are applicable in Kosovo:
The Law on Foreign Investment provides for non-discriminatory treatment, constant protection and security, compensation in case of nationalization and expropriation, including payment of interest, compensation in case of violation of applicable law and international law attributable to Kosovo, freely, transferable and otherwise unrestricted use of income, protection against retroactive application of laws, legal or non-legal actions.
The new Law on Strategic Investments in Kosovo, which was promulgated in February 2017, aims to stimulate and attract investments. Called the Law on Strategic Investments in the Republic of Kosovo, its primary function is to limit or dispense with the unpleasantries of bureaucratic procedures involved in larger-scale investments that fall into the scope of “strategic investments”. The status of a strategic investments is given to those endeavors which contribute to the crucial economic and social development and economic growth, employment, introduction of new technologies, increase of competition, export or growth of welfare and living conditions.
Bilateral agreements are concluded with numerous countries with regard to investment protection, such as: USA, Austria, Turkey, Albania, Switzerland, Belgium, Luxemburg, United Arab Emirates and Macedonia. These agreements provide for investment protection and security, free funds transfer, free profit and dividends repatriation, protection against retroactive application of laws as well as protection from expropriation.
Carrying forward of losses
Based on the Law No. 05/L-029 on Corporate Income Tax (“Law on Corporate Income Tax”), tax and capital losses can be carried forward for up to six successive tax periods, and shall be available as a deduction against any income in those years.
Avoiding double taxation
Based on the Law on Corporate Income Tax (No.03/L-16), a resident taxpayer who receives income from business activities outside of Kosovo through a permanent establishment outside of Kosovo, and who pays tax on that income to any state, shall be allowed a tax credit under this regulation in an amount equal to the amount of tax paid to such state.
Any tax credit under the present section is limited to the amount of tax that would be paid under this regulation on the income made in such state.
Any applicable bilateral agreement on the avoidance of double taxation shall supersede the provisions above.
In order to promote local production, the new Kosovo Customs and Excise Code No. 03/L- 109 applies a reduced rate of zero percent customs duty on the import and export of certain capital goods, raw materials, agricultural production inputs, and services.
The Multilateral Investment Guarantee Agency (“MIGA”) (a member of the World Bank Group) guarantees investments in Kosovo up to the value of EUR 20,000,000.
The US Overseas Private Investment Corporation (OPIC) also provides political risk insurance for foreign investors in Kosovo.
The capital market legislation in Kosovo is still underdeveloped. A special law on securities is yet to be adopted. The Kosovo security related legislation is up to this point contained in bylaws and the Central Bank of Kosovo mainly appears as the authority in charge. Insofar there is no active capital market in Kosovo and hence no listed companies.
The Regulation MOF-CBK No. 01/2014 for the Primary and Secondary Market of Government Securities of the Republic of Kosovo (“Regulation”) regulates the manner and procedure of issuing and trading of Government securities on the primary and secondary market. The Central Bank of Kosovo maintains, records, trades and settles all Government security transactions through an electronical system, which includes the initial electronic auction sales at the primary auction, electronic trading and the central securities depository.
Concepts related to insider trading, market manipulation and director dealings are underdeveloped and are not applied in practice considering the lack of a stock exchange in Kosovo. As a rule, these types of actions can be treated as criminal activity and prosecuted by the prosecution authorities.
Kosovo law regulates agents, but has very little provisions about distributors. Additionally, there are no standardized contracts for both agency and distribution agreements that are used in practice. The only requirement is that they do not violate the provisions of the law, otherwise they will be considered as null.
In order to appoint an agent, the agent and the principal conclude an agency agreement in writing. The agent can also request the principal to give him a proxy.
The principal is allowed to hire more agents for the same kind of work on the same territory. However, once the agent enters into an agency agreement with one principal, it cannot represent another principal for the same kind of work on the same territory without the consent of the first principal.
