Investment in Kosovo 2016 Web

Investment in Kosovo 2016 | 1
Investment
in Kosovo
2016
KPMG in Kosovo
kpmg.com/al
2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
2 | Investment in Kosovo 2016
Investment
in Kosovo
Edition 2016
Preface
Investment in Kosovo is one of a series of booklets
published by KPMG member firms to provide information
to those considering investing or doing business
internationally.
Every care has been taken to ensure that the information

presented in this publication is correct and reflects the
situation as of May 2016 unless otherwise stated. Its
purpose is to provide general guidelines on investment
and business in Kosovo. As the economic situation in the
country continues to undergo changes, further advice
should be sought before making any specific decisions.
For further information on matters discussed in this

publication please contact Gilbert McCaul, Partner.
KPMG Albania Shpk Kosovo Branch
6 Pashko Vasa Str.

10 000 Pristina
Kosovo
Tel: +381 38 246 771
Fax: +381 38 246 772
kpmg.com/al
Contents
General Information........................................................................................................... 6
Geography and population.................................................................................................... 6
Climate ................................................................................................................................ 6
Official language................................................................................................................... 6
A brief history of Kosovo...................................................................................................... 7
Currency............................................................................................................................... 7
Government and political system......................................................................................... 7
Visa system for foreigners traveling to Kosovo..................................................................... 8
Travel.................................................................................................................................... 8
Airport .................................................................................................................................. 9
Investment Environment ................................................................................................ 10
Economy ............................................................................................................................ 10
Labor market...................................................................................................................... 11
Fiscal indicators ................................................................................................................. 11
Trade .................................................................................................................................. 12
Privatization and investment opportunities ........................................................................ 13
Agriculture and farming ..................................................................................................... 13
Tourism............................................................................................................................... 14
Energy ............................................................................................................................... 14
Mining................................................................................................................................. 15
Telecommunications .......................................................................................................... 16
Foreign direct investments ................................................................................................ 16
Business Environment .................................................................................................... 18
Business entities ............................................................................................................... 18
Business Registry............................................................................................................... 20
Financial sector .................................................................................................................. 20
Protection of intellectual property rights ........................................................................... 23
Accounting and Auditing ................................................................................................ 24
Accounting regulations and requirements.......................................................................... 24
Audit requirements ............................................................................................................ 25
Taxation ............................................................................................................................ 26
General .............................................................................................................................. 26
Corporate income tax......................................................................................................... 26
Personal income tax........................................................................................................... 29
Value added tax.................................................................................................................. 30
Withholding tax.................................................................................................................. 31
Customs duties and customs code.................................................................................... 31
Excise taxes........................................................................................................................ 32
Local taxes.......................................................................................................................... 32
Double Tax Treaties ............................................................................................................ 32
Employment Regulations................................................................................................ 33
Legislation ......................................................................................................................... 33
Employment contracts....................................................................................................... 33
Termination of employment contracts ............................................................................. 33
Conditions of employment ................................................................................................ 33
Holidays and absence from work....................................................................................... 34
Government Control......................................................................................................... 35
Public procurement............................................................................................................ 35
Competition law................................................................................................................. 36
Environmental laws............................................................................................................ 36
Appendix A Important Links.............................................................................................. 37
General Information
Geography and population Kosovo has an estimated population of
Kosovo is located in Southeast Europe, on 1.8 million and its capital, Pristina, has a
the Balkan Peninsula and encompasses population of some 210,000 inhabitants,
10,877 square kilometers. The country according to the latest statistics published
is bordered by the Republic of Serbia in by the Kosovo Agency of Statistics in
the north and east, the Former Yugoslav June 2015. Ethnic Albanians make up the
Republic of Macedonia in the south, the majority of the population (92%) while
the largest minority is represented by
Republic of Albania in the southwest and
Serbians. Other minority groups include
Montenegro in the northwest.
Bosnians, Turks, Roma, Gorans, Ashkali and
The terrain is mostly mountainous Egyptians. Kosovo has one of the youngest
and the highest peak is Gjeravica at populations in Europe with an estimated
2,656 meters (8,714ft) above sea level. The 40% of its citizens below the age of 20.
Sharr Mountains are located in the south The main religions are Muslim, Serbian
and southeast bordering the Republic of Orthodox and Roman Catholic.
Macedonia and the Kopaonik Mountains
are located in the north. The central region Climate
of Drenica and the eastern part of Kosovo, The climate in Kosovo is mostly
known as Gollak or Gallap, are largely hilly continental. The geographic location of
areas. There are two main plains in the the country is the reason for its large
country. Rrafshi i Dukagjinit basin is located annual temperature range. The summer
in the west and the Plain of Kosovo lies temperature highs can reach +38C
in the east. The low hill area of Drenica (100F), and the winter temperatures
is between the two basins. The Plain of can be as low as -20C (-4F). Kosovo
Kosovo is on average higher than the experiences warm summers and cold and
plain of Rrafshi i Dukagjinit by about snowy winters.
100 meters (328ft).
Official language
The numerous landscapes and other tourist
attractions, two of the most prominent Kosovo has two official languages
being the Rugova Canyon and the Gadime Albanian and Serbian. Turkish, Bosnian and
Cave, make Kosovo a destination Roma languages have the status of official
worth visiting. languages in certain municipalities.
Kosovo is in the Central European time

zone and hence is one hour ahead of
Greenwich Mean Time (GMT).
A brief history of Kosovo The war ended on 10 June 1999. A

The Kosovo region in the Balkans in the NATO-led Kosovo Force (KFOR) entered
ancient past was known as Dardania and the province following the Kosovo War,
its inhabitants as Dardans. After the Roman tasked with providing security to the
conquest, the region became part of the United Nations (UN) Interim Administration
Moesia Superior province in the Mission in Kosovo (UNMIK). In accordance
1st century AD and then part of the with UN Security Council Resolution 1244
(1999) which placed the country under
Byzantine Empire. Kosovo was first
a transitional administration, Serbias
absorbed into Serbia in the late 12th
territorial integrity was protected, but it
century, and was part of the Serbian
was UNMIK that assumed responsibility for
Empire from 1346 to 1371. The Serbian
governing Kosovo. On 17 February 2008,
Empire was defeated by the Ottoman Turks
Kosovos Assembly declared independence
and the Ottoman Empire took control of
from Serbia. As of May 2016, 111 UN states
todays territory of Kosovo in 1455. It ruled
recognize the independence of Kosovo.
in the region for almost 500 years.
It has become a member country of the
After the First Balkan War of 1912, most of International Monetary Fund (IMF) and
the countrys territory was internationally the World Bank and, in December 2012, it
recognized as part of the Kingdom of became the 66th member country of the
Serbia, while the region of Rrafshi i European Bank for Reconstruction and
Dukagjinit as part of the Kingdom of Development (EBRD). Kosovo aspires to be
Montenegro in the Treaty of London of part of the European Union.
May 1913. In 1918, Serbia became part
of the newly-formed Kingdom of Serbs, Currency
Croats and Slovenes. During the Second The euro was declared the official currency
World War, most of the territory of Kosovo of Kosovo from 1 January 2002. This
was awarded to the Italians who occupied was undertaken to replace the previous
Greater Albania and a smaller part in the widespread use of the German mark which
north to the Germans who occupied Serbia. had been the measurement currency in the
Following the end of the war, Kosovo country before 2002. Today, the euro is the
became part of the Socialist Republic of most widely used currency in Kosovo with
Serbia within the Socialist Federal Republic the Serbian dinar still in circulation in the
of Yugoslavia and enjoyed a certain degree Serbian enclaves.
of autonomy during the period 1974-90.
The Yugoslav Republic began to break up Government and political system

