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Republika e Kosovës
Republika Kosovo -Republic of Kosovo
Kuvendi – Skupština – Assembly

LAW Nr.03/L – 162

ON CORPORATE INCOME TAX

Assembly of Republic of Kosovo,

In conformity with the Article 65 (1) of the Constitution of the Republic of Kosovo,

Adopts :

LAW ON CORPORATE INCOME TAX

CHAPTER I

GENERAL PROVISIONS

Article 1
Purpose

This Law establishes the system of Corporate Income Tax in the territory of Republic of
Kosovo.

Article 2
Definitions

1. For the purposes of the present law the following provisions have this meaning :

1.1 Capital assets – tangible and intangible property costing more than one
thousand ( 1,000 ) € , with a useful service life of one year or more;

1.2 Corporation – a legal person, which has an identity that is separate and
distinct from its members, owners or shareholders. A business organization, the
capital of which is divided into a specified number of shares of the same par
value. Shareholders are not liable for the obligations of the corporation. A
corpora tion may be either a joint stock company or a limited liability company,
which is so indicated in its company charter and company name.

1.3 Dividend – a distribution made by a company to a shareholder:

1.3.1. of cash or shares with respect to the share holder‘s equity interest in
the company; and
1.3.2. of property other than cash or shares, unless the distribution is made
as a result of liquidation;

1.4. Economic activity – any activity of producers, traders or persons supplying
goods or services in cluding mining and agricultural activities and activities of the
professions. The exploitation of tangible or intangible property for the purposes of
obtaining income therefrom on a continuing basis shall in particular be regarded
as an economic activity;

1.5. Financial statement – the general purpose financial statements prepared in
accordance with legislation regulating the Kosovo Board on Standards for
Financial Reporting and legislation regulating the financial reporting of bu siness
associations ;

1.6. Kosovo source income – means gross income that arises in Kosovo, which
includes

1.6.1. Income from economic activity where such activity is located in
Kosovo;
1.6.2. Income from the use of movable or immovable property located in
Kosovo;

1.6.3. Income from the use of intangible property in Kosovo;

1.6.4. Interest on a debt obligation paid by a resident or a public authority;

1.6.5. Dividends paid by a resident business organization;

1.6.6. Gain fro m the sale of movable property, immovable pro perty, and
securities located in Kosovo; and

1.6.7. Other income not covered by the above – mentioned sub -paragraphs
arising from economic activity in Kosovo.

1.7. Foreign source income – gross income that is not Kosovo source income;

1.8. Gross inco me – all income received or accrued, including but not limited to,
income from production, trade, financial, investment, professional or other
economic activities;

1.9. Tangible Property – cash , equipment , machinery , plant , property — anything
that has long -term physical existence or is acquired for use in the operations of the
business and not for sale to customers . In the balance sheet of the business, such
assets are generally listed under the heading ‘Plant and equipment’ or ‘Plant ,
property , and equipment.

1.10. Intangible property – patents, copyrights, licenses, franchises, and other
property that consists of rights only, but are incorporeal ;

1.11. Involun tary conversion – property, in whole or in part, that is destroyed,
stolen, seized, or condemned, or the taxpayer is otherwise forced to dispose of by
reason of threat or imminence of any of the foregoing;

1.12. Open Market value – the amount that, in or der to obtain the goods or
services in question at that time, a customer at the same market stage at which the
supply of the same or similar goods or services takes place, would have to pay,
under conditions of fair competition, to a supplier at arm‘s leng th;

1.13. Resident – a person or group of persons that is established in Kosovo or that
has its place of effective management in Kosovo;

1.14. Non -resident – any person or group of persons that is not resident in
Kosovo;

1.15. Permanent Establishment – means a fixed place of business through which
the business of a non -resident person is wholly or partly carried on in Kosovo, as
described in Article 29 of this Law.

1.16. Person – for purposes of this law shall include the following:

1.16.1. a natura l person;

1.16.2. a l egal person, which is a general term meaning any organization,
including any business organization that has, as a matter of law, a legal
identity that is separate and distinct from its members, owners or
shareholders, such as, but no t limited to, joint stock company and limited
liability company;

1.16.3. a partnership, whi ch means a general partnership, a limited
part nership or similar pass -through arrangement that is not a legal person

and that proportionately s hares items of ca pital, income, and loss among
its partners; and

1.16.4. a grouping or association of persons, includ ing consortiums, but
excluding partnerships, set up for a common purpose of a specific
economic activity. An association is two or more individuals, compan ies,
organizations or governments , or any combination of these entities with
the objective of participating in a common activity or pooling their
resources for achieving a common goal. Each participant retains its
separate legal status and the associatio n‘s control over each participant is
generally limited to activities involving the joint endeavor, partic ularly
the division of profits. An association is formed by contract , which
delinea tes the rights and obligations of each member;

1.17. Public authority – a central, regional, municipal, or local authority, public
body, ministry, department, or other authority that exercises public executive,
legislative, regulatory, administrative or judicial power;

1.18. Related person – means persons that have a special relationship that may
materially influence the economic results of transactions between them. Special
relationship shall mean:

1.18.1. The persons are officers or directors of one another‘s business;

1.18.2. The persons are legal partners in business;

1.18.3. The pers ons are in an employer -employee relationship;

1.18.4. One person holds or controls fifty percent (50%) or more of the
share s or voting rights in the other person;

1.18.5. One person directly o r indirectly controls the other person;

1.18.6. Both persons are directly or indirectly controlled by a third person;
or

1.18.7. The persons are husband or wife, or relatives to the third degree
inclusive, or in law to t he second degree inclusive;

1.19. Representation costs – all costs related to pr omotion of the business and
include business entertainment and representation;

1.20. Tax period – the calendar year or any other reporting period provided in this
Law.

1.21. Immovable property – for tax purposes, all land and establishments and
structures below or above the land surface and connected to the land, including
property which is accessory to immovable property; rights to w hich the provisions
of general L aw res pecting landed property apply; usufruct of immovable property;
and rights to variable or fixed payments as consideration for the working of, or
right to work, mineral deposits, sources and other natural resources;

1.22. Royalty – payment of any kind rec eived as a consideration for the use of, or
the right to use, any copyright of literary, artistic, or scientific work including
cinematograph films, and patent, trade mark, design or model plan, secret formula
or process, or for information concerning indu strial, commercial or scientific
experience.

1.23. Religion – the Islamic Community of Kosovo, the Serbian Orthodox
Church, the Roman Catholic Church, the Jewish Religious Community, and the
Evangelical Church.

1.24. Eligible religjion – every religion included in the definition of religion
established in this Law.

1.25. Kosovo – shall include all the land, inland waters and airspace of Kosovo, as
defined by the Constitution of the Republic of Kosovo.

1.26. Operating Leas ing – any leasing that is no t a financial leasing .

1.27. Financial Leas ing – a leasing that transfers substantially all the risks and
rewards incident to ownership of an item of property. Title may or may not be
tra nsferred at the end of the leasing. A finance leasing meets at le ast one of the
following four conditions:

1.27.1. if the lease life exceeds seventy -five percent ( 75% ) of the life of
the asset;

1.27.2. if there is a transfer of ownershi p to the leasing -receiver at the end
of the leasing term;

1.27.3. if there is an o ption to purchase the asset at a ” agreed price” at the
end of the lease term;

1.27.4. if the present value of the lease payments, discounted at an
appropriate discount rate, exceeds ninety percent (90%) of the fair market
value of the asset.

