Prishtinë, October 25, 2007 – Kosovo has become more attractive for foreign investors. After a change in legislation, tax rules are now in accordance with the practice in European countries. When a foreign entrepreneur used to pay taxes as soon as he entered Kosovo (and maybe only stayed for a couple of days), he will now only be taxed after 180 days. The Amendments to the Regulation on Personal Income Tax and on Corporate Income Tax have recently been signed by the Special Representative of the Secretary-General, SRSG Joachim Ruecker.
Background: Following the 37th meeting of the Kosovo’s Economic and Fiscal Council held on 12 June 2007, the SRSG has promulgated UNMIK Regulation 2007/23, which amends the UNMIK Regulation on Corporate Income Tax and Personal Income Tax. The amendments entered into force on 6 August 2007. The amended parts of the tax regulations are the parts concerning ‘Permanent Establishment’.
Previous Permanent Establishment rules in Kosovo did not conform to international standards, which created difficulties especially for international companies, because they were not sure for which parts of their business in Kosovo they had to pay taxes.
According to international practice, a country should tax only those profits of an enterprise that are derived from business activities of a ‘permanent establishment’ in that country, which can for example mean a certain amount of time a company has to do business in a foreign country before it will be taxed (usually 180 days). The exact definitions for what falls under ‘permanent establishment’ are outlined in the OECD Model Tax Treaty and Commentary as well as in the UN Model Treaty and Commentary and are understood by the international community. The recent amendments in the Corporate Income Tax Law and the Personal Income Tax Law are now very similar to the international standard and make it much easier for international companies to plan their economic activities in Kosovo.
ECIKS (Source: DSRSG Office)