in the early 1990s. An upsurge in Kosovo The Assembly of Kosovo has 120 seats
followed, which drew the attention of the and all members serve a four-year term.
international community in 1998. After Currently, the seats are held as follows: the
the breakdown of negotiations between Democratic Party of Kosovo has 35 seats,
Serbian and Albanian representatives, the the Democratic League of Kosovo has
North Atlantic Treaty Organization (NATO) 33 seats, the Group Vetevendosje has
intervened on 24 March 1999 launching a 17 seats, the Alliance for the Future of
campaign of heavy bombing against Serbia. Kosovo has 8 seats, the Srpska List Party
has 11 seats, the Initiative for Kosovo Party to Kosovo, foreigners need to be informed
has 6 seats, and the remaining 10 seats whether they need a visa to enter it.
are held by minority groups and non-
Citizens of countries such as Albania,
affiliated individuals.
Australia, Canada, European Union (EU)
The Head of State is the President of the Member States, USA, South Africa, and
Republic of Kosovo who, according to the Turkey do not need a visa. However,
Constitution of the country, is elected by Kosovo is starting to implement a stricter
the Assembly for a five-year term. In visa regime. Individuals are required to
April 2016, Kosovos Assembly elected register with the police if they are present
Hashim Thaci as President. in the country for more than 90 days and
to prove to the border police at the time of
The President proposes to the Assembly a
entry that they have a legitimate reason to
candidate for Prime Minister, who is finally enter Kosovo. According to Law
approved by the Assembly. In accordance No. 04/L-219 on Foreigners, a foreigner
with Kosovos Constitution, the basic unit shall not engage in paid employment in the
of local government is the municipality. Republic of Kosovo on the basis of a visa
Currently, there are 38 municipalities alone. If foreigners stay in Kosovo for more
established in Kosovo. than 90 days in a year, they must apply for
The judicial system consists of the a residence permit. This will facilitate their
Constitutional Court, the Supreme Court, entry into and exit out of Kosovo.
the Appeal Court and the District Court.
Kosovos Constitution provides that the Travel
Supreme Court of Kosovo is the highest Skopje and Tirana are one and a half
judicial authority. The Kosovo Judicial hours and three and a half hours by road,
Council elects a Chair and Vice Chair from respectively, from Pristina. Additionally,
its members, both for a term of three there are regular bus lines from these two
years. Elections to these offices do not cities to Pristina.
extend the mandate of the members of the
There are bus connections from Belgrade
Kosovo Judicial Council.
and Nis to Pristina and Prizren and from all
The European Union Rule of Law Mission, major towns in Serbia to the northern parts
EULEX, is acting to strengthen Kosovos of Kosovo.
institutions, judicial authorities and law As Serbia does not currently recognize
enforcement agencies. Following the Kosovo, travelers will not be given a
Kosovo War in 1999, KFOR, a military force Serbian exit stamp if they enter Kosovo
under NATO command, is working with from Serbia. In addition, if the Serbian
Kosovos authorities to provide security authorities find any Kosovo stamps in the
within the country. travelers passports, the stamps will be
crossed out, although it is unlikely that
Visa system for foreigners traveling travelers will be denied entry because of
to Kosovo them. However, if one lives in or intends
Kosovo is relatively easy to access and a to travel frequently to Serbia, it has been
valid passport is required. Before traveling suggested to obtain matching pairs of entry
and exit stamps; this means backtracking

and leaving Serbia via a recognized border
checkpoint, such as Belgrade Airport.
Airport
Pristina International Airport Adem Jashari
is the only civilian airport in Kosovo. It
takes a 20-minute drive from Pristina to get
there. Many recognized European airlines
operate via it including: Austrian Airlines,
Turkish Airlines, Hamburg International,
Adria Airways, Germania, Croatia Airlines,
EasyJet, Scandinavian Airlines, Norwegian,
Helvetic Airways, Germanwings, Edelweiss
Air, AtlasJet, and Pegasus Airlines.
The Airport has direct flights to: Berlin,

Dusseldorf, Hamburg, Hannover, Istanbul,
Ljubljana, London, Munich, Stuttgart,
Vienna and Zurich. Airlines and flight
destinations are liable to change, often
depending on the season.
Investment Environment
Economy compared to EUR 2,935 in 2013. However, it
Despite the challenges faced by other still continues to be low compared to other
countries due to fluctuations in the global countries in the region such as Albania,
economy and particularly in Europe, Kosovos Bosnia and Herzegovina and Serbia as each
economy has experienced positive growth exceeds EUR 4,000.
during recent years. However, the economy In 2014, the inflation rate or consumer price
of the country is characterized by a high index (CPI) dropped to 0.6%, which is less
reliance on the import of goods which than the rate of 1.8% over the same period
negatively affects the growth rate and the in 2013. This decline is attributed to the
current account balance. price decrease of the imported goods which
In 2014, Kosovo experienced a real gross reflects the interrelation between the price
domestic product (GDP) growth of 1.2% developments in Kosovo and the prices in
which is lower compared to previous years. international markets.
This growth is due mainly to the increased The growth of domestic demand in 2014
consumption and the level of investments. had an impact on the import growth and,
In 2015, the Central Bank of Kosovo consequently, on the deficit growth of the
estimated a growth rate of 0.4% which is current account. In 2014, the position of the
mostly attributed to consumption and private current account in Kosovo deteriorated due
investments while it is still lower than the to a higher deficit in trade of goods, while
previous year. Investments are estimated to the positive balance in services trade and
register growth. categories as primary and secondary income
continues to contribute to the narrowing of
Kosovos GDP per capita incurred a slight this deficit.
increase in 2014 reaching EUR 2,989
2010 2011 2012 2013 2014 2015(e)
GDP at market prices, EUR million 4,402 4,815 5,058 5,327 5,568 5,707
Real GDP growth rate (%) 3.30 4.40 2.80 3.4 1.2 3.00
GDP per capita in EUR 2,480 2,672 2,799 2,935 2,989 3,055
Inflation rate (%) 3.50 7.30 2.50 1.80 0.6 0.40
Current account in EUR million (516) (658) (380) (339) (438) (541)
Source: 2015 Macroeconomic Development Report, issue 3, 2016 Macroeconomic Development
Report, issue 4 and 2015 IMF Country Report
Note: (e) for estimate
Labor market increase of 18.8% in comparison to 2014.

The unemployment rate in Kosovo is Non-tax revenues amounted to
estimated to be 35.3%, according to the EUR 188.1 million or 9.8% higher
latest available statistics from the Kosovo than the previous year.
2014 Labor Force Survey carried out by the Budget expenditure in 2015, not including
Kosovo Agency of Statistics. Unemployment designated donor grants and trust funds,
is higher among youth and women. stood at EUR 1.57 billion and recorded an
The situation is not expected to improve annual growth of 6.2%.
quickly given that Kosovo has the youngest
population in Europe and these individuals Capital expenditures in 2015 absorbed
enter the labor market each year finding 25.8% of the total expenditure reaching
limited employment options. On the other EUR 404 million, which represents a
hand, the labor market offers a work force decrease of 1.8% from the previous year.
with varied skills and levels of education Most of the capital expenditure in 2014
and training. and 2015 was intended for infrastructure
investments, which largely consisted of
An important component of Kosovar life and the construction of the Pristina-Hani i Elezit
the labor market is migration. Traditionally, highway, which began in July 2014.
migration has been very high, which in turn
has alleviated some of the labor market According to the Central Bank of Kosovo,
pressures. Another positive influence from during 2015 Kosovos budget recorded
migration is the fact that returning migrants a primary deficit of EUR 110.2 million,
bring to the local market their experience compared with the deficit budget balance of
and skills gained abroad. EUR 143 million in 2014. In the same period,
general government debt amounted to
Fiscal indicators EUR 748.9 million, or 12.98% of GDP
(10.63% in 2014). This increase in public
The state budget during 2015 experienced
debt in 2015 is mainly accounted for by the
an increase of revenue and expenses.
growth of domestic debt of 47.3% which
Revenue increased by 9.3% to
reached EUR 378 million, while the external
EUR 1.46 billion. Revenues collected at the
debt increased significantly by 13.7%,
borders continue to dominate the structure
reaching EUR 371 million. While in previous
of budget revenues, and represented 65%
years public debt was dominated by external
of the total revenues in 2015. Revenues
debt, at the end of 2015 domestic debt had a
collected from border taxes reached
higher share (50.4%) of the total public debt.
EUR 944.9 million, marking an annual
Kosovo Government budget overview
EUR million 2010 2011 2012 2013 2014 2015

Revenue 1,177 1,302 1,537 1,356 1,370 1,460
Expenses (1,270) (1,386) (1,466) (1,490) (1,500) (1,570)
Budget (deficit)/surplus (93) (84) 71 (135) (130) (110)
Source: 2014 Annual report and Quarterly Assessment of the Economy No. 13, Q IV/2015 of Central
Bank of Kosovo
Trade accounted for 42% (2013: 11%) and

The negative trade balance in Kosovo 15% (2013: 19%) of the total exports
worsened in 2014 influenced by the high respectively. In 2015, the Kosovo Agency
dependence on imports and the low level of Statistics estimates that the 28 EU
of exports. countries will account for 20% of exports
(2014: 14%) while Asian countries will
The construction of the Merdare-Morine decline to 18% (2014: 42%).
highway is now finished. The construction
of the Pristina-Skopje highway began at the Other countries with a high share of
end of 2014. The first part of this highway exports are the neighboring Macedonia and
between Pristina and Skopje opened for Montenegro with respective shares of 10%
traffic in the second half of 2015. and 5%.
Both highways are considered to be of Unlike exports, EU countries account for

high strategic importance for the country, the largest share of imports, with 43% for
primarily since they provide Kosovo with 2014. Meanwhile, neighboring countries
access to the sea via the Albanian coast such as Serbia and Albania account for
and with the market of Macedonia. 21% of all imports with respective shares
of 14% and 7%. As in previous periods, a
Exports are mainly metal related goods, similar trend continued in 2015.
which in total represent around 52% and
49% of exports for the years 2014 and Food items, livestock, oil and oil derivatives
2013 respectively. The remaining exports make up around 33% of imports in 2014
relate to agricultural products, beverages (2013: 37% of all imports), while machinery
and tobacco, machinery, mechanical and and equipment as well as metals represent
electrical equipment, as well as chemical 21% of the total imports in 2014 (2013:
exports. In 2015, the Central Bank of 20%). The value of imported mineral
Kosovo estimates that exports will continue products is estimated to decline to 10%
to be dominated by the base metals in 2015. Besides the category of mineral
category which, for the first 9 months of products, all other categories of imports
2015, increased approximately 7%. were characterized by a slight increase in
the first 9 months of 2015.
In 2014, the main destinations for exports
were Asian countries and Albania which
Trade balance
EUR million 2010 2011 2012 2013 2014 2015(e)