1.28 . Subco ntractor – any person performing a part of a comprehensive project
which has been undertaken by a prime contractor. The subcontractor is directly
engaged in the execution and realization of the comprehensive project and acts on

behalf of the prime contrac tor. The period spent by a subcontractor working on a
comprehensive project is considered as being time spent by a prime contractor on
the project.

1.29 . Prime Contractor/ Contractor – any business, whether an organization or
individual, which has agreed to carrry out operations under any legal binding
document signed by the beneficiary, either by doing the operations itself or by
arranging for them to be done by others .

1.30 . TAK – the Tax Administration of Kosovo.

1.31 . Minister – Minister of the Mi nistry of Economy and Finance.

Article 3
Taxpayers

1. The following persons shall be taxpayers under the present Law:

1.1. A corporation or other business organization that has the status of a legal
person under the applicable L aw in Kosovo;

1.2 . A business organization operating with public or socially owned assets;

1.3. An organization registered as a non -governmental organization under
Legislation on the Registration and Operation of Non -Government al
Organizations in Kosovo;

1.4. A non -resident person with a permanent establishment in Kosovo, subject to
the provisions of paragraph 2 of the Article 4.

Article 4
Object of Taxation

1. The object of taxation for a resident taxpayer shall be taxable income from Kosovo
source income and foreign source income.

2. The object of taxation for a non -resident taxpayer shall be taxable income from
Kosovo sources.

Article 5
Taxable Income

1. Taxable income for a tax period shall mean the difference between gross income
received or accrued during th e tax period and the deductions and allowances allowable
under this law with respect to such gross income.

2. A taxpayer with annual gross income over fifty thousand ( 50.000 ) € shall calculate
taxable income by preparing financial statements and adjusting income and expenses
recorded in such statements in the manner prescribed in the present Law.

3. A taxpayer with annual gross income of fifty thousand (50.000) € or less shal l
calculate taxable income:

3.1. In ac cordance with paragraph 2.1 of A rticle 35 of this Law; or

3.2. By opting to prepare financial statements, adjust income and expenses
recorded and maintained in the books and records required by Article 36 of this
Law, and submit annual declarations i n the manner prescribed in this Law.

3.2.1.A taxp ayer wishing to make the option described in sub -paragraph
3.2 shall submit a statement to th e tax administration by 1 March of the
tax peri od in which the taxpayer ris hes to make the option that the option
is being made. The sta tement to be submitted shall be in a format
prescribed by the tax administration. Once such option is made, the
taxpayer must continue to prepare financial statements and adjust income
and ex penses recorded in such statements for the tax period in which the
option is made and, at least, for the next succeeding three tax periods.

3.2.2. A taxpayer eligible to reverse the option made in sub -paragraph
3.2.1 of this A rticle, must submit a request for ruling to TAK, in
accordance with appl icable provisions of the Law on Tax Administration
and Procedures, and r eceive approval from TAK before maintaining
books and records in accordance with Article 37 of this Law. Approval
must be received by 1 Mar ch of the year for which the taxpayer requests
the ruling.

3.3. By pre paring financial statements and adjusting income and expenses
recorded in such statements in the manner prescribed in the present law, if such
taxpayer has income from more than one e conomic activity, such as rental
activites and trade activities.

3.4. In accordance with sub -paragraph 2.1.3 of Article 35 of this law if the
taxpayer‘s only income is from rental activity, un less the taxpayer is engaged in
the business of renting movab le and immovable property. A taxpayer engaged in
the business of
renting mo vable and immovable property is required to follow the provisons
applicable to taxpayers engaged in trade or business activities.

4. As an exception to the sub -articles above, any business licensed by CBK to insure or
reinsure life, property or other risks shall calculate taxable income and pay income tax in
accordance with Article 32 of this law.

5. As an exception to this Article, taxpayers engaged in long -term construction c ontracts
and projects shall report the taxable income from those long -term contracts and projects
in the manner pre scribed in a sub -legal act issued by the Minister.

6. Taxa ble income from operating leasing and financial leasing shall be determined and
reported in the manner prescribed in a sub -legal act to be issued by the Minister. The
sub -legal act shall describe operating leasing and financial leasing .

Article 6
Tax Rate

1. The corporate income tax rate shall be ten percent (10%) of taxable income.

2. For income taxable in tax periods prior to 1 January 2009, the corporate income tax
rate shall be twenty percent (20%) of taxable income in accordance with the legislation in
force at that time.

CHAPTER II
INCOME EXEMPT FROM TAX

Article 7
Exempt Income

1. The following income shall be exempt from corporate income tax:

1.1. Without prejudice to Article 33 of this law , the income of organizations
registered under Legislation on the Registration and Operation of non –
governmental organizations th at have received and maintained public benefit
status to the extent that the income is used exclusively for their public benefit
purposes;

1.2. Income of the Central Bank of Kosovo, and of entitled and duly authorized
international governmental financi al institutions operating in Kosovo;

1.3. Dividends received by resident and non – resident taxpayers;

1.4. Interest on financial instruments which are issued, or guaranteed, by a public
authority of Kosovo paid out to resident or non -resident tax payers;

1.5. Income of e ligible religions of Kosovo for exercising economic activities
specific to their self -sustainability, such as :

1.5.1. the production of embroidery and cl erical vestments, candles, icon
painting,
1.5.2. woodcarving and carpentry, and
1.5.3. traditional agricultural pr oducts, in accordance with the laws
applicable to religion in Kosovo.

1.6.Income of a prime contractor or a subcontractor, other than a local person,
generated from co ntracts for the supply of goods or servic es to the United
Nations (including UNMIK), the Spe cialized Agencies of the United Nations,
KF OR and the International Atomic Energy Agency under the condition that they
are directly engaged in projects and programs of the organizations mentioned
before.

1.7 Income of a prime contractor or a subcontractor but other than a local person,
generated from contracts with foreign governments, their organs and agencies, the
European Union, the Specialized Agencies of the European Union; the World
Bank, th e IMF and international inter -governmental organizations for the supply
of goods or services in support of p rograms and projects for Kosovo.

2. The international inter -governmental organizations shall be determined in a sub -legal
act issued by the Minist er.

CHAPTER III
EXPENDITURE

Article 8
Disallowed Expenses

1. In determining taxable income, the following are disallowed as expenses:

1.1. Cost of acquisition and improvement of land;

1.2. Cost of ac quisition, improvement, renewal and reconstructi on of assets that
are capitalized, depreciated or amortized under the provisions of the present Law;

1.3. Fines, penaltie, costs and interest related to them;

1.4. Income taxes paid or accrued for the current or previous tax period and any
interest or l ate penalty incurred for la te payment of it ;

1.5. Value added tax for which the taxpayer claims a rebate or credit for input tax
under legislation on Value Added Tax in Kosovo; and

1.6. Any loss from the sale or exchange of property between related persons.

1.7. Pension contributions above the maximum amount allowed by the Kosovo
pension L aw.

Article 9
Allowable Expenses

1. Subject to the limitations in the present Law, in determining taxable income, a
taxpayer shall be allowed as a deduction fro m gross income expenses paid or incurred
during the tax period wholly and exclusively in connection with its economic activities,
including premiums paid on the health insurance in behalf of an employee and those
dependents eligible to be included in the policy of the employee.