The principal is obliged to pay the agent a fee (commission) for the contracts that were concluded with its mediation during the term of the agency agreement, as well as for the contracts concluded by the agent in the name and on behalf of the principal, if it had authorization to do so. Also, it has to pay the agent a fee for all contracts it concluded directly with clients that were found by the agent for the principal. If the parties agreed that the agent will have exclusive right of representation on a certain territory or with a certain group of clients, than the principal must pay the agent a fee for all contracts it concluded without the mediation of the agent on that territory or with a client from that group.
If the principal concludes a contract in a reasonable time after the termination of the agency agreement as a consequence of acts taken by the agent before the termination, the agent has a right to receive compensation.
In exceptional cases, the agent can give a written guarantee that the third party shall fulfil its obligations from the contract concluded between the third party and the agent acting in the name and on behalf of the principal. In that case, the agent has a right to a special fee (del credere commission).
The right of remuneration is gained when the principal fulfils, or had to fulfil its obligation under the contract concluded with the third party.
The agent loses the right to a commission if the contract between the principal and the third party is not fulfilled for reasons that are not on the side of the principal.
Unless otherwise agreed, the agency agreement is concluded for an indefinite term. If it is concluded for a fixed term, then is shall be terminated upon its expiration. If the agreement is for an indefinite term, each party may terminate it by sending a written notice to the other party while respecting the following notice periods:
Each party may terminate the agency agreement without a notice period due to serious reasons, in particular because of failure to fulfil the contractual obligations or due to changed circumstances.
The agent may not request or receive a fulfilment of its principal’s claim if it does not have a special authorization for it.
The agent has the flowing obligations:
On the other hand, the principal’s obligations are the following:
The parties can agree in writing that after the termination of the agency agreement the agent cannot perform partially or fully an agency activity on the same territory, with the same clients or regarding the same products that the agency agreement between them referred to. That provision would be valid only for two years after the termination of the agreement.
Kosovo does not have laws regulating distributor agreements, except for dental products, where a contract with a licensed distributor is required. Any local agent or distributorship relationship should be clearly defined, stipulated by contract, and contain an alternative dispute resolution clause. Agreements should also be registered with local courts in case of a legal disagreement.
Choice of law
The general rule that applies in Kosovo is that the parties are free to choose the governing law to their contract unless other is provided by law or an international agreement. If the parties have not selected a governing law, the law of the state with which the contract is in closest relationship shall be applied. Exceptionally, for contracts related to real estate, the law of the state in whose territory the real estate is located is exclusively applicable.
Choice of dispute resolution forum
Party autonomy is also a criteria for determination of the dispute resolution forum. The parties can explicitly or implicitly agree that the dispute between them shall be resolved by a competent court (choice of court agreement) or an arbitration tribunal (arbitration agreement). The parties can enter into this type of agreements before the dispute has arisen in the form of a contract provision, or after its appearance.
Public procurement in Kosovo is regulated by Law No. 04 /L–042 on Public Procurement in Republic of Kosovo, as amended (“PPL”). This law must be observed by persons, economic operators, undertakings, contracting authorities, works concessionaires and public bodies conducting, or involved, participating or interested in, a procurement activity involving or relating to the use of such funds or resources.
Unless otherwise determined with special provisions of the PPL for using different procurement procedures, a contracting authority shall select and use open or restricted procedure when conducting procurement activities leading to the award of a public contract. Pursuant to relevant legislation the award criteria are the following: that the contract shall be awarded to the economic operator submitting the lowest-priced tender; or that the contract shall be awarded to the economic operator submitting the most economically advantageous tender. The following procedures are used by Contracting Authorities for awarding contracts: open procedure, restricted procedure, design contest, negotiated procedure after publication of a contract notice, negotiated procedure without publication of a contract notice, procedure for price quotations, and minimal value procedure.
According to the PPL, the tender for privatization of publicly owned enterprises procedure shall be opened in accordance with the Public Procurement Law.
The Privatization Agency of Kosovo (“Agency”) is an independent public institution of the Republic of Kosovo exercising its functions and responsibilities with full autonomy in compliance to the Law on Agency, Operational Policies of the Agency, Rules of Tender and other applicable legal and sub normative acts in the Republic of Kosovo. The Agency has the mandate to administer Enterprises and assets as stipulated by the Law on Agency including the right to sell, transform and/or their liquidation. The Agency enjoys full juridical personality and may sue or be sued in a court procedure any other similar procedure.