Exports 296 319 276 294 325 325
Imports 2,158 2,492 2,508 2,450 2,539 2,635
Trade balance (1,862) (2,173) (2,232) (2,156) (2,214) (2,310)
Coverage ratio 14% 13% 11% 12% 13% 12%
Source: Kosovo Agency of Statistics

Note: Coverage ratio is computed as export over imports ratio, (e) for estimate

Privatization and investment extended from 3 to 4 years for investments

opportunities ranging from EUR 2 to 5 million, and from
The privatization process is administered 1 to 3 years for investments under
by the Privatization Agency of Kosovo EUR 2 million.
(PAK). PAK has been established as an In addition, the Government of Kosovo
independent public body which manages has prepared a Draft Law on Strategic
the privatization of so-called socially-owned Investments in the Republic of Kosovo.
enterprises (SOEs). As reported by PAK, in Its aim is to facilitate, attract, and
2012, more than 590 SOEs were privatized create the necessary conditions for the
in the last 56 rounds of privatization via the implementation of strategic investments
spin-off privatization method. Most of in Kosovo. The law will also regulate
the SOEs subject to privatization operated administrative procedures and the criteria
in the agriculture sector with a share of for evaluation, selection and supervision of
21.3%, followed by trading companies with strategic projects, as well as administrative
a share of 11.5%. procedures for granting the use of the
During 2012, the total revenue from property of the Republic of Kosovo with the
privatization through spin-off was aim of implementing strategic investment
EUR 552 million whilst revenue from sale projects. The Assembly of the Republic of
of SOEs through liquidation was Kosovo is expected to approve this law
EUR 62 million. In 2013, 136 contracts in 2016.
(liquidation 105, spin-off 31) were
completed, while in 2014, in total 145 Agriculture and farming
contracts were completed. During 2015, Agriculture has traditionally been an
PAK did not execute any asset sale due important economic activity in Kosovo.
to the lack of Board of Directors. The total In fact, as reported by the World Bank,
amount of the sales proceeds during the it previously accounted for as much as a
entire process (June 2002 December quarter of the total domestic output, while
2015) is EUR 660,223,469. it significantly decreased in recent times,
to less than 20%. In addition, average
Several sectors present good investment
agricultural land per person is around
opportunities to take advantage of the
0.150.18 hectares, less than half the
young population, the growing economy
EU average.
and the fairly untapped natural resources of
the country. The dissolution of state-owned agricultural
enterprises has significantly fragmented
The Government of Kosovo decided to
the farm structure and has led to a decline
amend its tax policies in order to provide
in arable land and irrigation, which results
tax incentives for new investments; for
in lower agricultural production and
example, depending on the size of the
subsequent economic losses. In any case,
investment, 0% corporate income and
about 53% of the total surface area of the
value added tax rates may be applied. The
country is considered to be arable land.
decision will begin to be implemented once
the respective administrative instruction There is a substantial scope for future
is signed by the Minister of Finance. The investments in this sector and ample
time frame for these incentives has been opportunities for marketing products,
both domestically and abroad, given the providing good prospects to develop
limited investor attention it has received cultural tourism.
to date. Recent studies from the Kosovo
Agency of Statistics indicate that some Energy
140,000150,000 people are employed Energy production is largely based on
in agriculture. The development of the thermal power plants utilizing coal (lignite)
agriculture sector would also present and to a smaller extent hydropower
additional opportunities for investments in generation. The Kosovo Energy Corporation
the food processing industry, horticulture JSC (KEK) is the sole power corporation in
sector (i.e. production of fruits and Kosovo for energy production. Currently,
vegetables), and livestock subsector. the local energy production is realized
by two thermal power plants, Kosova A
Tourism and Kosova B, with an installed capacity
The countrys natural resources include of 800 MW and 678 MW, respectively.
mountains, lakes, and rivers and represent As per data from the Energy Regulatory
tourism opportunities. Kosovos potential in Office of Kosovo, both thermal power
tourism is closely related to the countrys plants contributed 97% of the total energy
geographical position. The mountainous produced in 2014.
south offers good opportunities for
In addition, the hydropower plant (HPP) of
winter tourism and the most important
Ujman with an installed capacity of 35 MW
sites are the Mountains of Sharr, Cursed
and other small distributive hydropower
Mountains where Brezovica and Rugova
plants with a total installed capacity of
are distinguished as skiing and recreational
10.84 MW account for the remaining
centers, Luboteni Peak, and Gjeravica Peak
energy production.
which is the highest peak in Kosovo.
Kosovo has launched a project to build a
In April 2015, Kosovos Trade and Industry
coal-fired power plant, Kosova e Re, with
Ministry signed a contract with a French
an installed capacity of 500 MW. The
consortium, which includes several
new thermal power will be built by the
international and local companies for
US power company Contour Global. It is
the development of Brezovica. The total
expected that around 10,000 jobs would
amount expected to be invested is around
be created during the construction of the
EUR 410 million over the next 17 years
plant which would employ 500 people once
to make Brezovica one of the largest
it comes on stream. The project received
mountain resorts in the Balkans.
support from the World Bank and the
In addition, the wellness tourism has European Union. The construction will start
a great potential for development. The during 2016, and is expected to be finished
numerous thermal springs are renowned in 2020-2021. The project cost is estimated
in the region for their healing effects and to be approximately EUR 1.4 billion.
the most famous ones are Kllokoti spa and
KEK has been unbundled into production
Peja spa.
named KEK JSC (Kosovo Energy
There are also plentiful religious and Corporation), transmission named KOSTT
other sites of cultural and historical value JSC and a distribution and supply division
named KEDS (Kosovo Energy Distribution Mining

Services JSC). In 2012, the Government Kosovo has vast mineable quantities of
of Kosovo privatized KEDS through an lignite, lead-zinc-silver, nickel, chrome,
international tender, which was won by the
aluminum, magnesium and a wide variety
consortium alik Holding & Limak
of construction materials.
from Turkey.
Lignite is of high importance to Kosovo.
Following the privatization, in line with legal
According to the Ministry of Mining and
requirements, the electricity distribution
Energy, at 14,700 megatons, Kosovo
business was unbundled from the supply
possesses the worlds fifth largest proven
business. The result is that Kosovo
reserves of lignite. Lignite is deposited
Electricity Supply Company JSC (KESCO)
across the Kosovo Basin, Dukagjin and
was established from January 2015. It is
Drenica Basins, although mining has so far
the only public supplier of electricity in
been restricted mostly to the Kosovo Basin.
Kosovo and is responsible for customer
contracts, purchases, sales and the supply Meanwhile, lead, zinc, and silver mining
of electricity. Meanwhile, KEDS continues have proved popular. These mining
to operate as the distribution system activities have been based on a series
operator. This separation was in anticipation of nine mines, five of which comprise
of the liberalization of the energy sector todays Trepca Complex. Active mining in
in Kosovo. these five mines ceased at the beginning
of the Serbian-Kosovo conflict and offers
Two of the main problems for the energy
sector in Kosovo remain the high level very good investment opportunities. In
of technical and commercial losses and fact, Trepca is a frequently discussed
the level of energy production which is privatization topic. However, its sale is
insufficient to cover the increasing energy complicated by ownership problems. In the
demand. In this regard, investments in beginning of 2016, the Prime Minister of
the energy sector are needed. Similarly, Kosovo stated that Trepca is not required to
the neighboring country Albania is faced remain a socially-owned enterprise within
with problems in the energy sector as well the scope of the Privatization Agency of
due to the high dependency on the water Kosovo; yet, Trepca should not be allowed
reserves in the country. to be liquidated and its status can be
discussed in terms of future ownership
Given these conditions, the governments with a combination of public ownership and
of both countries have considered the co-ownership, or part of private ownership
integration of the energy sector in Albania,
and privatization of those assets which
almost entirely HPP based, with that
Trepca no longer needs. The Government of
of Kosovo, which is coal power plant
Kosovo has determined that the Assembly
based, as two complementary systems.
will approve a special law for Trepca in
Moreover, the importance of the energy
2016, and within it, technological and
system unification in both countries further
environmental development of alternatives
increases with the construction of the
and other options which will be harmonized
interconnection line of 400 KV between
with European Union rules.
Albania and Kosovo which will start
operating during 2016.
Telecommunications technology and communication sector