2. Educational expenses paid by an employer to an educational institution for an
employee shall be allowable in full in the year in which such expenses are paid, provided
that:

2.1.education expenses are paid direct ly to the educa tional institution;

2.2. the educationa l institution is recognized by L aw in force in Kosovo;

2.3. the education is relevant to the employee‘s position and does not qualify that
employee for work in a different occupation; and

2.4.the employee remai ns in the employment of the employer after completion of
the education for whic h the expenses were paid by the employer for a peri od of
time to be specified in a sub -legal act issued by the Minister.

3. Training expenses (expenses incurred by an employ er to provide basic skills necessary
for the employee to perform assigned tasks or necessary to provide updated skills to the
employee) which are job -related shall be allowable in full in the year in which such
training expenses are incurred. The amount o f such expenses shall not exceed one
thousand ( 1,000 ) € per employee in any tax period. Any training expenses incurred
above that amount will not be allowable in that tax period.

4. If a taxpayer, other than a taxpayer engaged in the business of renting movable or
immovable property, opts to not maint ain records of actual expenses paid or incurred in
the rental activity, such taxpayer shall be allowed a deduction from gross rental income in
an amount equal to ten percent ( 10% ) of the rents received in order to account for
depreciation allowances and co ver the costs of repairs, collection charges, and other
epenses paid or incurred in generating the rental income.

5. No deduction shall be allowed for any accrued expense based on a withholding
obligation unless such expense is paid on or before 31 March of the subsequent tax

period. Any expense not allowed by this sub -paragraph shall be deductible in the tax
period in which it is actually paid.

6. Expenses, including depreciation expen ses, related to operating leasing and financial
leasing shall be rep orted in the manner prescribed in a sub -legal act to be issued by the
Minister.

7. No deduction shall be allo wed for any expense unless those documented in the manner
required by a sub -legal act issued by the Minister.

Article 10
Allowable Deductions

1. Contributions made for humanitarian, health, education, religious, scientific, cultural,
environmental protection and sports purposes are allowed as a deduction under the
present Law up to a maximum of five percent (5%) of taxable income computed before
the charitable contributions are deducted.

2. An allowable contribu tion under paragraph.1 of this A rticle must be made to:

2.1. A n organization registered under Legislation on the Registration and
Operation of Non -Governmental Organizations in Kosovo t hat has receive d and
maintained public benefit status;

2.2. Any oth er non -commercial organizations that directly perform activities in
the public interest and not for profit, such as:

2.2.1. Medical institutions;

2.2.2. Educational in stitutions;

2.2.3. Organizations to protect the environment;

2.2.4. Religious institutions;

2.2.5. Institu tions that care for disabled or elderly persons;

2.2.6. Orphanages; and

2.2.7. Institutions that pro mote science, culture, sports or arts

3. An allowable deduction shall not include a contribution that directly, or indirectly,
benefits the donor or related persons of the donor.

4. Any taxpayer who claims an allowable deduction must file an annual tax declaration
in accordance with Article 34.2 of this law and submit a receipt in respect of such
deduction to the Tax Administration.

5. The Minister shall issue a sub -legal act for implementation of this Article.

Article 11
Representation Costs

Expe nses incurred for representation shall be limited to fifty percent ( 50% ) of the amount
invoiced for business entertainment. The maximum amount of representation expenses
shall not exceed two percent ( 2% ) of annual gross income.

Article 12
Bad Debts

1. A bad debt shall be considered an expense if it meets these conditions:

1.1. The amount t hat corresponds to the debt has previously been included in
income;

1.2. The debt i s written off in the taxpayer‘s books as worthless for accounting
purposes:

1.3. There is no d ispute of the legal validity of the debt;

1.4. At least six months of the debt have exceeded of term ; and

1.5. There is a dequate evidence of substancial attempts made by the taxpayer to
collect the debt, incl uding any applicable actions to maximize collection of the
debt, such as:

1.5.1. taxpayer has offset any undisputed debt owed to the debtor against
the bad debt;

1.5.2. correspondence and contacts attempting to collect the debt;

1.5.3. le gal action was considered t o be uneconomical for documented
reasons or legal action was unsuccessful, or

1.5.4. a claim was filed in a bankruptcy/liquidation proceeding, if
applicable, and the amount to be received has reasonably been determined
by the administrator/executor. To the extent that money has bee n received
from the bankruptcy, it has been applied to the outstanding debt .

2. Bad debt deductions are limited to the non -recovered portion of the debt. Any bad
debt deducted as an expense and then subsequently collected sh all be included in income
at the time of collection.

3. No bad debt deduction shall be allowed for debts between related parties.

4. The Minister shall issue a sub -legal act to describe the requirements for bad debt
deductions as provided in this Arti cle.

Article 13
Reserve Funds

1 Except as otherwise provided in this Law, contributions to reserve funds are not
allowable as an expense.

2. Financial institutions licensed by Central Bank of Kosovo, other than those income is
derived from insuring li fe, property or other risks, are entitled to an expense for the
creation of a special reserve fund for the institution‘s doubtful assets, of an amount not to
exceed the maximum amount allowable by the Central Bank of Kosovo. If a financial
institution is e ngaged in both bank and insurance activities, the expanses for reserve fund
are allowable only in relation to doubtful assets arising from bank activities.

3. Subsequent to the creation of the special reserve fund, any amount withdrawn from
the fund sha ll be included in income and any amount placed back into the fund, to
replenish it t o the allowable amount that is allowed as a deduction.

Article 14
Payments to Related Persons

1. Compensation or emoluments paid to a related person shall be allowed as an expense
in an amount equal to the lesser of the actual payment or the open market value.

2. Interest, rent, and other expenses paid to related persons shall be allowed as an expense
in an amount equal to the minimum actual payment or the open market v alue.

Article 15
Depreciation

1. Expenditures on tangible property, other than expenditures for land, works of art, and
other property which are not subject to wear, owned by the taxpayer and used for the
taxpayer‘s economic activity, shall be recovere d over time by depreciation deductions in
the manner prescribed by the present Article.

2. Expenditures on improvements to leaseholds used for the taxpayer‘s economic activity
shall be recovered through depreciation deductions calculated using the straig ht-line
method with a period equal to the life of the leasehold.

3. All tangible property of the taxpayer that is subject to depreciation under this Article
shall be placed in one of the following categories:

3.1. Category 1: Buildings and other constr ucted structures;

3.2. Category 2 : Automobiles and light trucks, heavy transport vehicles, earth
moving equipment, bulldozers, scrapers and other heavy vehicles, computers,
peripherals and other data processing equipment, office furniture and office
equ ipment, instruments, sundries and other accessories; and livestock used for
production or breeding.