Sale structure and bid statement
The Agency shall establish the subsidiary on behalf of the SOE and shall keep it in trust for the SOE, subsidiary’s issued share capital. As an integral part of the tender, the Agency shall perform the sale of subsidiary’ issued share capital, on behalf of the SOE whilst tendered items shall be transferred to the subsidiary for a definite time. The Subsidiary or tendered item shall be tendered for sale through public auction in compliance to procedures set out in Rules of Tender. There shall be one bidding round and these rules stipulate procedures that govern the tender including method whereby potential bidder may be registered as eligible bidder, information and documents to be included in the bid, highest bid identification and method to proceed with the sale of subsidiary or tendered item to the potential winning bidder. In order to consider a bid, the bidder must be in accordance to Rules of Tender. Bidders’ participation at any moment of the tender or through submitting the bid, the bidder complies and undertakes in compliance with these rules of tender. Upon submitting a bid, the bidder must emphasize what subsidiary or tendered item he is competing and must submit the bid price.
Sale is performed in accordance to the highest bid price
The Agency shall sell the subsidiary or tendered items only with highest bid price. Highest bidder shall have the right to buy the subsidiary or tendered items only by highest bid price. If for any reason the sale does not proceed with the highest bidder, the second highest bidder by complying to these rules of tender shall have the opportunity, but is not obliged to purchase the subsidiary or tendered items with highest bid price. If for any reason the sale does not proceed with the second highest bidder, the third highest bidder by complying to these rules of tender shall have the opportunity, but is not obliged to purchase the subsidiary or tendered items with highest bid price.
The Agency shall designate the tender schedule. Bidders must consult the tender schedule and obtain information regarding terms and dates set by it and comply with them during the tender process.
Law on Business Organizations does not foresee any specific articles on consortia or joint ventures, though the Law No. 04/L-045 on Public-Private-Partnership (“Law on PPP”) does mention consortia as a group of bidders.
In fact, the Law on PPP foresees the participation of consortia for the purpose of qualifying as bidders for specific projects. The two articles dedicated to the participation of consortia in special projects outline briefly some conditions for qualification. It states that each member of a consortium may participate, either directly or indirectly, in only one consortium at a time. When considering the qualifications of bidding consortia, the Public Authority shall consider the capabilities and levels of participation of each of the consortium members and assess whether the combined qualifications of the consortium members are adequate to meet the needs of all phases of the project.
There is no specific tax structure in Kosovo concerning public contracts.
The Government of the Republic of Kosovo by decision establishes the visa regime. The foreign national who is a citizen of the country for which an entry visa to the Republic of Kosovo is required is responsible to obtain the visa before entry in the Republic of Kosovo. The foreign national with the entry visa to the Republic of Kosovo does not enjoy the right to work in the Republic of Kosovo. Diplomatic and consular missions issue air transit visas (visa A) and entry visas (visa B, C and D).
Air transit visa (A): is issued for air transit at the airport of the Republic of Kosovo for citizens of countries for which the Government of the Republic of Kosovo has determined such a regime. The multi-entry air transit visa (A) is issued for a maximum term of six months and it is issued for one, two or more transit passages through the international air transit zone.
Entry visa (B): is issued for transit through the territory of the Republic of Kosovo, while the term of the visa should be in accordance with the time needed for transit. The multi entry transit visa (B) is issued for a maximum term of six months and it is issued for one, two or more transits.
Entry visa (C): is issued for purposes of residence in the territory of the Republic of Kosovo for a determined time, but no more than 90 days for each period of six-months. Multi-entry visas are issued for periods of validity from six months to five years.
Entry visa (D): is issued when the diplomatic or consular mission receives confirmation by the Ministry of Internal Affairs that a person fulfils the conditions to receive a residence permit in the Republic of Kosovo. Entry visa (D) is issued for one single entry and its validity is three months.
The types of residence in the Republic of Kosovo are: - short term residence - temporary residence and - permanent residence. Short Term Residence means the residing of a foreign national for up to three (3) months within a period of six (6) months without a visa or with a visa when required.