in Kosovo and offers services in mobile
Kosovo has not yet received a country code
communications, fixed telephony, digital
from the International Telecommunication
cable television, internet services, as well
Union and, for this reason, the providers
as media. IPKO is the first mobile operator
in the country use three country codes:
which offered fast-speed mobile internet
Monaco (+377), Slovenia (+386) and
3.75G network in Kosovo.
Serbia (+381).
Kujtesa Net LTD is an internet services
In 2013, during the negotiation process
and cable TV provider which is also
between Kosovo and Serbia which was
located in Kosovo. It is ranked as the third
facilitated by the European Union, the
telecommunication provider in the country.
two governments provisionally agreed for
Kosovo to have its own code. According to
Foreign direct investments
the Brussels agreement, the International
Telecommunications Organization (ITO) Foreign direct investments (FDI) received
has agreed that the new code (+383) for in Kosovo in 2014 reached the lowest value
Kosovo is expected to be available in 2016. of euro or almost half less than in 2013.
The failed telecom privatization, a weak
Post and Telecommunications of Kosovo business environment, and domestic
JSC (PTK) is composed of two business political turbulence in 2014 were among the
units: Kosovo Telecom and Vala mobile factors that contributed to the substantial
network operator. PTK offers fixed decline of net FDI in 2014. The state is
and mobile phone services, as well looking to improve impeding factors in
as internet services, and is a leader of attracting foreign investments, such as
telecommunication services in the country corruption, organized crime, and the
serving over 1.2 million customers. PTK judicial system.
has approximately 2,400 employees and
the Government of the Republic of Kosovo The higher level of FDI in 2015 presents
holds 100% of its shares. signs of a solid recovery. The increase
of FDI in 2015 is due to higher inflow of
Meanwhile, from 2008, Z-Mobile has investments but FDI in Kosovo continues
been licensed to carry out mobile to be highly dependent to developments in
telecommunication services, functioning as the economies of the Eurozone countries,
a virtual operator using the network of PTK. where most of the FDI comes from.
During 2014 and 2015, PTK invested
more than EUR 100 million in upgrading
the network to support 3G and 4G
technologies. As a result, approximately
1 million customers of Vala have benefited
from this.
IPKO Telecommunications LLC (IPKO), a

subsidiary of Telekom Slovenia, is one of
the main companies in the information
Foreign direct investments by country
EUR million 2008 2009 2010 2011 2012 2013 2014 2015
Top five countries
Switzerland 32 23 35 31 44 42 38 76
Turkey 24 15 5 35 66 89 20 69
Albania 22 23 20 11 5 19 20 41
United Kingdom 37 6 39 80 14 11 (40) 35
Germany 44 75 92 67 50 22 29 33
Total top five countries 158 142 191 224 178 182 69 254
Other countries 212 154 178 161 51 98 83 84
Total 370 296 369 384 229 280 151 338
Source: Monthly Statistics Bulletin, March 2016, issue 175 of the Central Bank of Kosovo

FDI in Kosovo during 2008-2015 are In January 2014, the Assembly of the
predominantly concentrated in the Republic of Kosovo approved a new law
following economic sectors with on Foreign Investment, Law No. 04/L-220.
respective averages: real estate with 40%, Its purpose is to protect, promote and
construction with 11% and the financial encourage foreign investments in the
sector with 17%, followed by the transport Republic of Kosovo. This law also provides
and telecommunications sector with 6% of foreign investors with a set of fundamental
the total FDI. rights and guarantees and, as such, it plays
During this period, real estate and a significant role in attracting and protecting
construction recorded the highest increase foreign investments.
whereas transport and telecommunications
incurred a substantial decrease, from 14%
of FDI in 2008 to negative 2.0% in 2015.
Foreign Direct Investments by sectors
400
350
300
EUR million
250
200
150
100
50
-
2008 2009 2010 2011 2012 2013
Real estate Construction

Transport & Telecommunication Production
Financial services Other sectors
Source: Central Bank of Kosovo

Business Environment
Business entities other obligations incurred by, or imposed
by law or contract on such an individual
Types of business entities business. Even though an individual
According to Law No. 02/L-123 of the business is not a legal entity, it may
Assembly of Kosovo dated 27 September contract, hold property and sue or be sued
2007, the business entities which may be in its own name or in the name of
registered with the Business Registry in its owner.
Kosovo are:
To register an individual business, the
Individual business owner must sign and submit to the
Registry a form containing information
Overall partnership
about the organization and the purpose of
Limited partnership the business as well as the written consent
of the registered agent to serve in such
Limited liability company
a capacity.
Joint-stock company.
Overall partnership
Apart from the above entities, foreign
entities may also register through a branch An overall partnership is a business
office in Kosovo. Since the branch has no organization which comes into existence
separate legal personality, its rights and as a result of an association of two or
obligations pertain to the parent company. more persons and/or companies for the
purpose of engaging in business, either
Any non-resident person who is subject by registration or by conducting business
to taxation in accordance with the tax without being registered with the Registry.
legislation of the Republic of Kosovo These persons are considered to be overall
must appoint a fiscal representative partners. Every overall partner is, and all
prior to starting any economic activity overall partners are, jointly and severally
in the Republic of Kosovo. The fiscal liable for all debts and other obligations
representative must register with the Tax incurred by, or imposed by law or contract
Administration of Kosovo within five days on, the overall partnership. Such liability
of being named. is unlimited.
Individual business An overall partnership is not a legal entity.

Nevertheless, it has the right to contract,
A person owning an individual business,
hold property and sue or be sued in its
whether registered or unregistered, has
own name.
unlimited personal liability for all debts and
To register an overall partnership, an A limited liability company may come into

overall partner or a person authorized by existence only upon registration with the
them signs and submits to the Registry Registry. To establish and register a limited
an overall partnership memorandum liability company, a founder must sign
providing information about the and submit to the Registry the statute of
organization and the purpose of the the limited liability company, which must
business as well as the written consent of contain information about the organization
the registered agent to serve in such and purpose of the business, a copy of the
a capacity. companys bylaws and the written consent
of the registered agent to serve in such
Limited partnership a capacity.
A limited partnership is a partnership
having one or more partners with unlimited Joint-stock company
liability and one or more partners who A joint-stock company is a legal entity
are liable only to the extent of their which is owned by its shareholders but is
contributions to the limited partnership. legally separate and distinct from them.
A limited partnership is not a legal entity. A shareholder of a joint-stock company is
Nevertheless, it has the right to contract, not a co-owner of, and has no transferable
hold property and sue or be sued in its interest in any property or assets of such
own name. a company. A joint-stock company may
have a sole shareholder. The shares of a
A limited partnership is created only upon
joint-stock company may be transferred by
the registration of its limited partnership
the owner(s) without the approval of other
memorandum with the Registry along with
shareholders or the company. The initial
a copy of the companys bylaws and the
capital of a joint-stock company must be at
written consent of the registered agent
least EUR 10,000.
to serve in such a capacity. The limited
partnership memorandum is the founding A joint-stock company may come into
and constitutive document of a existence only by registering with the
limited partnership. Registry. To register and establish a joint-
stock company, a founder must sign and
Limited liability company submit to the Registry the charter of the
A limited liability company is a legal entity joint-stock company, which must contain
which is legally separate and distinct from information about the organization and the
its owners. An owner of a limited liability purpose of the business, a copy of the
company is not a co-owner of, and has companys bylaws and the written consent
no transferable interest in, the property of the registered agent to serve in such
owned by the limited liability company. a capacity.
The shares of a limited liability company
are distributed only to its founders and the Foreign business organization
company cannot conduct a public offering A foreign business organization, as defined
of its shares. in the Law on Business Organizations,
may engage in business activity in
Foreign entities are permitted to own and
Kosovo to the same extent as a local
participate in a limited liability company.
business organization. It has to register The Business Registry is responsible for:

with the Registry as a foreign business
Registration of new companies
organization and comply with the
requirements of the Law. Registration of trade names
A foreign business organization is subject Registration of branches of foreign

to registration if it, or any agent, employee companies
or representative acting on its behalf,
Receipt of annual financial statements
engages in any type of business activity
and business reports of limited liability
in Kosovo. A foreign business organization
companies and joint-stock companies.
is not required by the law to register in
the Registry if its business activity is
Financial sector
exclusively limited to exporting to Kosovo
of products or services that are imported Supervision of the Central Bank of
by a consumer or purchaser established or Kosovo over the activities of banks and
residing in Kosovo. other financial institutions
To establish a branch, an authorized person Pursuant to Law No. 04/L-093 on Banks,
of the foreign business organization must Microfinance Institutions and Non-banking
sign and submit a standard application Financial Institutions (Banking Law),
form, a foreign business organization the Central Bank of Kosovo (CBK) is the
memorandum containing information licensing and supervising authority for
and details about the organization, capital banks, microfinance institutions, non-
structure and purpose of the parent banking financial institutions, foreign
company, structure and purpose of the exchange offices and money transfer
branch, and the registration certificate of agencies. The CBK exercises supervision
the foreign organization in the jurisdiction over compliance of the activities of banks
of incorporation. and financial institutions with the rules
established by the Banking Law and the
In the case of a wholly owned subsidiary
regulatory framework of the CBK.
in Kosovo, a new company incorporated
under the provisions of the countrys Licenses for banking activities are issued
legislation must be established. by the CBK. In order to perform services,
the financial institutions are obliged to
Business Registry obtain licenses from the CBK for the
The Business Registry is a central performance of their activities.
register which maintains the records of all The CBK was established according to
registered companies. Law No. 03/L-074 dated 5 June 2008 on
Each registered company can be found the Central Bank of the Republic of Kosovo
online by entering the company which was revoked and replaced by Law
name or business ID number on No. 03/L-209 dated 22 July 2010. The CBKs
http://www.arbk.org/arbk/. Application legal independence and main duties are
forms are also available on this website, provided for in a separate article of the
although many of them are now out of date Constitution. The CBKs main objectives
and not accepted by the Registry. are to:
Foster and maintain a stable financial Cooperate with and participate in

