Low Operating Costs

The main advantage of the Kosovar labor force is its low operating cost. With the average monthly wage estimated at €360, it is the most competitive in Europe.

Personal Income Tax

Personal Income Tax (Law No.03/L-161) applies to natural persons receiving income from

Kosovar sources and  foreign incomes received by Kosovo residents.

Income tax 0 -10 % (Progressive)

€0-80

= 0%
€80-250 = 4%
€250-450 = 8%
€450+ = 10%
Mandatory pension contribution: 5%
Tax on Dividends: 0%
Cost of electricity at 5.5 – 8.5 EUR cents per kWh (22 cents in EU)

Value Added Tax

Value Added Tax (Law No.03/L- 146) is applied to all importers and businesses with an annual turnover in excess of €50,000. The VAT rate stands at 16 percent and is levied on all goods and services, with an exemption for certain agricultural and capital goods (on which VAT is 0 percent). Exporters receive full VAT reimbursement for exported goods.

Country VAT Corporate profit tax Personal income Tax
Kosovo 16% 10% 10%
Macedonia 18% 10% 10%
Serbia 20% 15% 12%
Bosnia and Herzegovina 17% 10% 10%
Croatia 25% 20% 12-40%
Montenegro 17% 9% 9%

Comparison of Tax Systems in the region - 2012

Specific Tax code on Depreciation

According to article 15 of the Law on Corporate Income Tax (No.03/L- 162), the amount allowed as a depreciation deduction for the tax period is to be determined by applying the following percentages to the capital accounts under the reducing balance method:

  • Category 1: Buildings; five percent (5%)
  • Category 2: Vehicles and office equipment; twenty percent (20%)
  • Category 3: Machinery and heavy transport vehicles; fifteen percent (15%)