Tax-deductible expenses in Kosovo: a list

Two businesses with the same income can pay very different taxes. The difference is usually in deductible expenses: how much they are, whether they're documented and whether the accountant classified them correctly.

This article applies to businesses taxed on profit, meaning LLCs and Individual Businesses with full accounts. Under the 3% or 9% tax, expenses aren't deductible. See Tax for small businesses.

Three conditions for every expense#

For an expense to be deductible, it must:

1. be made for the business, to earn income;
2. be real, paid or owed;
3. be documented: an invoice with your business's NUI, a contract, proof of payment.

Expenses above a certain amount must be paid through a bank. Large cash payments may not be accepted.

Expenses that are usually deductible#

Expense	Notes
Wages and employer contributions	With contracts and EDI filings
Rent for premises	With a contract; watch withholding tax when the landlord is an individual
Electricity, water, internet, phone	In the business's name
Goods and materials	With a purchase invoice
Accountant, lawyer and consultant fees	With an invoice
Marketing and advertising	Including online ads, with an invoice
Business insurance	Property, liability, business vehicles
Interest on business loans	The loan must be for the business
Staff training	When related to the job
Business travel	With a business reason and documents
Bank fees and card terminal commissions	With a bank statement

Depreciation: assets aren't deducted at once#

When you buy an asset that lasts more than a year (a computer, a vehicle, equipment, furniture), it usually isn't deducted in full in the year you buy it. It's deducted gradually through depreciation, at the rates the law sets for each category.

Example: a €1,500 computer doesn't reduce this year's profit by €1,500, only by the annual depreciation share.

Expenses with limits#

• Entertainment (lunches, dinners, client gifts): deductible only up to a percentage of income.
• Donations: deductible up to a share of profit, when given for humanitarian, cultural, sporting or social purposes recognised by law.
• A vehicle also used privately: only the business share is deductible.
• Bad debts: deductible when the conditions are met, such as when they have been pursued legally.

Expenses that aren't deductible#

• Fines and penalty interest, including ATK and traffic fines;
• the owner's or family's personal expenses;
• corporate income tax itself;
• expenses without documents or invoiced to someone else;
• dividends paid out.

Mistakes that cost you in an audit#

1. An invoice without your NUI. Always ask for an invoice in the business's name, not just a till receipt.
2. Mixing private and business accounts. Keep a separate bank account. See The business bank account.
3. Expenses unrelated to the activity. A clothes shop deducting farm equipment will need to explain it.
4. Suppliers that don't exist. An invoice from a deregistered or fictitious business isn't accepted. Before large payments, check the supplier's status on Kerko. See How to verify a business.

Classifying expenses correctly is the accountant's main job before the annual return. And if ATK comes for an audit, these documents are the first thing they check.