system, including a safe, sound and international councils and organizations
efficient payment system concerning matters which are within its
fields of competence and
Contribute to achieving and maintaining
domestic price stability Carry out any ancillary activities
incidental to the exercise of its tasks.
Support the general economic policies
of the Government The CBK is exclusively responsible for
the regulation, licensing, registration and
Act in accordance with the principle
supervision of banks and other financial
of an open market economy with
institutions as further specified in the
free competition, favoring an efficient
relevant Laws.
allocation of resources.
The staff of the CBK, and other qualified
Pursuant to the above objectives, the CBKs
persons appointed by the Executive Board,
main tasks as per Law No.03/L-209 are to:
may visit the offices of financial institutions
Determine and implement a financial to examine such accounts, books,
system stability policy, including documents and other records, to obtain
oversight of a deposit insurance such information and records from them,
scheme, conducting market operations, and to take such other action as the CBK
and providing emergency liquidity may deem necessary or advisable.
Regulate, license, register and The CBK established the Credit Registry to
supervise financial institutions collect and provide information to facilitate
reduced risks of lending and to improve
Promote and oversee safe, sound
access to credit while ensuring maximum
and efficient payment, clearing and
protection of personal data. Credit
securities settlement systems
reporting is mandatory for all financial
Maintain an appropriate supply of institutions operating in Kosovo.
banknotes and coins in Kosovo
All financial institutions are required to file
Hold and manage the international with the Credit Registry all information on
reserves their credits and credit products, borrower
repayment history, and guarantees. CBK
Collect and produce statistics
regulations and operational instructions
Contribute to achieving and maintaining provide for details on compliance,
domestic price stability penalties, credit reports, and borrower
rights. Information about mortgages,
Inform the Assembly, Government and
pledges and other collateral can be
the public at large about its policies,
additionally reported to the Credit Registry.
tasks and operations
Act as banker, financial advisor and Banking sector

fiscal agent for the Government and The banking and financial system structure
to any other public bodies and public in Kosovo consists of commercial banks,
organizations of Kosovo branches of foreign banks, microfinance
institutions, non-banking financial Raiffeisen Bank, Turkiye Is Bankasi, Ziraat

institutions, foreign exchange offices and Bank and TEB Bank.
money transfer agencies.
Foreign banks dominate the market both
Pursuant to the Banking Law, a Kosovo in terms of the number of banks and their
bank must be established in the legal form share of the total banking sector assets.
of a joint-stock company issuing shares
with a fully paid-up minimum registered Other financial intermediaries
capital of EUR 7 million. Banking activities In addition to commercial banks,
in Kosovo may be performed only upon microfinance institutions (MFIs) represent
obtaining a bank license, issued by the another important lending source in
Central Bank of Kosovo. Kosovo. Currently, there are 18 MFIs in
A foreign bank registered in another operation. The main beneficiaries
country may perform banking activities of MFI loans are small enterprises
in Kosovo only upon opening a branch in and households.
Kosovo and obtaining a license issued by Other financial intermediaries in Kosovo
the CBK. are exchange offices and money
Microfinance institutions are legal entities transfer agencies.
organized as either a non-governmental
organization (NGO) under the NGO Law or Insurance
as a joint-stock company under the Law on Pursuant to Law No. 05/L-045 on
Business Organizations which provides, as Insurance (Insurance Law), the Central
its primary business, loans and a limited Bank of Kosovo (CBK) is the licensing
number of financial services to micro and and supervising authority for insurance
small legal entities, low-income households companies, reinsurance companies and
and low-income persons. intermediary companies in insurance
activities. The CBK exercises supervision
Non-banking financial institutions are legal
over the compliance of the activities
entities which are neither a bank nor a
of insurance companies with the rules
microfinance institution and which are
established by the Insurance Law and the
licensed by the CBK to engage in activities
regulatory framework of the CBK.
specified in the Banking Law.
At the end of 2015, there were 15
Pursuant to the Banking Law, the Central
insurance companies operating in Kosovo,
Bank of Kosovo determines the rules of
of which 12 offer non-life insurance
licensing, supervision and functioning for
products, while the other three offer only
microfinance and non-banking financial
life insurance products. Eleven are foreign
institutions, taking into consideration the
owned insurance companies, while the
specifics of their financial activity.
remaining three are locally owned.
There are ten banks operating in Kosovo:
The total assets of the insurance sector in
Bank for Business, Banka Kombetare
Kosovo amounted to EUR 152.7 million in
Tregtare Kosovo Branch, Economic Bank,
December 2015, marking an annual growth
Komercijalna Banka ad Beograd Mitrovica
of 9.1% compared to 2014.
Branch, NLB Prishtina, Procredit Bank,
The total premiums received by insurance Protection of intellectual property

companies in 2015 reached EUR 80 million rights
(2014: EUR 80.1 million), which represents The Law on Trademarks governs
an annual decrease of 2.6% compared trademarks in accordance with the
to 2014. The activities of insurance requirements of international conventions
companies continue to be concentrated and EU law and practices. Trademarks are
mainly in third party liability policies, which registered and thus protected for a period
generate 52% of all premiums, while of 10 years. Under certain preconditions,
the remaining premiums mainly related registration may be renewed for a further
to border insurance policies and other 10-year period.
voluntary insurance.
The Law on Industrial Design provides for
The decrease in premiums received was industrial designs and their protection, the
followed by an increase in claims paid right to profit and the scope of protection.
of 18.7% (2013: increase of 25.4%), An industrial design is protected for a
which in 2014 reached EUR 36.2 million period of five years. This protection may be
compared to EUR 31.2 million in 2013. The extended for a period of five years, and for
ratio between claims paid and premiums a maximum of 25 years upon registration.
received in 20154 reached 64%, as
compared to 2014 ratio of 52%. There is also a Law on Patents and a Law
on Copyright Protection which is modeled
The insurance sector was characterized by a closely on the relevant EU legislation.
loss of EUR 7.7 million until December 2015,
which is a deterioration as compared to
the previous years loss of EUR 2.5 million.
The loss was due to the non-life insurance
activities, while the life-insurance activities
remained profitable.
Pension funds
Kosovo Pension Saving Funds continued
to grow in both assets and net return
on investments during 2015. Kosovos
pension system assets, most of which are
managed by the Kosovo Pension Savings
Trust, amounted to EUR 1,240 million in
December 2015, representing an annual
growth of 13.1%.
Of the total pension assets of Kosovo

Pension Savings Trust, approximately
10.5% were invested in Kosovo in
June 2015, while the rest invested out of
the country.
Accounting and Auditing

Accounting regulations and Average number of employees during
requirements the financial year higher than 50.
Accounting and financial reporting for The Law defines business organizations as
financial institutions is regulated by the medium if they fulfill two of the following
Central Bank of Kosovo. All financial three criteria:
institutions are required to report
audited financial statements prepared in Net annual turnover higher than
accordance with the International Financial EUR 2 million but less than
Reporting Standards (IFRS) no later than EUR 4 million
30 April of the following year. Gross assets at balance sheet date
On 29 July 2011, the Assembly of the higher than EUR 1 million and less than
Republic of Kosovo passed Law EUR 2 million
No. 04/L-014 on Accounting, Financial Average number of employees during
Reporting and Audit (the Law), which is the financial year higher than 10 but
applicable for all Kosovo entities which are smaller than 50.
not regulated by the Central Bank
of Kosovo. The Law also prescribes punitive measures
against business organizations which fail to
Based on this Law, large business comply with the requirements of this Law.
organizations and all business organizations
registered as limited liability companies Entities which do not satisfy the size
or joint-stock companies in Kosovo must criteria above must prepare their financial
apply IFRS, including interpretations, statements in accordance with the Kosovo
recommendations and guidance issued Accounting Standards (KAS) as issued by
by the International Accounting Standard the Kosovo Board on Standards for Financial
Board, which are to be approved by the Reporting (the Board). KAS currently
Kosovo Financial Reporting Council. comprise nineteen accounting standards.
The Law defines business organizations as Any topics not addressed in KAS need to
large if they fulfill two out of three criteria: comply with IFRS. Even if an entity meets
the criteria to prepare financial statements
Net annual turnover higher than in accordance with KAS, it may choose
EUR 4 million to prepare the general purpose financial
Gross assets at balance sheet date statements in full compliance with IFRS.
higher than EUR 2 million All entities must prepare financial
statements at least annually. Together with
the financial statements, entities must file

their annual corporate income tax return
with the tax authorities by 31 March of the
subsequent year.
In October 2014, Administrative Instruction