3.3. Category 3: Plant and machinery; rolling stock and locomotives used for rail
transport; airplanes; ships; perennial plants and trees used for vinicult ure or
production of fruits (such as apples, pears, walnuts, blueberries, etc.); and all
other tangible as sets not included in Category 1 or Category 2 of this paragraph.

4. The amount allowed as a depreciation deduction for the tax period shall be deter mined
by applying the following percentages to the individual capital asset under the straight
line method at the close of the tax period according to the category to which the asset
belongs:

4.1. Category 1: five percent (5%);

4.2. Category 2: tw enty percent (20%); and

4.3. Category 3: ten percent (10%)

5. According to this Article, a n asset shall first be taken into account when it is first
placed into service.

6. The initial amount to be depreciated shall be the purchase price or, in t he absence of a
purchase price, the cost price. The initial amount shall also include:

6.1. taxes duties, levies and charges, and

6.2. Incident al expenses such as commission, packing, transport, and insurance
costs charged by the supplier.

7. The ind ividual depreciation of the assets of Category 2 and Category 3 shall only
apply for those assets acquired on, or after, the da te of entry into force of this L aw.

8. Capital goods (assets) that were purchased and their depreciation was started under the
pooling method prior to the entry into fo rce of this L aw , shall continue to be depreciated
under the previous legislation until the value of the pool equals zero.

9. Purchase of an asset for a price of one thousand ( 1,000 ) € or less shall be allowed as a
current expense.

10. Tangible assets with a purchase price of more than one thousand (1,000) € and less
than three thousand ( 3,000 ) €, acquired after the date on which this law comes into force,
shall be placed in a single asset pool and depreciated at a rate of twenty percent ( 20% ) of
the value of the assets in the pool, irrespective of which category of assets it would be
placed in under th e provisions of paragraph 3 of this A rticle. As new qualifying assets
are purchased, their purchase price shall be added to the value of the pool. As assets are
sold from the pool, the purchase price of the asset sold shall be reported as ordinary
business income in the year in which the asset is sold, but the value of the pool will not
be reduced as a result of th e sale.

Article 16
Depreciation of Livestock

Depreciation of livestock is allowed only if such animals are used in the course of
economic activity of the agricultural entity. Animals which breed offspring used only for
personal use or dairy animals use d only for personal use are not subject to depreciation.

Article 17
Special Allowance for New Assets

1. If a taxpayer purchases production lines for plant and machinery, railway inventory
and locomotives used for railway transportation, airplanes, ship s, heavy transport
vehicles, earth moving equipment, bulldozers, scrapers and other heavy vehicles for the
purpose of the taxpayer‘s economic activity between 1 January 2010 and 31 December
2012, a special deduction of ten percent (10%) of the cost of acqu isition of the asset shall
be allowed in the year in which the asset has been first placed into service. This
deduction shall be in addition to the normal allowable depreciation deduction. The
deduction shall be allowed only if the asset is new or is place d into service in Kosovo for
the first time. A deduction shall not be allowed if the asset is transferred from an existing
or a former business in Kosovo.

2. This deduction shall be in addition to the normal allowable depreciation deduction .

3. The de duction shall be allowed only if the asset is new or is placed into service in
Kosovo for the first time. A deduction shall not be allowed if the asset is transferred from
an existing or a former business in Kosovo.

4. Other special allowances may only b e granted if so provided by specific Law.

Article 18
Repairs and Improvements

1. In the case of any depreciable asset, amounts expended for repairs or improvements,
excluding day -to-day maintance repairs, shall be capitalized and added to the basis of the
asset if the repairs or improvements extend the useful life of the asset for at least one year
and the amount of repair or improvement is greater than one thousand ( 1,000 ) € for that
asset. I f the repair or improvement is one thousand (1,000) € or less for any asset, the
amount of the repair or improvement shall be an expense in the year paid or accrued.

2. If the repairs or improvements meet the criteria for capitali zat ion per paragraph 1 of
this A rticle, the amount shall be capitalized and added to the remaining book value of the
capital asset. The new book value of the asset will be used as the basis for depreciating
the asset. The asset will be depreciated in accord ance with the rules of the applicable
category.

3. The Minister shall issue a sub -legal act for implementation of this Article.

Article 19
Amortization

1. Expenditures on intangible assets that have a limited useful life including patents,
copyrigh ts, licenses for drawings and models, contracts and franchises are deductible in
the form of amortization charges.

2. The method of amortization shall be the straight -line method and the allowance shall
be based on the useful life of the asset as determ ined by the legal agrement on the
acquisition and use of the intangible asset.

Article 20
Exploration and Development Costs

1. Exploration and development costs in respect of a natural deposit of minerals and
other natural resources and interest attri butable thereto shall be added to a capital account
and amortized under the present Article.

2. The amount allowed as an amortization deduction with respect to exploration and
development costs referred to in paragraph 1 of this Article, for the tax peri od shall be
determined by multiplying the balance in the capital account by a fraction of:

2.1. The numerator of which is the units extracted from the natural deposit during
the year; and

2.2. The denominator of which is the estimated total units to b e extracted from the
natural deposit over the life of the asset.

3. The estimated total units to be extracted referred to in sub -paragraph 2.2 of this Article,
shall be determined in accordance with instructions concerning such estimates or any
other met hod, to be set out in a sub -legal act to be issued by the Minister.

CHAPTER IV
CAPITAL GAINS AND LOSSES, BUSINESS LOSSES

Article 21
Capital Gains and Losses

1. Capital gain means income that a taxpayer realizes through the sale or other
disposition of capital assets including real estate and securities.

2. The amount of capital gain is the positive difference between the sales price of the
capital asset and the cost of the capital asset as determined under paragraph 5 of this
Article.

3. The sa les price of a capital asset shall be the sum of any amount received, plus any
other compensation received, as consideration for the sale.

4. If the parties are related persons and the sales price is less than the open market value,
then, for purposes o f the present Article, the sales price shall be adjusted to the open
market value in the manner prescribed in a sub -legal act issued by the Minister.

5. The cost of the capital asset is the amount that the taxpayer paid for the acquisition of
the asset , including expenses incurred in acquiring the asset that have not been previously
expensed, increased by the cost of improvements, and reduced by depreciation and other
expenditures allowable under this Law.

6. Capital gains shall be recognized as busin ess income and capital losses as business
losses, if not provided otherwise in this L aw.

7. Capital gains and losses shall not be recognized for pooled assets (assets in Category 2
and Category 3 acquired prior to the da te of entry into force of this L aw) referred to in
paragraph 8 of Article 15 of this Law.

8. Capital loss means a loss that a taxpayer realizes through the sale or other disposition
of capital assets including real estate and securities.

9. The amount of capital loss is the negative d ifference between the sales price of the
capital asse t per paragraph 3 or 4 of this A rticle and the cost of the capital asset as
determined under paragraph 5 of this Article.

10. Capital losses shall be treated as ordinary losses from economic activ ities that may be
deducted from income in the current year. If the amount of the capital loss for the taxable
year exceeds the taxpayer‘s income for that year, the amount of the excess of such loss
over income in the current year may be carried forward for up t o seven (7) successive tax
periods and shall be available as a deduction against any income in those years. The
provisions of Article 23 of this L aw shall apply to the losses described in this paragraph.