Temporary Residence Permit
Temporary residence is granted to a foreign national who wishes to reside in the Republic of Kosovo for purposes of: 1. family reunification; 2. secondary education or higher education; 3. scientific research; 4. humanitarian reasons including refugees, persons under subsidiary protection and victims of human trafficking or victims of smuggling of migrants and foreign nationals who have expressed willingness to cooperate with the competent authorities; 5. work; and 6. employment of posted employee. The temporary residence permit is issued for a one (1) year period.
Natural persons, who are not citizens of Kosovo, when willing to work in Kosovo for a timeframe of more than three (3) months, shall be granted a work permit issued by the Ministry of Labour and Social Welfare.
Contract form requirement
Law No.03/L –212 On Labour (“Labour Law”) expressly recognizes only the written form of an employment contract, signed by the employer and the employee which shall contain the minimum rights for the employee stipulated by Labour Law. An employment contract shall include the minimum elements as follows: (i) data on the employer (designation, residence and business registration number); (ii) data on the employee (name, surname, qualification and dwelling); (iii) designation, nature and the form of labour and/or services and the job description; (iv) the place of work or a statement that work is performed at various locations; (v) working hours and working schedule; (vi) the date of commencement of work; (vii) the duration of the employment contract; (viii) the basic salary and any other allowance or income; (ix) the period of vacations; (x) terms for the termination of the employment relationship; and (xi) any other data that the employer and employee deem important for the regulation of the employment relationship. An employment contract may include other rights and duties provided for by Labour Law.
Minimum employment terms
The minimum employment terms set forth by law which are required to be considered by employers before concluding employment relationships with employees are: (i) a minimum age of 18 (eighteen) years. However, in this respect when an employee is employed for easy labour which does not present a risk to either health or development and such a work is not prohibited by any law or sub legal acts, the LoL allows an employment relationship with persons older than 15 (fifteen) years’ old; (ii) a minimum wage which will be defined annually by the Government of Kosovo based on the proposal of the Social-Economic Council; (iii) an obligation to report employees to the Kosovo Tax Administration (KTA), and to other authorised institutions for managing and administering obligatory pension schemes; and (iv) safety measures.
Employment contracts in Kosovo may be concluded for: (i) an unspecified period; (ii) a specified period; and (iii) specific tasks. A contract for a specified task may not be longer than 120 (one hundred and twenty) days within a year. The period for giving notice to an employee by the employer for termination of an employment relationship depends on the duration of the contract. When an employment contract is concluded for an unspecified period, in the case of the termination of the contract by the employer, the following periods of prior notice shall be taken into consideration:
In the cases when the employment contract is concluded for a specified period, for the prior notice for termination of employment relationships, the employer shall give the employee prior notice of at least 30 (thirty) calendar days. The decision for termination of an employment relationship by the employer is mandatory to be issued in written form and to contain also the grounds for the termination.
The employee may be bound by a post-termination non-compete provision in the employment agreement that can be justified only if the employee has been in contact with business secrets of the employer the dissemination or use of which may seriously damage the employer.
Relevant authorities for the protection and enforcement of intellectual property rights arising from trademarks are the following:
In Kosovo, any natural or legal person is eligible to for the registration of a mark granting them trademark protection. Foreign applicants enjoy the same rights regarding trademark protection as domestic applicants, provided that such rights derive from international treaties or principles of reciprocity. Foreign applicants however need to be represented in proceedings before the IPO either by a professional representative such as a registered IP representative or a lawyer.
Under the Kosovo Law on Trademarks, any mark that is used to distinguish goods and services in trade and that may be graphically presented can be granted trademark protection. Marks subject to protection may comprise the following: words, slogans, letters, numbers, images, drawings, combinations of colours, three-dimensional shapes, and combinations of such marks and of graphically presentable musical notes.