No. 02/2014, Applying IFRS for medium
and small commercial companies entered
into force. Accordingly, financial statements
of small and medium commercial
companies are to be prepared in conformity
with the IFRS for small and medium
undertakings published by the International
Accounting Standards Board and adopted
by Kosovo Financial Reporting Council.
Commercial companies must apply the
IFRS for small and medium enterprises
starting from financial years which begin on
1 January 2015.
Audit requirements
The Law requires that financial statements
of large business organizations be audited
by statutory audit firms which are licensed
to carry out statutory audits in Kosovo,
while the financial statements of medium-
sized organizations are required to be
audited either by statutory audit firms or
auditors licensed to carry out statutory
audits in Kosovo.
Audited financial statements of large and

medium-sized business organizations must
be submitted to and published with the
Kosovo Financial Reporting Council and a
copy submitted to the Ministry of Trade and
Industry no later than 30 April and
30 June of the following year for
standalone and consolidated financial
statements, respectively.
Taxation
General The tax year in Kosovo is the calendar
The tax system in Kosovo has been year. Corporations conducting business in
established during the last decade and is Kosovo are subject to CIT at a rate of 10%.
still being developed. The first legislative The following entities are subject to CIT:
act to introduce an independent Kosovo
tax system was the UNMIK Regulation on Corporations or other business
Tax Administration and Procedures which organizations which have the status of
entered into force in 2000. Since then, an legal entities under the applicable law
important goal of the Kosovo legislators in Kosovo
has been to harmonize the system with Business organizations operating with
EU legislation. publicly or socially owned assets
The Kosovo tax legislation provides for the Organizations registered as NGOs under
following taxes: the Regulation on the Registration
Corporate income tax (CIT) and Operation of Non-Governmental
Organizations in Kosovo
Personal income tax (PIT)
Permanent establishments in Kosovo of
Value added tax (VAT) non-resident persons.
Withholding tax (WHT) Kosovo residents are considered to
Custom duties comprise: corporations, groups of
corporations or organizations established
Excise tax in Kosovo or which have their place of
Local taxes. effective management in Kosovo.
Kosovo resident corporations are subject

Corporate income tax to CIT on their worldwide income,
Law No. 05/L-029 on Corporate Income Tax whereas non-resident entities are subject
became effective on 1 September 2015. It to tax only on the income derived from the
replaced Law No. 03/L-162 on Corporate Kosovo source.
Income Tax introduced on 1 February
Taxpayers with an annual gross income
2010, and Law No. 04 / L-103 on amending
(revenue) of EUR 50,000 or less may
and supplementing Law No. 03/L-162 on
choose to be taxed either on an actual
Corporate Income Tax introduced on
income basis or on a presumptive tax basis
30 May 2012.
and have to pay:
3% of each quarterly gross income Income tax paid and accrued and any
from trade, transportation, agricultural interest or penalty incurred for late
or similar businesses but not less than payment
EUR 37.50 per quarter
Value added tax for which the taxpayer
9% of their annual gross income claims a rebate or credit for input tax
deriving from the provision of services,
Any loss from the sale or exchange of
vocational, entertainment and similar
property between related persons
activities but not less than EUR 37.50
per quarter Benefits in nature in the form of meals
and transport tickets, unless organized
10% of the net rental income for
by the taxpayer themselves
the quarter, reduced by any amount
withheld during that quarter. Pension contributions above the
maximum amount allowed by the
However, such taxpayers can choose to be
Kosovo Pension Law (i.e. exceeding
taxed on the basis of 10% of their actual
15% of the gross monthly salary)
taxable income (gross income minus
deductible expenses) by submitting a form Contributions made for humanitarian,
to the tax authorities. In such a case, the health, education, religious, scientific,
taxpayers need to prepare the related cultural, environmental protection and
financial statements and submit them to sports purposes, which exceed 5% of
the tax authorities on an annual basis. the taxable income
The corporate income tax is applied to Expenses for presents, other than
the income as calculated in the financial those having the name and logo of
statements and adjusted for tax purposes. the business, which are part of the
In determining the taxable income, representation expenses
expenses are deductible only if they
Representation expenses which exceed
are incurred wholly and exclusively in
2% of the total gross income
connection with the economic activity.
Expenses on rents of apartments
Some expenses are designated as non-
serving for accommodation and lodging
deductible in the Kosovo Law on Corporate
of resident and non-resident employees,
Income Tax, including:
regardless of the terms of contract of
Cost of land acquisition and employment or service
improvement
Contributions to reserve funds
Cost of acquisition, improvement,
Expenses which are not properly backed
renewal and reconstruction of assets
up by supporting documents.
which are depreciated or amortized
Fines, penalties, costs and interest Depreciation

related to them Entities may set depreciation rates for
Bad debts which do not meet certain assets in accordance with their accounting
conditions as provided for by the Law policies, while under the provisions of the
Law on Corporate Income Tax, maximum registered under the Regulation on the
annual rates allowed for tax purposes Registration and Operation of Non-
are specified according to a separate tax Governmental Organizations granted
depreciation schedule. public benefit status to the extent that
the income is used exclusively for their
The straight-line method is applied for:
public benefit purposes
Buildings and other constructed
Income of the Central Bank of Kosovo
structures which are depreciated at a
and of entitled and duly authorized
5% rate
international inter-governmental financial
Automobiles and light trucks, heavy institutions operating in Kosovo
transport vehicles, other heavy
Dividends received by resident and non-
vehicles, computer peripherals and
resident taxpayers
other data processing devices, office
furniture and equipment, and others Interest on financial instruments which
which are depreciated at a 20% rate are issued or guaranteed by a public
authority of Kosovo paid out to resident
Plant and machinery, rolling stock and
or non-resident taxpayers
locomotives used for rail transport,
airplanes, ships, perennial plants and Income of eligible religious institutions
trees used for viniculture or production of Kosovo
of fruits and all other tangible assets
Income from a contractor or
not included in the first or second
subcontractor, other than a local
category are depreciated at a 10% rate.
contractor, generated from contracts
for the supply of goods and services
Amortization
to the United Nations, the Specialized
Expenditures on intangible assets which Agencies of the United Nations, KFOR
have a limited useful life such as patents, and the International Atomic Energy
copyrights, licenses, contracts and Agency
franchises are deductible in the form of
amortization charges. Income of a contractor or a
subcontractor but other than a local
The straight-line method is applied as a contractor generated from contracts
method of amortization and the allowance with foreign governments, their organs
is based on the useful life of the asset and agencies, the EU and its specialized
as determined by the legal agreement agencies, the World Bank, the IMF and
governing the acquisition and use of the other international inter-governmental
intangible asset. organizations for the supply of goods or
services in support of the programs and
Income exempt from corporate projects in Kosovo.
income tax
The following income is exempt from Losses carried forward
corporate income tax: Losses may be carried forward and may
The income of organizations be settled against future income for six
consecutive fiscal years. The losses have residence in Kosovo or (ii) are physically
to be settled according to the first loss present in Kosovo for more than 183 days
before the last one principle. in any 12-month period of time, and all
entities, individual business enterprises
Foreign tax credit and partnerships which are established
According to the tax legislation provisions, in Kosovo or have their place of effective
income taxes paid abroad by residents management in Kosovo.
are credited to the tax balance due in Kosovo resident individuals, individual
Kosovo up to the maximum amount of tax business enterprises and partnerships are
payable in Kosovo. Non-residents with a subject to personal income tax on their
permanent establishment in Kosovo can worldwide income, whereas non-resident
obtain an official document from Kosovos individuals, individual business enterprises
tax administration, certifying the amount of and partnerships are subject to tax only on
taxes they have paid, so this can be used income derived from a Kosovo source.
to obtain a credit if permitted by the foreign
tax authority. Personal income tax is levied on the
following categories of income:
Transfer pricing Wages
There are transfer pricing provisions in Business activities
Kosovo which allow the tax authorities to
Rents
adjust taxable income if the transactions
between related parties are not made at The use of intangible property
arms length. Interest
Capital gains
Special treatment of insurance
companies Lottery winnings and winnings in games
of chance
Companies, whose activity is the insurance
Pensions
or reinsurance of life, property, or other
risks, pay tax at a 5% rate of the gross Any other income which increases the
premiums accrued during the tax period, taxpayers net worth.
instead of corporate income tax.
Tax rates
Personal income tax The personal income tax rate system
Under Law No. 05/L-028 on Personal is a progressive tax system with a 10%
Income Tax effective from 1 September maximum tax rate. For each tax period,
2015, Kosovo tax residents comprise: personal income tax is charged at the
all individuals who (i) have their principal following rates:
Personal income tax (annual taxable income in EUR
0 960 0%
961 3,000 4% of the amount over EUR 960
3,001 5,400 EUR 81.6 + 8% of the amount over EUR 3,000
5,401 and over EUR 273.6 + 10% of the amount over EUR 5,400
Taxes must be withheld by employers on a Supply of goods or services with a

monthly basis. turnover exceeding EUR 30,000 within
a calendar year. The registration must in
Taxpayers who receive income other
any event occur within 15 calendar days
than wages, dividends, interest, lottery,
of exceeding the turnover.
gambling, or income from intangible
property are required to prepare an annual VAT is levied on (i) supplies of goods or
tax return for personal income tax by services with a place of supply in Kosovo,
31 March of the following year. (ii) import of goods into Kosovo. The current
VAT rate applicable in Kosovo is 18% which
Pension contributions is applied on domestic transactions and
As per Law No. 04/L-101 on Pension Funds imports of goods. In addition, a reduced
of Kosovo, the employer and employee VAT rate of 8% is applied to the supply of
must pay pension contributions at a certain goods and services (as well as their
minimum level of 5%. The maximum level import), such as water, utilities and certain
allowed is 15% of the gross monthly salary. food products.
Under Kosovo legislation, foreign Certain supplies are considered VAT

individuals are not required to pay exempt without the right to credit the input
pension contributions. VAT (e.g. the supply of financial services,
the supply of medical care services and
Health insurance contributions education services).
The Assembly of Kosovo approved Law Certain supplies are considered VAT
No. 04/L-249 on Health Insurance in exempt with the right to credit the input
April 2014 which regulates the public VAT (e.g. the supply of services related
health insurance system. Accordingly, to international transport and supply of
the mandatory health insurance premium services outside the territory of Kosovo).
for employees and employers is 7% of
The taxable value of a taxable supply in
the gross income shared equally by the
Kosovo is the total consideration payable
employer and the employee (i.e. 3.5%
for that supply. For imports, the taxable
each). The start date for the collection of
value is the customs value plus customs
premiums will be separately confirmed by
duties, excise taxes and other charges
the Ministry of Health.
levied in customs.
Value added tax