11. Gross income from capital gains does not incl ude capital gains realized from the sale
of the assets of the Kosovo Pension Savings Trust or any other pension fund defined
under legislation on pensions in Kosovo.

12. A capital gain shall not be recognized on the involuntary conversion of assets to th e
extent that the consideration received from the conversion consists of either property of
the same character or nature or money that is invested in property of the same character
or nature within a replacement period of two (2) years,

13. If a sale of a capital asset involves an installment agreement that lasts more than the
tax period in which the sale is finalized (all applicable documents are signed by all parties
and the sales agreement is legally enforceable) any gain must be reported on a straight –
line basis over the life of the installment agreement and the amount of gain attributable to
any tax period must be reported on the tax declaration as income in that tax period.
Further provisons related to installment sales shall be described in a sub -legal act.

Article 22
Involuntary Conversions

A capital gain shall not be recognized on the involuntary conversion of property to the
extent that the consideration received from the conversion consists of either property of
the same character or nature or money that is invested in property of the same character
or nature within a replacement period of two (2) years.

Article 23
Tax Losses

1. A tax loss as defined by this L aw is the negative difference between the taxpayer‘s
income and expenses and allow ances determined in accordance with this law.

2. The amount of the tax loss determined under the present Article may be carried
forward for up to seven (7) successive tax periods and shall be available as a deduction
against any income in those years.

3. The amount of the carry forward taken into account for any tax period after the year of
the tax loss shall be the entire amount of the loss, reduced by the aggregate amount
previously allowed as a deduction.

4. If a taxpayer has a tax loss in more th an one (1) year, the present Article shall be
applied to the losses in the order in which they arose.

5. Except as provided in Article 26, the provisions of this Article shall be allowable only
to the business which incurred the loss. If the business cha nges its type of business
organization or has an ownership change of more than fifty percent ( 50% ), the carry
forward will no longer be applicable. The Minister may issue a sub -legal act to regulate
loss carry forward provisions related to changes in type s of business organizations or
ownership change, as well as any other loss carryforward provisions necessary for
implementation of this Article.

CHAPTER V
LIQUIDATION AND REORGANIZATION

Article 24
Distribution of Property

1. A company that distribut es property other than shares to a shareholder with respect to
the shareholder‘s interest shall recognize a gain or a loss as if such property had been sold
to such shareholder at its open market value.

2. The property distributed to the shareholder sha ll be valued at the open market value of
the property.

3. In the case of a distribution of shares dividends that does not change the share of
participation of the recipient, the company shall not recognize a gain or a loss and the
shareholder shall not r ealize income.

Article 25
Liquidation

1. In case a company is liquidated in accordance with applicable L aws of Kosovo, the
company shall take into account any gain or loss as if it had sold the property distributed
in the liquidation at its open market value.

2. Except as otherwise provided in this Law, the recipients of property distributed in a
liquidation shall be treated as if they exchanged their equity interest in the liquidated
company for an amount equal to the open market value of such prope rty.

3. In the case of a liquidation of a subsidiary where the property of the subsidiary is
distributed to a parent, the parent shall not recognize any gain or loss.

Article 26
Reorganization

1. Transfers of property pursuant to a written plan for a reorganization of a taxpayer,
whether due to bankruptcy, merger, acquisition, division, exchange of shares or
otherwise, which is approved by the Tax Administration, shall not be taxed under this
Law.

2. In the case of a reorganization, the value of t he property held by the reorganized
taxpayer shall be determined by reference to the acquisition value of such property
immediately before the reorganization.

3. In the course of a reorganization, a distribution to a shareholder in respect of the
sha reholder‘s equity interest shall not constitute taxable income to the shareholder.

4. Except as otherwise established in a sub -legal act issued by the Minister, the acquiring
taxpayer shall succeed to and take the place of the acquired taxpayer with res pect to
inventories, loss carry forwards, dividend accounts, and all other such items. Loss carry
forwards are allowable to the acquiring taxpayer only if provided in the plan of
reorganization and approved by the Tax Administration according to the provi sions
established in the sub -legal referred to in this sub -paragraph.

CHAPTER VI
TRANSFER PRICES, AVOIDANCE OF DOUBLE TAXATION

Article 27
Transfer Prices

1. The price used in conjunction with asset transactions or contract obligations between
related persons shall be considered the transfer price.

2. The price expected to be received in conjunction with asset transactions or contract
obligations between parties that had been dealing according to market dominance shall be
considered the open market v alue.

3. The open market value shall be determined under the comparable uncontrolled price
method and, when this is not possible, the resale price method or the cost -plus method or
any other method as defined by sub -legal act .

4. The difference betwee n the open market value and the transfer price shall be included
in taxable income.

5. A sub -legal act shall be issued by the Minister for implementation of this Article.

Article 28
Avoidance of Double Taxation

1. A taxpayer resident in Kosovo who r eceives income from business activities outside
of Kosovo and who pays income tax on that income to any other State, shall be allowed a
tax credit under this Law for the amount of income tax paid to such State that is
attributable to the income derived fro m that other state.

2. The tax credit allowed in paragraph 1 of this Article is limited to the amount of
foreign tax paid on the income earned outside Kosovo, not to exceed the amount of tax
due in Kosovo on that same income. To the extent that Kosovo tax on that income
exceeds the foreign tax paid, the excess amount must be included in the computation of
Kosovo tax due.

3. Any applicable international agreement negotiated by the Minister, and ratified by the
Assembly, on the avoidance of double taxati on shall supersede the provisions of the
present article as they relate to the parties to that international agreement.

Article 29
Permanent Establishments

1. Permanent establishment means a fixed place of business through which the business
of a non -resident person is wholly or partly carried on in Kosovo.

Permanent establishment shall include:

1.1. Any place of management;

1.2. Any branch;

1.3. Any office;

1.4. Any factory;

1.5. Any workshop;

1.6. Any mine; and

1.7. A ny oil or ga s source, quarry or other place of exploitation of natural
resources.

2. Permanent establishment shall also include;

2.1. Any building site, construction, assembly or installation project, or
supervisory activity in connection th erewith, but o nly if such site, project or
activ ity lasts longer than one hundred and eighty -three ( 183 ) days. Where the site,
project, or activity lasts longer than one hundred and eighty -three (183) days,
including any preparatory activity, the site, project, or activ ity shall be deemed to
have been or created a permanent establishment from the day such work was
commenced;

2.2. The furnishin g of any service, including any consultancy service but
excluding any supervisory activity referred to in sub -paragraph 2.1 of th is Article,
carried out in Kosovo by a non -resident person through employees or other
personnel, but only if such activities continue within Kosovo for a period or
periods totaling ninety ( 90 ) days or more w ithin any twelve -month period. Where
the activ ities do continue within Kosovo for a period or p eriods totaling ninety
(90 ) days or more within a twelve –month period, the activities shall be deemed to
have created a permanent establishment from the day such activities commenced;

2.3. Any site used for the search for natural resources within Kosovo, where such
activities within Kosovo c ontinue for a period or periods totaling one hundred
and eighty -three (183) days or more within any twelve – month period. Where
the activities do continue for a period or periods totaling one hundred and eighty –
three (183) days or more within a twelve -month period, the activities shall be
deemed to have created a permanent establishme nt from the day such activities
commenced; and

2.4. Any immova ble property situated in Kosovo and owned by a nonresident
person.

3. Notwithstanding paragraph 1 of this Article, where a person, other than an agent of an
independent status to whom Article 29.6 applies, acts in Kosovo on behalf of a non –
resident person, the non -resident per son shall be deemed to have a permanent
establishment in Kosovo in respect of the activities which that person undertakes for the
non -resident person, if such a person:

3.1. Has and habitually exercises in Kosovo an authority to conclude contracts in
the name of the non -resident person, unless the activities of such person are
limited to those ment ioned in paragraph 5 of this Article which, if exercised

through a fix ed place of business, would not make this fixed place of business a
permanent establishment under the provisions of that Article; or

3.2. Has no such authority , but habitually maintains in Kosovo a stock of goods
or merchandise from which he regularly delivers goods or merchandise on behalf
of the taxpayer.