Trademark application procedure commences by filing of the application for trademark registration to the IPO, either via post office or directly at the IPO premises. Application, containing duly filled form, valid power of attorney (should it be filed via legal representative), graphic representation of the mark (if the application is for a mark with a figurative element), complete list of relevant goods and services under the Nice Classification of Goods and Services, and proof of payment of administrative fees, will be entered into the register of applications, where the note of a filing number, date and the time of the receipt will be given by the IPO. The filing date is also a priority date.
Benefits of registering a trademark are multiple, but the main benefit lies in the protection it grants. Thus, the trademark holder has the exclusive right to use the trademark for goods and/or services to which it relates, and to prohibit others from an unauthorised use of an identical or similar mark for marking identical or similar goods or services on the market, should such use be likely to cause confusion in commerce. Additionally, the Trademark Law specifically governs that, in the event of intentional infringement of a trademark, the injured party may, instead of simply being remunerated pecuniary damage, request from the infringing party compensation of up to three times the usual licence fee it would have obtained for the use of the infringed trademark.
The trademark registration procedure, where a mark is not found to be in opposition to any other previously registered trademark, usually takes somewhere from six to twelve months, thereby comprising any potential examination reports rendered by the IPO leading to the extension of the procedure.
However, should there be a parallel court procedure initiated for the infringement involving a filed mark, the registration procedure might be extended to several years as the registration procedure would be suspended until the decision is rendered in the court proceedings.
The average total cost for the registration proceedings excluding any potential additional costs for responses to the examination report amounts to approximately EUR 160.
The examination report of the registration procedure consists of formal requirements and of material conditions for the trademark registration.
Formal examination consists of verifying the validity of the filed trademark application (consisting of the trademark application form, the mark claimed, list of goods and services to which the mark applies, and power of attorney, should the applicant be represented by someone). Should the examiner find that an application is improper, he/she will notify the applicant by dispatching an examination report to him specifying the irregularities noted and inviting the applicant to remedy the deficiencies. If the applicant fails to remedy the deficiencies in the application within the time limit assigned, or if he/she fails to pay adequate administrative fee for remedying such deficiencies, the examiner will issue a procedural order rejecting the application.
Material examination takes place once the application is found formally to be in order. Such procedure aims at examining the existence of any potential conflicts with other previously registered trademarks. If there are objections, the IPO will notify the applicant of this in writing, asserting the reasons for which the mark cannot be registered and requesting from the applicant to submit its comments within the specified time limit of 60 days. If the applicant fails to act upon the IPO’s request, or if it does but the IPO nevertheless finds that the mark may not be registrable, it will reject the application.
The trademark lasts for 10 years as of the date of filing of the application for registration, and is indefinitely renewable for further 10-year periods upon payment of prescribed administrative fees.
Enforcement of IP rights and particularly trademarks are performed on several different levels.
As is the case in other jurisdictions of the former Yugoslavia, border control mechanisms are available via Customs Administration, allowing for trademark holders, applicants or exclusive licence holders to file a demand for trademark protection at the state borders. Acting upon rights holders’ request, or ex officio, the authorities are empowered to temporally seize all goods that are either the object or means of an IP rights infringement, whenever there is prima facie evidence establishing that an IP right has been infringed. Following the seizures, the customs officers notify without delay the rights holders, the IPO (if it is necessary to obtain relevant information) and any other interested parties (if any such parties are known) about the measures taken.
The notification is crucial as it includes an invitation to the holder of the IP rights to initiate the proceedings for protection of its rights in the court proceedings and to inform the customs authorities about such proceedings or of the preliminary injunction issued by the court.
Court proceedings, as additional means of enforcement, are initiated by filing a complaint with the competent court. The infringement complaint is usually filed with a demand for preliminary injunction. After receiving such a complaint, the court quickly decides on preliminary injunction. Furthermore, before rendering the final decision on the complaint, the court schedules a hearing to receive the statements of the parties. The judge will schedule as many hearings as is deemed necessary before rendering a decision.
Below you may find an overview of the manner of obtaining and registering ownership according to the laws of Kosovo.
Ownership of immovable property is officially obtained upon registering the said ownership with the competent MCO.
