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October 2014
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Investing in Kosovo


Reasons to invest in Kosovo - Benefits for potential foreign and local investors. Some of the benefits from investing in Kosovo are: low taxes, rich resources and supportive business environment.

  • Taxes in Kosovo are very low compared to neighboring countries.
  • The tax system is kept extremely simple.
  • The population - young and motivated, 70% under the age of 35
  • A young and motivated workforce with strong entrepreneurial skills and spirit and also general knowledge of most European languages
  • Enviable natural resources: coal, zinc, lead, ferro-nickel and fertile agricultural land.
  • Free access to European Union market and neighboring markets
  • Modern institutions in support of businesses
  • Simple and quick procedure for business registration (within 3 days)
  • Secure banking system
  • Modern legal structure and in accordance with the EU, and
  • The official currency is the Euro, which eliminates the risk of Euro-zones.


After its independence, Kosovo has made great progress in many areas of its development such as: increasing political stability, raising the level of security, stable economy with continuous growth, completion of legislation etc. It has become an important part of regional cooperation initiatives, through which the creation of a common regional market is achieved, as well as the elimination of customs tariffs, elimination of trade barriers, and opening new perspectives. Kosovo institutions have worked and continue to work rapidly to meet the standards required for European Union membership.

A stable macroeconomic environment has been created, with a sound financial system, reforms were made in fiscal policy in the application of lower tax rates in the region. Among the important objectives that our country has set for itself is the increased competitiveness of the domestic economy in the regional market.

Progress has been achieved in the establishment of modern infrastructure, both within Kosovo and also in its connections with the region. It is worth mentioning here the connection with Albania through construction of a highway and commitments of Albania to build the railway line in the near future connecting these two countries. The importance of this route for Kosovo has double meaning, considering that Kosovo already has its Adriatic port through which it is connected with sea transport. Through this route Kosovo is connected to its port at a time distance of only two and a half hours. Soon the construction of highways that connect Kosovo with Albania, Macedonia and Serbia will begin, which represents a very favorable opportunity for foreign investors.

Our country offers great opportunities for investment in other sectors such as: agriculture, energy, viticulture, tourism, extraction and processing of metals, etc.

Business registration system in Kosovo is another important factor stimulating the growth of investment, with simplified procedures, and quick registration of new businesses for a short time.

All these point to Kosovo as a very attractive country with investment opportunities for any investor of different sectors, such as in privatization where privatization and concession granting of large public companies is expected such as Post and Telecom of Kosovo and the Power Distribution System as well as investment in green fields. In the latter, very favorable opportunities are offered in the provision of physical infrastructure by industrial parks.

Kosovo is working on creating a financial capital market, which would offer an opportunity for investors who want to invest in shares of various companies.

During year 2010 it is estimated that € 314.6 million were invested, compared with the previous year the value thereof increased by 8%.

The total number of foreign companies operating in Kosovo amounts to about 4210.

Investments in the banking system represent greater financial value with foreign capital.

Foreign capital has a wide geographical distribution, from more than 80 countries of the world, where Albania ranks first in number of registered businesses.

Distribution of foreign investment companies by sectors of economy


NoSectorNo of Companies% in total
1.Trade167440%
2.Production62415%
3. Construction50212%
4.Tourism and Hotels3107%
5.Transport1584%
6.Banking Sector 1253%
7.Telecommunications982%
8.Health Services491%
9.Education 330.8%
10.Various Services63715.2%

TOTAL4210


CUSTOMS SYSTEM

Customs of Kosovo apply advanced procedures in the clearance of goods through the electronic system - TIMS (Trade Information Management System) where 90% of the declarations are made through DTI (Direct Trade Input). The estimated average time for customs clearance at border crossings is 3 hours.

Customs duties for import in Kosovo are:

  • 0% for goods imported from CEFTA countries
  • 10% for goods imported from all other countries
  • Variable excise tax levels for products such as: tobacco, petroleum, alcohol, etc.


After changes made to the customs system, customs duties were reduced for:

  • Capital assets
  • Raw materials for agribusiness and some other sectors in production
  • Work in process for further processing from 10% to 0%,


The following are free from customs duty:

  • Artificial fertilizer
  • Pharmaceutical products
  • Surgical instruments and equipment
  • Goods used for humanitarian purposes
  • Goods used by foreign diplomats and consular missions
  • KFOR
  • UNHCR
  • International Red Cross
  • UNMIK registered NGOs whose goal is the support of humanitarian and reconstruction programs and projects in Kosovo

TAX SYSTEM

Tax policy in Kosovo is oriented towards simple rules which provide a broad tax base and the lowest tax rates in the region and beyond. Taxes vary based on the form of business and annual turnover.

Tax administration applies three main tax regimes:

  • Value Added Tax (VAT)
  • Corporate Income Tax (CIT)
  • Personal Income Tax (PIT)


Value Added Tax (VAT) – The main tax in Kosovo is value added tax, VAT, paid for goods and services. This tax rate is fixed at 16% for all goods regardless of their origin and 0% for goods which are dedicated for export. Businesses that have an annual turnover of € 50,000 must register for VAT.

Corporate Income Tax - This tax is paid every three months depending on annual turnover. The corporate tax rate for annual turnover above € 50,000 is 10%

Personal Income Tax - This type of tax is applied on income from salaries, business, rent, interest, real estate etc. Personal income tax rates paid on salaries are progressive based on the amount of salary earned and are also the lowest rates in the region and EU countries.

Tax rates are:

0% for 960 Euro/year
4% over 960 up to 3000 Euro/year
8% between 3001 and 5400 Euro/year
10% over 5400 Euro year

Pension Contributions – The Kosovo Pensions and Savings Trust is responsible for administration and management of individual accounts for retirement savings. This tax is mandatory for the employee and the employer. They are required to contribute to financing the employee pension fund at a rate of 5% of salary from the employee and 5% from the employer.

The table below shows taxes of countries in the region:

CountryProfit and Corporations TaxIncome taxVAT
Kosovo10% 4- 8 -10%16%
Montenegro 9%12%17%
Macedonia10% 10%18%
Serbia10% 10-20%18%
Croatia20% 15-45%23%
Bulgaria10% 10%20%
Greece25% 0-40%19%
Romania16% 16%19%


Currency – the use of Euro as a currency impacts the creation of a credible environment with low inflation.

BUSINESS REGISTRATION

Procedures for business registration in Kosovo are very simple and fast. Regarding foreign investment there is a Foreign Investment Law, which protects foreign investors and treats them as equals to domestic investors.

To operate as a legitimate business, foreign and domestic enterprises must be registered in the Business Registration Agency, at the Ministry of Trade and Industry as one of the following business categories:

1. Individual Business,
2. General Partnership,
3. Limited Partnership,
4. Limited Liability Company
5. Joint Stock Company,
6. Foreign Company,
7. Socially Owned Enterprise,
8. Publicly Owned Enterprise,
9. Agricultural Cooperative,
10. Other enterprises under the jurisdiction of KTA

In accordance with the provisions of the Foreign Investment Law, foreign companies are allowed to engage in any business activity which is open to local businesses, and there is no restriction in terms of capital that these companies may have. Foreign investors can establish their branches in the same way as local businesses.

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