4. A non -resident person who provi des insurance shall, except in regard to reinsurance,
be deemed to have a permanent establishment in Kosovo if it collects premiums in
Kosovo or insures risks situated in Kosovo through a person other than an agent of an
independent status to whom paragrap h 6 of this Article applies.

5. Notwithstanding paragraphs 1 and 2 of this Article, ―permanent establishment‖ shall be
deemed not to include:

5.1. The use of facilities solely for the purpose of storage or display of goods or
merchandise belonging to th e non -resident person;

5.2. The maintenance of a stock of goods or merchandise belonging to the non –
resident person solely for the purpose of storage or display;

5.3. The maintenance of a stock of goods or merchandise belonging to the non –
resident pers on solely for the purpose of processing by another taxpayer;

5.4. The maintenance of a fixed place of business solely for the purpose of
purchasing goods or merchandise or of collecting information for the non -resident
person;

5.5. The maintenance of a fixed place of business solely for the purpose of
carrying on, for the non – resident person, any other activity of a preparatory or
auxiliary character; and

5.6. The maintenance of a fixed place of business solely for any combination of
activities menti oned in sub -paragraphs 1 to 5 of this paragraph, provid ed that the
overall activity of the fixed place of business resulting from this combination is
only of a preparatory or auxiliary character.

6. A non -resident person shall not be deemed to have a per manent establishment in
Kosovo merely because it carries on business in Kosovo through a broker, general
commission agent or any other agent of an independent status, provided that such persons
are acting in the ordinary course of their business. However, when the activities of such
an agent are devoted wholly or almost wholly on behalf of that taxpayer, and conditions
are made or imposed between that taxpayer and the agent in their commercial and
financial relations which differ from those which would hav e been made between
independent taxpayers, he will not be considered an agent of an independent status within
the meaning of this Article.

7. The fact that a non -resident person controls or is controlled by a company which is a
resident of Kosovo, or whic h carries on business in Kosovo (whether through a
permanent establishment or otherwise), shall not of itself deem either company a
permanent establishment of the other.

CHAPTER VII
WITHHOLDING TAX

Article 30
Withholding Tax on Interest, Royalties, Ren ts, Lottery Winnings, and Games of
Chance

1. Each taxpayer who pays interest, except as provided in paragraph 4 of this Article, or
royalties to resident or non -resident persons shall withhold tax at the rate of ten percent
(10%) at the time of payment or credit and remit the tax withheld to an account
designated by TAK in a bank or financial institution licensed by the Central Bank of
Kosovo. The withheld tax must be paid to the bank, or financial institution by the 15th
day of the month following the m onth in which the account is credited or the payment is
made.

2. Each taxpayer who pays rent to resident or non -resident persons sha ll withhold tax at
the rate of n ine percent (9%) at the time of payment or credit and remit the tax withheld
to an account designated by the Tax Administration in a bank, or financial institution,
licensed by the Central Bank of Kosovo. The withheld tax must be paid to the bank, or
financial institution by the 15th day of the month following the month in which the
payment is made or credited.

3. Each organizer of a lottery , or game of chance subject to the provi sions of Article 38 of
this Law , who pays lottery, or game of chance, winnings to resident and non -resident
persons shall withhold tax at the rate of ten percent (10 %) at the time of payment or
credit and remit the tax withheld to an account designated by the Tax Administration in a
bank, or financial institution, licensed by the Central Bank of Kosovo. The withheld tax
must be paid to the bank, or financial institut ion by the 15th day of the month following
the month in which the payment is made, or the recipient is credited with the winnings.

4. Interest on loans provided by financial institutions licensed by CBK to their customers
in the ordinary course of their business and interest on financial instruments which are
issued or guaranteed by a public authority shall not be subject to withholding.

5. Each taxpayer, or organizer of a lottery, or organizer of a ga me of chance subject to
the provi sions of Article 3 8 of this Law , who pays interest, royalties, rent, lottery
winnings, or game of chance winnings during a tax period shall provide a certificate of

tax withholding in the form specified by the Tax Administration to the recipient by 1
March of the year follo wing the tax period.

6. Each taxpayer, organizer of a lottery, or organizer of a game of chance su bject to
Article 38 of this Law , who pays interest, royalties, rent, lottery winnings, or game of
chance winnings, and who withholds tax under this article d uring a tax period shall
submit to the tax administration an annual reconciliation statement in the form and format
specified by the Tax Administration no later than 1 March of the year following the tax
period. Each taxpayer must include a copy of all wi thholding certificates, required by
paragraph 4 of this article, with the annual reconcilation statement submitted to the tax
administration.

Article 31
Withholding on certain payments to non -residents

1. In accordance with a sub -legal act to be issued by the Minister, income attributable to
a non -resident of Kosovo as an entertainer, such as a theatre, motion picture, radio or
television artiste, or a singer or musician, or as a sportsman, from his or her personal
activities exercised in Kosovo shall b e subject to withholding by the payor of that
income, whether paid directly or indirectly to the non -resident.

2. Income, other than income described in paragraph 1 of this Article, earned from
agreements or contracts, whether written or verbal, with Koso vo persons or entities by a
non -resident person or entity from services performed in Kosovo shall be subject to
withholding by the payor of that income, so long as the non -resident person or entity has
no permanent establishment in Kosovo and the gross com pensation paid to the non –
resident is more than five thousand ( 5,000 ) € in any tax period.

3. Notwithstandin g any other provisions in this L aw, the amount of withholding under in
paragraph 1 and 2 of this Article, shall be five percent ( 5% ) of the gross compensation.
Each payor shall submit a statement of withholding and remit the amount of tax withheld
to an account designated by the Tax Administration in a bank licensed by the Central
Bank of Kosovo within fifteen (15) days after the last day of each c alendar month, in
accordance with a sub -legal act issued by the Minister.

4. Withholding under this article shall be considered to be a final tax and the recipients of
such income subject to the withholding shall not submit a declaration to the tax
admin istration, notwithstanding the pr ovisions of Article 34 of this L aw.

5. Each payor who withholds under this article during a tax period shall provide a
certificate of tax withholding to the recipient of the income,by March 1 of the year
following the ta x period in the form specified in a sub -legal act issued by the Minister.

