Corporate income tax in Kosovo: 10% explained

One reason many entrepreneurs choose an LLC is the simple tax on profit: 10%, with no progressive bands. But the base that 10% is calculated on isn't always what you see in the bank account.

Who pays it

Corporate income tax is paid by:

LLCs and JSCs;
branches of foreign companies on profit made in Kosovo (see A foreign company in Kosovo);
public enterprises and other commercial companies.

Individual Businesses and partnerships don't pay it; their profit is taxed as the owners' personal income. The full comparison is in Individual business or LLC?.

Small companies with annual turnover up to €30,000 can pay a simplified tax on turnover instead of tax on profit. See Tax for small businesses.

How taxable profit is calculated

Taxable profit isn't simply money in minus money out. It starts from accounting profit with some adjustments:

Gross income from all sources.
Minus deductible expenses: those incurred for the business and backed by an invoice.
Plus non-deductible expenses that were booked in the accounts: fines, partners' personal expenses, expenses without proper documents.
With limits on some categories, such as entertainment, donations and depreciation at tax rates.

Example: an LLC has income of €200,000 and booked expenses of €160,000. Of those, €3,000 are traffic fines and a family dinner. Taxable profit is €43,000, and the tax €4,300.

The full list of what is and isn't deductible is in Tax-deductible expenses.

Quarterly instalments

Companies don't pay the tax only at year end. They pay four instalments, usually by:

15 April, 15 July, 15 October and 15 January.

The instalment is based on the previous year's tax. For new companies or those with a loss last year, it's based on an estimate of the current year's profit. The annual return, due by 31 March, calculates the final tax and the difference is paid. See Annual tax return.

Losses

If a year ends with a loss, it isn't wasted. The loss is carried forward and deducted from future profits, within the period set by law. That's one more reason to file the annual return even when there's no profit.

Dividends and partners' salaries

After the 10% tax, profit can be distributed to partners as dividends. For resident partners, dividends are currently not taxed again. That makes an LLC attractive when profits are high.

A partner who works in the company can also take a salary. The salary is a deductible expense for the company, but it's taxed as a salary for the partner and carries pension contributions. The mix of salary and dividends is a question for your accountant, because it depends on the amounts.

Withholding tax

Some payments a company makes are subject to withholding tax, which the company deducts and pays to ATK:

rent paid to an individual (see Rental income tax);
interest, royalties and some services from non-residents;
salaries (see Payroll tax and pension contributions).

Why a good accountant matters

The 10% rate is simple, but the base isn't. Classifying expenses, depreciation, inventory and withholding tax are where companies pay more than they should, or less and then get fined in an ATK audit. See When you need an accountant.

Frequently asked questions

What is the corporate tax rate in Kosovo?

Corporate income tax is 10% of taxable profit, one of the lowest rates in Europe.

Are dividends taxed in Kosovo?

Dividends a company pays to resident shareholders are currently not taxed again at shareholder level, because the profit was already taxed in the company.

When are quarterly instalments due?

Usually by 15 April, 15 July, 15 October and 15 January. The amount is based on the previous year's tax or, for new companies, on an estimate.

What happens to a loss?

A loss can be carried forward and deducted from profits in future years, within the period set by law.

This article is for information only and is not tax advice. Rates, deadlines and deductible expenses are set by the Law on Corporate Income Tax and ATK guidance, and can change.