Corporate Income Tax (CIT) in Kosovo is calculated on the net profit of a company, which is determined after deducting allowable expenses from the gross income. The calculation process involves the following steps:
- Determine Gross Income: This includes all income generated by the company during the fiscal year, including revenue from sales, services, investments, and other sources.
- Deduct Allowable Expenses: Companies can deduct various expenses incurred for business purposes, such as operating expenses, salaries and wages, depreciation of assets, interest expenses, and bad debts.
- Calculate Taxable Income: The taxable income is the amount remaining after deducting allowable expenses from the gross income.
- Apply the Tax Rate: The applicable tax rate is applied to the taxable income to determine the amount of tax owed.
Applicable Tax Rates
The standard corporate income tax rate in Kosovo is 9%. However, certain special provisions apply to specific types of companies and income:
| Type of Taxpayer/Income | Tax Rate |
|---|---|
| Standard Corporate Income | 9% |
| Small Businesses with annual revenue up to €50,000 | 0% (subject to conditions) |
| Income from agriculture, trade, or similar activities | 3% of gross income (for small businesses) |
| Income from services, professional activities, etc. | 5% of gross income (for small businesses) |
| Rental Income | 10% of gross income |
Taxable Income
Taxable income for corporations in Kosovo includes:
- Business Income: Profits derived from commercial activities, including sales, services, and manufacturing.
- Investment Income: Interest, dividends, and capital gains from investments.
- Rental Income: Income generated from renting property owned by the company.
- Other Income: Any other income not specifically exempted, such as royalties or gains from the sale of assets.
Exempt Income
Certain types of income are exempt from corporate income tax in Kosovo, including:
- Dividends: Dividends received from resident companies are generally exempt.
- Capital Gains: Capital gains from the sale of shares in resident companies are exempt under certain conditions.
- Income from Non-Profit Organizations: Income of non-profit organizations may be exempt if it is used for public benefit purposes.
Legal Basis
The corporate income tax system in Kosovo is primarily governed by the Law on Corporate Income Tax (LCIT). The relevant articles include:
- Article 2: Defines the scope of the tax and the types of taxpayers.
- Article 7: Outlines the calculation of taxable income.
- Article 8: Specifies the applicable tax rates.
- Article 10: Lists the allowable deductions.
- Article 12: Deals with exemptions from corporate income tax.
Additional Considerations
- Tax Treaties: Kosovo has tax treaties with several countries, which may modify the standard tax rules for companies operating in both countries.
- Transfer Pricing: Companies engaged in cross-border transactions with related parties must adhere to transfer pricing rules to ensure fair allocation of profits and prevent tax evasion.
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