In order to register ownership over an immovable property a party need to submit the standard form application for registration of ownership to the competent MCO with the supporting documentation, which includes:
The above documents need to be provided in original. In case the documentation is not in one of the two official languages in Kosovo (Albanian and Serbian), the documents need to be accompanied by an Albanian or Serbian translation by a certified translator as well as notary public verification of such translation. In case the document is issued by a foreign authority or verified by a foreign notary public and apostil might also be required.
The following documents can serve as a legal basis for registration of transfer of ownership of immovable assets:
The acquiring of ownership of movable property is done by concluding an agreement between the transferor and transferee and passing of the asset’s possession.
Registration of the ownership acquisition with a public registry might also be required for certain types of movable assets (e.g. motor vehicles).
After having registered with the KBRA, the business organization (i.e. foreign business organization, Limited Liability Company or Joint Stock Company) has to open a bank account in a local bank in Kosovo. The following documents are usually required by banks for purposes of opening the bank account:
(i) The incorporation documents of the business organization, i.e.: a. agreement of the branch; b. agreement and charter for a limited liability company. (ii) Photocopy of director(s) passport(s); (iii) Business Registration Certificate and the Information about Business (i.e. documents issued by the KBRA). The presence of the director(s) in the Bank for the opening of the account is mandatory. Once having completed registration with the KBRA and opening a bank account in Kosovo, the business organization has to register with the Tax Administration of Kosovo (‘TAK’) to obtain the Fiscal Number Certificate and VAT Certificate.
Director’s rights and obligations
A managing director has the authority to represent the company in the conduct of its business activities, including the authority:
Upon the conclusion of the transactions on behalf of the company, the managing directors are required to adhere to the restrictions prescribed by the charter of the company or established by the shareholders or the board of directors. A restriction on the right of representation does not apply with regard to third persons. Any person, including a managing director, who knowingly purports to act on behalf of the Limited Liability Company in violation of the obligations set forth by the company’s charter is personally liable for all damages caused to the company from these actions.
In exercising his rights, duties and responsibilities, a managing director shall act in fairness, loyalty and full care in due account of the interests of the company.
The duty of loyalty and care shall include, but will not be limited to, the duty to: (i) not use the property of the company for his own personal needs; (ii) not disclose confidential information of the company and not to use company confidential information for his own personal gain; (iii) not abuse with his position within the company with a view of personal gain to the detriment of that company; (iv) not acquire for own gain the business opportunities of the company; (v) not engage in commercial competition with the company; or (vi) serve only the interests of the company in all transactions in which the person has personal interest.
If a managing director acts contrary to the fiduciary duties and responsibilities, he is liable to compensate the damages to the company caused by such infringement, and repay any personal profit that he or any other affiliated persons may have acquired by such action.
Personal liability of directors - Any owner of a company has the right to file a complaint with the Court in the owner’s own name and on the owner’s own behalf, or in the company’s name and on the company’s behalf, against a managing director to enforce any rights the owner or the company may have against a managing director for violating his/her duties to the owner or the company. 115.2 If the owner is seeking the enforcement of the company’s rights against a managing director, all damages awarded against the managing director shall be the property of the company. If the Court finds that the complaint was validly filed, the Court shall award in favour of the complaining owner and against the managing director the owner’s reasonable expenses. Such reasonable expenses shall include the legal fees incurred by the owner in connection with the preparation, filing and prosecution of the complaint.
Non-competition – A managing director of a company shall not directly or indirectly engage, participate or have an interest in any business activity that is in competition with the company. The prohibition of the first sentence includes, but is not limited to, the managing director’s involvement as an employee, consultant, contractor, general partner, manager, director or controlling owner or shareholder of another business organization that engages in a business activity that is in competition with the company.
Criminal liability of legal entities and directors
Criminal liability of Legal Entities and Directors are prescribed with the Criminal Code No. 06/L-074 of the Republic of Kosovo and Law No. 04/L-030 On Liability of Legal Persons for Criminal Offences.
According to the above laws, a legal person is liable for the criminal offence of the responsible person, who has committed a criminal offence, acting on behalf of the legal person within his or her authorizations, with purpose to gain benefit or has caused damages for that legal person. The liability of legal person exists even when the actions of the legal person were in contradiction with the business policies or the orders of the legal person.