6. Each taxpayer who withholds tax under this article during a tax period shall submit to
the tax administration an annual reconciliation statement in the form and format specified

by the Tax Administration no later than 1 March of the year following the tax period.
Each taxpayer must include a copy of all withholding certific ates, required by paragraph
5 of this A rticle, with the annual reconcilation statement submitted to the tax
administration

7. The Minister shall issue a sub -legal act which will specify those persons or entities
who will be considered as ‗payors‘ under this article and all other activities required for
implementation of this article.

CHAPTER VIII
SPECIAL PR OVISIONS

Article 32
Treatment of Insurance Activity

1. In the case of any person that is licensed by CBK to insure or reinsure life, property,
or other risks, the tax imposed by this Law shall be an amount equal to five percent (5%)
of the gross premium s accrued during the tax period.

2. If an insurance company has income, other than income generated by the insurance or
reinsurance of life, property, or other risks, such other income shall be subject to taxation
at the established corporate tax rate an d taxable income shall be determined according to
the income and expens e rules established under this L aw.

3. Any business that engages in insurance activity and other economic activity shall
maintain separate accounts and records for the insurance activ ity and other economic
activity.

Article 33
Treatment of Commercial Income of Non -Governmental Organizations

1. A non -governmental organization that conducts any commercial or other activity that
is not exclusively related to its public purpose shall b e charged income tax at the rate of
ten percent (10%) on income derived from such unrelated business activity, reduced by
any deductions that are directly related to the carrying on of such business and which are
allowed by this Law.

2. The Tax Administra tion shall have the authority to audit any NGO to determine its
compliance with the income rules that govern NGO‘s. In cases that NGO profits are
deemed to exceed a reasonable level of profits for an organization that is established as a
non -profit organi zation, the tax administration shall have the authority to treat such
excessive profits in accordance with the provisions of paragraph 1 of this Article.

3. Any NGO that engages in activities exempt from tax under sub -paragraph 1.1 of
Article 7 of this law and other commercial activity, shall maintain separate accounts and
records for the public benefit activity and other commercial activity.

4. The Minister shall issue a sub -legal act which will describe the meaning of ―excessive
profits‖ under this Article.

CHAPTER IX
ADMINISTRATIVE PROVISIONS

Article 34
Tax Declarations

1. A taxpayer that is required or opts to calculate taxable income by adjusting for tax
purposes the income and expenses reported in its financial statements is required to
sub mit to the Tax Administration an annual tax declaration on or before 31 March of the
year following the tax period. The declaration shall be made on the forms prescribed by
the Tax Administration and shall include, among other things, gross income, allowa ble
deductions, taxable income and the tax due under this Law. Such taxpayers are also
required to submit, together with the tax declaration, the financial statements prepared in
accordance with Kosovo Accounting Standards and applicable legislation .

2. A taxpayer that claims an allowable deduction pursuant to Article 10 of this Law, is
required to submit to the Tax Administration an annual tax declaration on or before 31
March of the year following the tax period. The declaration shall be made on th e forms
prescribed by the Tax Administration and shall include, among other things, gross
income, allowable deductions, taxable income and the tax due under this Law.

Article 35
Tax Payments

1. Each taxpayer under the present Law shall make quarterly ad vance payments of tax to
an account designated by the Tax Administration in a bank, or financial institution,
licensed by the Central Bank of Kosovo on or before 15 April, 15 July, 15 October, and
15 January with respect to the calendar quarter immediately preceding these dates.

2. The amount of each quarterly advance payment shall be as follows:

2.1. Taxpayers with annual gross income of fifty thousand ( 50.000 ) € or less who
are not required to, or do not opt to, submitt an annual tax declaration as pe r
Article 34 of this Law shall make the following payments per quarter:

2.1.1.Three percent (3%) of each quarter‘s gross income from trade,
transport, agricultural and similar commercial activities, but not less than
thirty seven euros and fifty cents ( €37.50) per quarter.

2.1.2. Five perce nt (5%) of each quarter‘s gross income from services,
professional, vocational, entertainment and similar activities. but not
less than thirty seven euros and fifty cents (€37.50) per quarter.

2.1.3. Ten p ercent (10%) of net rental income for the quarter (gross rental
income less the ten percent (10%) allowaqnce provided in paragraph 2 of
Article 9 of this Law), reduced by any amount withheld during that quarter
pursuant to paragra ph 2 of Article 3 0 of this Law;

2.2. Taxpayers with annual gross income in excess of fifty thousand ( 50.000 ) €
and taxpayers who are required t o, or opt to, prepare financiar statements shall
make the following payments per quarter:

2.2.1. One -fourth (1/4) of the total tax liability for the current tax period
based on estimated taxab le income reduced by any a mount withheld
during the quarter pursuant to Article 30 of this L aw or Article 40 of the
Law on Personal Income Tax; or

2.2.2. For the second and subsequent tax periods that a taxpayer makes
payment under this subArticle, of at least one -fourth (1/4) of one hundre d
and ten percent (110%) of the total tax liability for the tax period
immediately preceding the current tax period reduced by any amount
withheld during the quarter pursuant to Article 30 of this law or Article 40
of the Law on Pers onal Income Tax; .

3. A taxpayer who has opted to prepare financial statements and report on the real basis
must continue on that basis for the year in which the option is made plus at least the three
succeeding tax periods as noted in sub -paragraph 3.2 of Article 5 of this law.

4. A taxpayer who has exceeded gross turnover of fifty thousand (50.000) € in any one
year is required to report income and make payments in accordance with paragraph 2 of
Article 5 of this law and sub -pargraph 2.2 of this Article for the tax period in which gross
turnover exceeded fifty thousand (50.000) € and, at least, the three succeeding tax
periods. If, after that time, the taxpayer wishes to return to reporting income and making
payments in accordance with sub -paragraph 3.1 of Article 5 and sub -paragraph 2.1 of this
Article, such taxpayer shall submit a request for rul ing to the tax administration in
accordance with Article 10 of the Law on Tax Administration Procedures prior to 1
March of the year in which the change is being requested.

5. A taxpayer who makes quarterly advance payments pursuant to sub -paragraph 2 .2 of
this Article shall perform a final settlement of tax and pay the final amount due on or
before 31 March of the year following the tax period.

6. The amount due for the final settlement shall be the total tax due for the tax period
determined i n acc ordance with this Law, minus :

6.1. The amounts withheld and paid to the Tax Administration pursuant to Article
30 of this law and Article 40 of the Law on Personal Income Tax;

6.2. The amounts paid in the quarterly instalments;

6.3. The foreign tax credit allowable under this Law.

7. I f the amounts paid or credited according to Article 6 of this L aw are greater than the
total tax due determined in accordance with this Law, the taxpayer shall be entitled to a
refund of the excess tax paid.

8. If an advance payment is not made timely, or in an amount that is less than that
required, the tax administration may impose a penalty in an amount equal to the rate of
interest in effect at the time the advance payment was due to be made. There shall be no
other additions to tax, for late or inadequate advance payments. If payments, or corrected
payments, for the quarterly instalments have been made on or before the due dates and a
final settlement, or final corrected settlement, has been made as requir ed by paragraph 5
of this Article, no penalty shall be charged for late, or ins ufficient advance payments, if:

8.1. The difference between the amount due in each instalment and the amount
paid in each instalment is not greater than ten percent (10%) of th e amount due; or

8.2. After the taxpayer‘s first tax period, the amount paid in each instalment is at
least ten percent (10%) mo re than one -fourth (1/4) of the tax liability on the tax
declaration for the preceding tax period.

