The personal income tax (PIT) system in Kosovo for 2024 remains a progressive tax system, where the tax rate increases with higher income levels. The tax is calculated on the annual taxable income of an individual, determined after deducting allowable expenses and deductions.
The calculation process involves the following steps:
- Calculate Gross Income: This includes all income earned during the tax year, encompassing salaries, wages, bonuses, business income, investment income (interest, dividends, capital gains), rental income, and other sources of income.
- Deduct Allowable Expenses: Certain expenses, such as mandatory social security contributions, health insurance premiums, and specific business-related expenses can be deducted from the gross income.
- Determine Taxable Income: The remaining amount after deducting allowable expenses constitutes the taxable income, which serves as the basis for applying the tax rates.
- Apply Applicable Tax Rates: The progressive tax rates are then applied to the taxable income to calculate the amount of tax owed.
Applicable Tax Rates (2024)
The tax rates for personal income in Kosovo for 2024 are as follows:
| Taxable Income (EUR) | Tax Rate |
|---|---|
| Up to 960 | 0% |
| 961 - 3,000 | 4% |
| 3,001 - 5,400 | 8% |
| Over 5,400 | 10% |
Taxable Income
In Kosovo, the following types of income are considered taxable:
- Employment Income: Salaries, wages, bonuses, and other benefits received from employment.
- Business Income: Profits earned from self-employment, freelance work, or business activities.
- Investment Income: Interest earned on savings accounts, dividends from stocks, and capital gains realized from the sale of assets.
- Rental Income: Income generated from renting out property, including residential or commercial properties.
- Other Income: This category includes pensions, annuities, royalties, and any other income not specifically exempted.
Exempt Income
Certain types of income are exempt from personal income tax in Kosovo, including:
- Social Security Benefits: Pensions, disability benefits, and other social security payments are generally exempt from tax.
- Child Allowances: Financial support provided to families with children is not subject to income tax.
- Scholarships and Grants: Certain scholarships and grants for educational purposes may be exempt, depending on specific conditions.
- Compensation for Personal Injury or Illness: Payments received as compensation for personal injuries or illness are usually exempt.
- Inheritances and Gifts: Inheritances and gifts received from family members may be exempt from taxation, depending on the relationship and amount.
Legal Basis
The personal income tax system in Kosovo is governed by the Law on Personal Income Tax (LPIT). The following articles of the LPIT are relevant to the calculation, rates, taxable income, and exemptions:
- Article 6: Defines tax residency.
- Article 10: Outlines the types of income subject to taxation.
- Article 13: Specifies the allowable deductions.
- Article 14: Provides the tax rates.
- Article 15: Lists the types of income exempt from taxation.
Rationale
The progressive tax rates aim to achieve a fair and equitable tax system where individuals with higher incomes contribute a larger share of the tax burden. The exemptions are designed to protect vulnerable groups, promote social welfare, and encourage certain activities like education and investment.