Deduction of input VAT
The Kosovo Parliament approved Law
The Kosovo VAT Law allows the
No. 05/L-037 on Value Added Tax which is
recoverability of all input VAT on domestic
effective from 1 September 2015. Based
supplies of goods or services (including VAT
on this Law, all individuals, legal, public and
on importation of goods) if such supplies
private persons are obligated to register for
relate to the activity subject to VAT. In order
VAT purposes if they perform the following
to recover the input VAT, contractors must
activities:
register for VAT purposes in Kosovo.
Import and export of goods or services,
or
Refund of VAT Under Kosovos tax legislation, Kosovo tax

If a taxpayer incurs a surplus of input VAT residents are obliged to withhold tax on the
over output VAT, they may ask for a refund following payments made to non-residents:
of surplus input VAT if: 5% withholding tax on income paid
The VAT return for the last month of a to non-resident entertainers for their
consecutive three-month period reflects activity exercised in Kosovo
an amount of VAT credit that exceeds 5% withholding tax on income paid to
EUR 3,000 and non-residents for services performed
The taxpayer was in credit at the end in Kosovo.
of each tax period (for VAT purposes
the tax period is considered to be the Customs duties and customs code
month) of a consecutive three-month Customs duties are regulated by Code
period and that all VAT returns and all No. 03/L-109, Customs and Excise Code
other tax returns for all past tax periods in Kosovo. The regulation provides for a
have been submitted on time. customs rate of 10% for all goods imported
into Kosovo.
In case of export, a refund may be
claimed after each tax period, provided Customs duties are charged according to
that the following conditions are met: classification of imported goods in a six-
digit harmonized system.
The amount of VAT credit exceeds
EUR 3,000 at the end of the tax period According to Law No. 04/L-163, the
(one month), and following goods are exempt from customs
duties:
The taxpayer complies with all
applicable and VAT provisions, and Exports
All VAT returns and other tax returns Goods imported by foreign diplomatic,
for all the past periods (months) have consular missions and their personnel
been submitted. (except for local personnel)
Goods imported by UNMIK, KFOR, the

Withholding tax
United Nations High Commissioner for
Under Kosovos tax legislation, Kosovo tax Refugees (UNHCR), the International
residents are obliged to withhold tax on the Committee of the Red Cross (ICRC) or
following payments made to residents and by donors having contracts with UNMIK
non-residents:
Goods used for humanitarian purposes
10% withholding tax on interest
payments Goods used for agricultural production
and some listed raw materials for heavy
10% withholding tax on royalties industry, and
9% withholding tax on rental payments Pharmaceutical products.
10% withholding tax on lottery winnings The tariff nomenclature provides for a
and gambling. customs rate of 10% for all goods imported
into Kosovo.
Kosovo is a member of the Central An annual fee for professional business

European Free Trade Agreement (CEFTA).
An annual motor vehicle fee
Excise taxes Construction permits and demolition fees

Law No. 03/L-112 on Excise Tax in Kosovo Other fees in relation to services
(amended by Law No. 03/L-220) contains a provided by the municipalities.
list of goods subject to excise tax and their
corresponding excise rates. Double Tax Treaties
Goods subject to excise tax include: wine, Kosovo has a Double Tax Treaty (DTT) with
cigarettes and other tobacco products, the Republic of Albania effective from
oil, fruit juice and other drink concentrates, 1 January 2016, with Macedonia effective
cars and other motor-operated vehicles. from 1 January 2014, with the United
Fixed amounts are provided for Kingdom effective from 1 January 2016,
certain goods. with Hungary effective from
1 January 2015, with Slovenia effective
Stabilization and Association Agreement from 1 January 2015 and with Turkey
The Stabilization and Association Agreement effective from 1 January 2016.
(SAA) is an international agreement signed Meanwhile, the Kosovo President has
between Kosovo and the European Union ratified DTTs signed by Former Yugoslavia
whose purpose is to establish contractual with Finland, Belgium, Germany and
relations between both parties. the Netherlands. However, the effective
The SAA between Kosovo and EU became applicability of such DTTs is unclear
effective on 1 April 2016. in Kosovo.
Based on the SAA, the gradual development It is unclear whether the DTT provisions
of the free trade zone between Kosovo and apply automatically in Kosovo or specific
EU is enabled within 10 years. According approval is to be obtained from the Kosovo
to the agreement, certain products, as set authorities. There are no specific internal
out in a list, originating from one of the rules in Kosovo on the implementation of
contracting parties countries may benefit the DTTs in force.
from a reduction in customs duties when According to Law No. 03/L-071 on Tax
imported in Kosovo. Administration and Procedures, if the
existing tax laws relating to the international
Local taxes juridical double taxation of income and
Local taxes are regulated by Law 03/L-049 capital of persons in the Republic of
on Local Government Finance. Kosovo do not address such taxation, the
principles of the Organization for Economic
Municipalities may impose the following
Cooperation and Development (OECD)
taxes and fees:
Model Tax Convention on Income and
Tax on immovable properties situated in on Capital apply in order to avoid double
their territory taxation of such income and capital.
An annual fee for business activity
Employment Regulations
Legislation Termination of employment
Relations between employers and contracts
employees in Kosovo are governed by the According to the Kosovo Labor Law, the
provisions of Law No. 03/L-212 on the Labor process of termination of employment
Law in Kosovo dated 1 November 2010. contracts differs based on the type of
the contract.
The Kosovo labor law has three priorities:
In case of termination of an employment
Employment regulation
contract with an unlimited period, the
Industrial relations parties notify each other through written
notice of:
Workplace safety.
7 days during the probation period of six
Employment regulations govern individual
months
employment contracts, including flexibility
of hiring through part-time and fixed-term 30 calendar days during the first six
contracts, conditions of employment months to two years of employment
encompassing the maximum number
45 calendar days during the first two
of working hours per day or per week,
years up to 10 years of employment
premiums for overtime work, paid annual
leave and the minimum wage. They 60 calendar days if the employee has
also regulate release of staff, including worked for the entity for more than
grounds for dismissal, notification rules for 10 years.
dismissal, priority rules for dismissal and
However, for all types of contracts,
severance pay.
immediate termination can occur at any time
for justifiable reasons. It is also possible that
Employment contracts
both parties may agree to terminate the
Generally, labor relations in Kosovo, as employment contract by mutual agreement.
well as the rights and obligations of the
employers and employees, are set out in Conditions of employment
employment contracts.
Working hours
An employment contract must be
concluded in writing. The first six months The Kosovo Labor Law provides that the
of employment can qualify as a probation normal workday must not exceed eight
period, which can be reduced or removed by hours per day or 40 hours per week. For
means of a written or collective agreement. employees who are less than 18 years old,
the normal workday must not exceed Other paid holidays

30 hours per week. The legislation establishes other paid
Every working hour taking place during the leaves of one to five days for the cases
interval from 10:00 pm to 6:00 am entitles of marriage, death of immediate family
employees to an extra payment added to members, child birth, and blood donation.
their salary, which cannot be lower than a When an employee is not able to work
30% increase of the regular hourly rate. because of sickness, the employer must
If the normal workday is exceeded or the pay the employee 100% of their wage for
circumstances require extra hours of work, a period up to 20 days of work within
an employee may perform overtime work. one year.
This overtime work must be paid with a
bonus of 30% added to the regular rate or Public holidays
may be compensated with holidays. A full- Kosovos Government has set a number of
time employee can only work up to eight public holidays on certain days during the
supplementary hours per week. year while religious holidays are subject to
change every year. The following holidays
The overtime performed on weekends
are applicable for 2016:
or official holidays is remunerated with
a bonus of no less than 50% added 1 and 2 January New Years holidays
to the hourly rate or with time off that
7 January Orthodox Christmas
corresponds to the duration of the
extra hours. 17 February Independence Day
27 March* Catholic Easter