Representation and Licenses
Representation in customs procedures can be performed by a company or sole proprietor who fulfils the conditions prescribed by law and has authorization for representation in customs procedures, i.e. an authorized customs representative. The Customs Administration issues the license to perform activities of representation in customs procedures within 30 days from the day of receipt of the duly submitted application, to which all evidence of fulfilment of the requirements has been attached.
Benefits and exemptions
VAT (Value Added Tax)
Almost all imports are subject to the Value Added Tax of 16% on the duty-paid value of the imported goods. However, certain goods are exempt from the VAT, whether either imported into Kosovo, or produced in Kosovo. TARIK indicates whether VAT is not collected on the importation of specific goods.
Articles 234 to 249 of the Customs Code provide the authority for the levying of Excise Tax on certain products.
Excise taxes are collected on certain luxury goods and a few other products. Click on this link to see the products that are subject to excise taxes.
Duty and/or VAT Exempt Goods
Some goods are exempt from customs duties and or VAT, such as certain agricultural products, as well as:
Suppliers of exempt goods and services covered above, are able to claim input VAT on their purchases/imports related to those exempt supplies (which means that, for example, large exporters will be entitled to VAT refunds), whereas suppliers of exempt goods and services covered by from “Public interest” to “Other exceptions” above, cannot claim back input VAT on their purchases/imports related to those exempt supplies (meaning in many cases an apportionment is necessary of the amount of input VAT that can be claimed).
In April 2016, Kosovo implemented a Stabilization and Association Agreement (SAA), which lifted customs duties on over 1044 agricultural and 487 fishery imports from the EU. Under the same agreement, customs tariffs on industrial imports will be phased out gradually over a period of 10 years.
The rate of customs import duty is zero on goods which originate in the territory of a country that is a party to the Central European Free Trade Agreement (CEFTA).
Most rates of import duty on goods which originate outside of CEFTA are 10% ad valorem (10% of the price paid or payable for the imported goods); however, some imported goods are exempt from the payment of the 10% import duty. TARIK provides detailed information on import duty rates, VAT rates, and excise tax rates (if any), as well as any required certificates or licenses that pertain to all imported goods.
Corporate income tax
The corporate tax rate for annual turnover is 10%.
The main tax in Kosovo is the Value Added Tax VAT which is paid for goods and services. The fixed rate of this tax is 18% for all goods regardless of their origin and of 0% for goods dedicated for export. Businesses that have annual turnover of EUR 30,000 must register for VAT.
In terms of import the period for VAT payment is 6 months and it is collected at administrative borders of Kosovo.
Double taxation treaties
Kosovo has Double Taxation Agreements with the following countries: Albania, Belgium, Finland, Germany, Hungary, North Macedonia, Slovenia, The Netherlands, Turkey, Malta, Austria, Luxembourg, Switzerland, Czech Republic, Croatia, United Arab Emirates and the United Kingdom.
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 recognized for fixed assets which are depreciated in a pool and purchased prior to 1 January 2010. There is no participation exemption for capital gains, nor is there any special relief for reinvestment. There is also no withholding tax on the proceeds of selling a direct or indirect interest in local assets/shares.
There are no taxes payable upon the formation of a subsidiary. 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%.
Although there is no withholding tax on dividends distributed from a Kosovo-resident company, there is a 10% withholding tax on royalties paid by a Kosovo company to a non-resident.
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.
Accounting standards: The Kosovo Council for Financial Reporting (KCFR) has adopted the use of IFRS for SMEs. As stated by KCFR, IFRS for SMEs must be used by entities that are neither large nor micro-sized. SMEs may use full IFRS if they wish.
Classification according to size:
Classification according to size
Fulfill two out of three criteria:
1) Turnover higher than 2 million EUR
2) Gross assets higher than 1 million EUR
3) Average number of employees higher than 10
Fulfill two out of three criteria:
1) Turnover higher than 50,000 EUR
2) Gross assets higher than 25,000 EUR
3) Average number of employees up to 10.