8.2.1. If the tax adminis tration performs an audit of any year and makes
an adjustment to the tax of that year of more than twenty percent ( 20% ),
the relief from penalty provided in sub -paragraph 8.2 will not apply to the
advance payment requirements for the succeeding tax perio d.

8.3. For the first tax period during which a taxpayer has been in business (the tax
period in which the taxpayer requested a fiscal n umber, or if taxpayer conducted
business prior to that time, the tax period in which economic activity started),
there shall be no penalty charged if, including the four th quarterly installment due
on 15 January, the taxpayer has made quarterly advance payments equal to at least
ninety percent ( 90% ) of the final tax obligatory for that tax period.

8.4. A taxpayer that had a loss on the previous year Personal Income Tax
declaration is not eligible to use the provisions of sub -para graph 2.2. of this
Article in making advance payments for the current year. Such taxpayer must

make advance payments in accordance with the provis ions of sub -paragraph 2.1.
of this A rticle.

8.5. The penalty to be charged under this Article shall be applied only to the
underpaid amount from the date of the underpayment until the date prescribed in
paragraph 5 of this Article for making the final se ttlement for the tax period, or,
if earlier, the payment date on which the taxpayer‘s advance payment includes an
amount sufficient to pay the advance payment for that quarter plus the underpaid
amount..

9. The Minister shall issue a sub – legal act for implementation of this Article.

Article 36
Requirement for Books and Records

1. A taxpaye r with annual gross income from business activities for the tax period in
excess of fifty thousand ( 50.000 ) €, shall keep the books and records ide ntified in
paragraph 4 of this A rticle.

2. A taxpayer with annual gross income from business activities for the tax period of fifty
thousand (50.000) €, or less may opt to prepare the books and records identified i n
paragraph 4 of this Article in accordance with sub -paragraph 3.2 of Article 5 of this Law.

3. A taxpayer who opts to prepare books and records identified in paragraph 4 of this
Article for any tax period shall be required to prepare such books and recor ds for the tax
period in which the option is made plus at least three succeeding tax periods as provided
in sub -paragraph 3.2 of Article 5 of this law.

4. The books and records required under this Article, maintained in accordance with the
accounting stan dards of Kosovo, are as follows:

4.1. A sales book in which all sales and returns must be recorded;

4.2. A purchase book in which all purchases and returns must be recorded;

4.3. A Cash recei pts journal and a cash payments journal that relate to the sales
book and purchase book.

4.4. A capital account, if applicable, that includes the opening balance, additions
to capital, expenses to be capitalized, depreciation rate, amount of deprecia tion,
dispositions, and closing balance; and

4.5. Financi al statements and balance sheets as required for establishing the
starting point for computation of the annual corporate income tax declaration.

4.6. The content of books and records required by this paragraph and any other
books or records required, i ncl uding those maintained in an electronic format,
shall be defined in a sub -legal act issued by the Minister.

Article 37
Requirements for Books and Records for Small Businesses

1. A taxpayer with annual gross income of fifty thousand (50.000) €, or less, who does
not opt to prepare the books and records required under paragraph 4 of Article 36, must
maintain the following minimal books and records:

1.1. A sales book in which all sales and returns must be recorded;

1.2. A purchase book in which all purchases and returns must be recorded;

1.3. A Cash receipts journal and a cash payments journal that relate to the sales
book and purchase book.

1.4. The content of books and records required by this paragraph and any other
books or records required, including those maintained in an electronic format,
shall be defined in a sub -legal act issued by the Minister.

Article 38
Temporary Provisions

1.The provisions relative to Games of Chance in sub -paragraphs 1, 3, 5, and 6 of Article
30 of th is Law shall become obsolete and superseded by provisions in the Law on Games
of Chance and Lottery (or similar law related to the regulation and taxation of games of
chance and lottery) relative to fixed quotes upon the date of its coming into force.

2. In accordance with the Law on VAT, a taxpayer must register for VAT when reaching
the threshold of fifty thousand (50.000) €, of gross turnover in a twelve ( 12 ) c onsecutive
month period. The Law on VAT includes provisions under which the registration
threshold may be changed with the approval of the Assembly. If the VAT registration
threshold is increased or decreased, the threshold for determining corporate income tax
liability based on an accounting for income and expenses (currently more than fifty
thousand (50.000) €, annual turnover) shall be increased or decreased accordingly.

2.1. An increase or decrease in the thres hold for determining corporate income tax
liability based on accounting for income and expenses shall be reflected in the
applicable provisions of Arti cles 5, 35, 36, and 37 of this L aw.

2.2. Any increae or decrease in the corporate income tax threshold s hall be
effective for the tax period beginning on 1 January of the year following the

revision of the VAT threshold and each successive tax period thereafter. If the
increase in VAT threshold is effective as of 1 January of a tax period, revision of
the c orporate income tax threshold shall be effective beginning with 1 January of
that same tax period.

2.3. Upon an increase or decrease in the threshhold having been approved by the
Assembly, the Minister shall issue a sub -legal act to implement the revised
threshold level, which will reflect the necessary revisions to Arti cles 5, 35, 36,
and 37 of this L aw.

CHAPTER X

FINAL PROVISIONS

Article 39
Implementation

1. The Minister of Economy and Finance shall have the a uthority to promulgate, in
writing, implementi ng regulations of general applicability as may be necessary to further
the proper, reasonable and uniform interpretation and application of the present law.
Such implementing regulations shall be administered and applied by the TAK. No such
implementing regulation shall have any legal effect until properly published in the
Official Gazette of Kosovo and otherwise made publicly available by the TAK in
accordance with the Law on Access to Official Documents.

2. Without limitation or prejudice of the above paragraph, the Minister shall issue sub –
legal acts for implementation and interpretation of Articles 5, 7, 9, 10, 12, 18, 20, 23, 26,
27, 31, 33, 36, and 37 within one hundred and twenty ( 120 ) days after the promulgation
of this law. Article 15 of the Law no. 03/L -113 applies for th e period 1 January 2009 to
31 December 2009.

Article 40
Appeals

1. Any person unsatisfied with the decision taken according to the provisions of this Law
by the Kosovo Tax Admini stration has the Right of submitting the request for review in
the department of Appeals of the Tax Administration.

2. Taxpayers who do not accord with the decision of Department of Complaints may
submit the complaint in the Independent Board for Review s.

3. If a Taxpayer is not satisfied with the decision taken by Independent Board for
Reviews, may submit a complaint in the competent Court.

Article 41
Applicable Law

This Law shall abrogate Law on Corporate Income Tax, No. 03/L – 113 of 18 December,
2008

Article 4 2
Entry into Force

1.This law shall enter into force fifteen (15) days after being published in the Official
Gazette of the Republic of Kosovo .

2. With th e entry into force of this Law, its effects will be from 1 January 2010.

Law No.03/L – 162
29 December 2009

The President of the Assembly of Republic of Kosova

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Jakup Krasniqi