Holidays and absence from work
9 April Constitution Day
Annual holidays
1 May* Orthodox Easter and Labor Day
Employees are entitled to not less than
four calendar weeks of annual leave during 9 May Europe Day
a year of work.
5 July* Bajram Day
For each five years of work an employee is
12 September* Bajram Day
entitled to one more day of annual leave.
25 December Christmas
Mothers with children up to three years of
age and single parents as well as persons *Subject to change every year
with disabilities are entitled to additional
When public holidays fall on a Saturday or a
two days off.
Sunday, Monday is considered a holiday.
Unused annual leave is not compensated in
money, unless the employment relationship
of an employee is about to expire.
The periods of temporary disability to work

are considered working time.
Government Control
Public procurement or authorization is required within the
Public procurement in Kosovo is subject to framework of a PPP. In addition, this Law
Law No. 04/L-042 on Public Procurement does not apply to service contracts or
in Kosovo and Law No. 04/L-045 on Public works contracts, as defined in the Law on
Private Partnerships. Public Procurement and to the privatization
or divestiture of public infrastructure or
The purpose of the Law on Public public owned enterprises pursuant to Law
Procurement is to ensure the most on Public Owned Enterprises.
efficient, cost-effective, transparent and fair
use of public funds and public resources in For matters not covered by this Law,
Kosovo by establishing the requirements the provisions of the Law on Public
and rules which are to be observed, the Procurement are applied.
procedures to be followed, the rights In the Law, a PPP is defined as any
to be respected, and the obligations to contractual of institutional cooperation
be performed by persons, economic between one or more public authorities
operators, undertakings, contracting and one or more private partners whereby
authorities, work concessionaires, the private partner:
and public bodies conducting, or
involved, participating or interested in, a Provides a public service or a public
procurement activity involving or relating to infrastructure on behalf of the public
the use of such funds and/or resources. authority
The Law on Public Private Partnerships was Assumes financial, technical,

approved on 21 October 2011. The purpose construction and operational risks,
of this law was to establish the legal including demand and/or availability
framework for public private-partnerships risks, in connection with the provision
(PPP), including procedures for the award of the public service or the public
of a PPP, the content and structure of a PPP infrastructure
Agreement and the institutional framework Receives a benefit for providing public
responsible for the management and service or public infrastructure in
development of PPP in the Republic the form of (i) payment by the public
of Kosovo. authority, (ii) charges or fees to be
This Law does not apply to the granting collected by the private partner or
of licenses, permits or authorizations by (iii) a combination of such payment and
a public authority, except to the extent such charges or fees.
that the issuance of a license, permit
A PPP may be implemented through The Kosovo Competition Authority is

either a contractual or institutional form. assigned by this Law to control competition
A contractual PPP may be in the form in the relevant market.
of a concession or a public contract. An
institutional PPP may be established Environmental laws
by a municipality in an existing publicly There are Laws on Environment Protection,
owned enterprise whose sole purpose Air Protection, Waste and Water.
is the performance of a public service or
public infrastructure. The private partner The purpose of the Law on Environment
may become partner of such PPP through Protection and the other laws above is to
acquisition of shares owned by such promote the establishment of a healthy
municipality. The private partner may environment for the population of Kosovo
participate either in the management of by aligning the environmental standards
such publicly owned enterprise, or in the with those of the European Union.
provision of the public service or public
infrastructure.
In certain cases, the approval by the

Government and the Assembly of Kosovo
is required for the acquisition of shares
in an existing publicly owned enterprise
owned by the Republic of Kosovo.
The law does not currently provide for a

maximum duration of a PPP.
Competition law
The Kosovo competition protection system
is governed by Law No. 03/L-229 on
Protection of Competition dated
7 October 2010 (Competition Law or
the Law). Its main purpose is to define
the rules and measures for protection
of free and effective competition in the
market, including organization of the
Competition Authority and procedures
concerning implementation of this Law.
The Law applies for all forms of prevention,

limitation or abuse of competition by
enterprises within the territory of Kosovo,
or outside Kosovo, if those actions are
believed to have an impact in Kosovo.
Appendix A
Important Links
Websites of institutions in Kosovo
Assembly of Kosovo
http://www.assembly-kosova.org/
Office of the Prime Minister of Kosovo
http://www.kryeministri-ks.net
Ministry of Trade and Industry
http://www.mti-ks.org/
Ministry of Finance
http://mf.rks-gov.net/
Ministry of Economic Development
http://mzhe.rks-gov.net
Ministry of Education, Science and Technology
http://masht.rks-gov.net/
Ministry of Agriculture, Forestry and Rural Development
http://www.mbpzhr-ks.net
Ministry of Labor and Social Welfare
http://mpms.rks-gov.net
Ministry of Infrastructure
http://mi-ks.net/
Ministry of Environment and Spatial Planning
http://mmph-rks.org/
Ministry of Public Administration
http://map.rks-gov.net
Central Bank of the Republic of Kosovo
http://www.bqk-kos.org
Independent Commission for Mines and Minerals
http://www.kosovo-mining.org/
Kosovo Registry of Business Organizations and Trade Names

http://www.arbk.org/
Kosovo Trust Agency
http://www.kta-kosovo.org/
Society of Certified Accountants and Auditors of Kosovo
http://www.scaak.org/
Kosovo Pension Savings Trust
http://online.trusti.org
Websites of international institutions in Kosovo

EULEX Kosovo - European Union Rule of Law Mission in Kosovo
http://www.eulex-kosovo.eu
UNMIK, United Nations Mission in Kosovo
http://www.unmikonline.org/
European Union Office in Kosovo
http://eeas.europa.eu/delegations/kosovo/index_en.htm
World Bank Kosovo
http://www.worldbank.org/en/country/kosovo
European Agency for Reconstruction
http://ec.europa.eu/enlargement/archives/ear/kosovo/kosovo.html
UNDP, United Nations Development Programme Kosovo
http://www.ks.undp.org/
Organization for Security and Co-operation in Europe (OSCE) Mission in Kosovo
http://www.osce.org/kosovo
United States Agency for International Development, Pristina Office
http://transition.usaid.gov/kosovo/eng/
KPMG Albania Shpk, Kosovo Branch
6 Pashko Vasa Str.

10 000 Pristina
Kosovo
Tel: +381 38 246 771
Fax: +381 38 246 772
kpmg.com/al
The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such
information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on
such information without appropriate professional advice after a thorough examination of the particular situation.
The KPMG name and logo are registered trademarks or trademarks of KPMG International.
2016 KPMG Albania Shpk Kosovo Branch,a branch of KPMG Albania Shpk, an Albanian limited liability company and a
member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
Cover photo: OPIS
a member Zagreb
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Investment in Kosovo 2016 | 1

Every care has been taken to ensure that the information

For further information on matters discussed in this

KPMG Albania Shpk Kosovo Branch

6 Pashko Vasa Str.

A brief history of Kosovo...................................................................................................... 7

Government and political system......................................................................................... 7

Visa system for foreigners traveling to Kosovo..................................................................... 8

Investment Environment ................................................................................................ 10

Fiscal indicators ................................................................................................................. 11

Privatization and investment opportunities ........................................................................ 13

Agriculture and farming ..................................................................................................... 13

Foreign direct investments ................................................................................................ 16

Business Environment .................................................................................................... 18

Business entities ............................................................................................................... 18

Financial sector .................................................................................................................. 20

Protection of intellectual property rights ........................................................................... 23

Accounting and Auditing ................................................................................................ 24

Accounting regulations and requirements.......................................................................... 24

Audit requirements ............................................................................................................ 25

Corporate income tax......................................................................................................... 26

Personal income tax........................................................................................................... 29

Value added tax.................................................................................................................. 30

Customs duties and customs code.................................................................................... 31

Double Tax Treaties ............................................................................................................ 32

Termination of employment contracts ............................................................................. 33

Conditions of employment ................................................................................................ 33

Holidays and absence from work....................................................................................... 34

Appendix A Important Links.............................................................................................. 37

Kosovo is in the Central European time

A brief history of Kosovo The war ended on 10 June 1999. A

The Yugoslav Republic began to break up Government and political system

and exit stamps; this means backtracking

The Airport has direct flights to: Berlin,

Inflation rate (%) 3.50 7.30 2.50 1.80 0.6 0.40

Note: (e) for estimate

Labor market increase of 18.8% in comparison to 2014.

Kosovo Government budget overview

EUR million 2010 2011 2012 2013 2014 2015

Trade accounted for 42% (2013: 11%) and

Both highways are considered to be of Unlike exports, EU countries account for

EUR million 2010 2011 2012 2013 2014 2015(e)

Source: Kosovo Agency of Statistics

Privatization and investment extended from 3 to 4 years for investments

named KEDS (Kosovo Energy Distribution Mining

Telecommunications technology and communication sector

IPKO Telecommunications LLC (IPKO), a

Foreign direct investments by country

Top five countries

United Kingdom 37 6 39 80 14 11 (40) 35

Other countries 212 154 178 161 51 98 83 84

Total 370 296 369 384 229 280 151 338

Real estate Construction

Source: Central Bank of Kosovo

Individual business An overall partnership is not a legal entity.

To register an overall partnership, an A limited liability company may come into

business organization. It has to register The Business Registry is responsible for:

A foreign business organization is subject Registration of branches of foreign

Foster and maintain a stable financial Cooperate with and participate in

Act as banker, financial advisor and Banking sector

institutions, non-banking financial Raiffeisen Bank, Turkiye Is Bankasi, Ziraat

The total premiums received by insurance Protection of intellectual property

Of the total pension assets of Kosovo

Accounting and Auditing