Fulfill two out of three criteria:
1) Turnover higher than 4 million EUR
2) Gross assets higher than 2 million EUR
3) Average number of employees higher than 50
Fulfill two out of three criteria:
1) turnover less than 50,000 EUR
2) gross assets less than 25,000 EUR
3) average number of employees less then 10.
Accounting regulation bodies: Ministry of Finance, Kosovo Council for Financial Reporting (KCFR)
Accounting report currency and language: Accounting registers are maintained in the official language of the Republic of Kosovo as stipulated by the Constitution of the Republic of Kosovo (Albanian and Serbian), whereas the currency used is Euro.
Reporting periods: Financial Statements must be submitted annually.
Timeline of submission: The financial statement of the Business Organizations have to be submitted and published in KCRF no later than 30 April of the following year. Consolidated financial statements have to be audited in accordance with International standards on auditing and shall be submitted to KCFR and no later than 30 of June of the following year.
Professional accountancy bodies: Society of Certified Accountants and Auditors in Kosovo (SCAAK)
Certification and auditing: All large and medium entities must have their financial statements audited. All statutory audits shall be carried out in accordance with ISA and related interpretations, guidance and pronouncements issued by the IAASB and approved by the KCFR. KCFR reviews ISA after they have been translated into Albanian and approves for application in the jurisdiction. As of 2017, the 2015 IAASB Handbook is being applied. During 2016, the Society of Certified Accountants and Auditors of Kosovo (SCAAK) has translated and disseminated to its members the latest revised ISA related to audit opinion (ISA 700, 701, 705, 706, 720) as published by IAASB. Audits must be conducted by auditors approved to carry out statutory audits by the competent authorities as defined in the law. As of 2017, there are three licensed professional associations: Society of Certified Accountants and Auditors of Kosovo, Institute for Accounting, Auditing and Finance, and AAB Institute for Certified Accountants and Auditors.
Transfer pricing scope: Related party transactions that are covered by the Administrative Instruction Mof-No 02/ 2017 on Transfer Pricing (“Instruction”) include controlled transactions between Kosovo residents (including permanent establishments of non-residents in Kosovo) and non-residents, as well as all transactions between Kosovo residents (including permanent establishments of non-residents in Kosovo) and residents of certain low or no-tax jurisdiction.
Transfer pricing scope: Related party transactions that are covered by this Instruction include controlled transactions between Kosovo residents (including permanent establishments of non-residents in Kosovo) and non-residents, as well as all transactions between Kosovo residents (including permanent establishments of non-residents in Kosovo) and residents of certain low or no-tax jurisdiction.
Related party definition: ‘Related parties’ are considered to be persons having a special relationship that may materially affect the economic results of the transactions between them. Most common examples are:
A related person is considered to ‘effectively control’ business decisions of another person if:
Transfer pricing methods: The recognized methods of calculation of such prices are based on OECD transfer pricing guidelines:
No above method is preferred over another. This implies that taxpayers are allowed to choose methods to be used in determination of “arm’s length” prices and preparation of transfer pricing study. The method is chosen on the level of each type of transaction. Combining two or more methods is also allowed. However, the one that has been chosen must be practically applicable and should result eventually in reasonable estimate of effects in accordance with the “arm’s length” principle. A simplified approach to determining arm’s length is applied in such cases to reduce the compliance cost to taxpayers and provide greater certainty for MNEs when offering such services to their group members. 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 study: The study must be submitted in any of the official languages of Kosovo, although in exceptional cases the authorities may accept documentation prepared in English.
Who is obliged to prepare: Preparation of the study is mandatory for all entities conducting transactions with related parties (resident „mother company“ also has to prepare a Master file).
Submission dates: Transfer pricing documentation must be submitted to the Tax authorities within 30 days upon the request. However, taxpayers with controlled transactions exceeding EUR 300,000 within the reported fiscal period must submit a „notice on controlled transactions“ together with the CPT return.
Advance transfer Pricing Agreements (APA): Not applicable.
Thin capitalization: No local rules.
BEPS Actions – Implementation timeline
No timeline has been announced.