Frequently asked questions on corporate income tax (CIT)

The standard corporate income tax rate is 10%, applied to taxable profit — recognised income minus deductible expenses under Law no. 06/L-105. This applies to corporations and to all businesses that report on a real-income basis. Small businesses under the statutory threshold may be taxed differently, on gross turnover rather than on profit.

If your gross annual income does not exceed €30,000, you are taxed on gross turnover under Article 38 of Law no. 06/L-105: 3% for trade, transport, agriculture and similar commercial activities, 9% for services, crafts and professional activities — but no less than €37.50 per quarter. You do not need to compute actual profit, but neither can you deduct expenses. Fryti Audit helps you assess which regime costs you less.

The rate follows the classification of your activity at registration: trade, transport, agriculture and similar commercial activities are taxed at 3% of gross income, while services, crafts and professional activities at 9%, under Article 38 of Law no. 06/L-105. For an activity like a burek bakery the deciding factor is the code on your registration certificate — verify it before you file, because the gap between 3% and 9% is substantial.

No. Businesses taxed on gross turnover pay the flat rate on income with no expense deductions at all — that is the flip side of the regime's simplicity. Only businesses reporting on a real-income basis deduct expenses. If your expenses are high relative to income, switching voluntarily to the real-income basis may work out cheaper.

Yes, a voluntary switch to real-income taxation is allowed even below the threshold, but the choice must be notified to TAK (the Kosovo tax authority) on the prescribed form before 1 March of the tax period, under Article 35 of Law no. 06/L-105. The option pays off when margins are thin or the business runs at a loss, because tax on actual profit then comes out lower than a percentage of turnover. Beware: the election binds you to the real-income basis for the following periods — you cannot switch back and forth at will.

As soon as your turnover within the year exceeds €30,000, you move compulsorily to real-income taxation — 10% tax on profit — for that tax period and for at least the three following periods. That means proper books of account and financial statements, not just a turnover record. Remember that the same threshold also triggers the obligation to register for VAT within 15 days.

Because paying on time is not enough — the amount of each instalment must also be sufficient. Every instalment must be at least one quarter of 110% of the previous year's tax liability (or of a realistic estimate for the current year); if an instalment falls short, TAK charges interest under the law on tax procedures. Fryti Audit computes clients' instalments at the start of the year precisely so these surprises do not happen.

The CD return is the annual corporate income tax declaration, filed electronically through EDI, TAK's electronic filing system, by 31 March of the following year. It computes the final liability for the year and reconciles it with the quarterly instalments paid: you either pay the difference or carry a tax credit. It is filed by corporations and by businesses reporting on a real-income basis — Fryti Audit prepares and files it for its clients together with the financial statements.

Deductible are the expenses paid or incurred during the tax period wholly and exclusively for the economic activity, under Article 10 of Law no. 06/L-105 — and only if documented with an invoice or other evidence meeting the legal requirements. This extends to expenses incurred abroad, such as fuel or motorway tolls in international transport, provided the documents satisfy the documentation requirements. The owner's private expenses are never deductible.

You risk having it disallowed. Transactions above €300 are required to go through a bank account, and without bank proof of payment the purchase is not accepted as a deductible expense, even when you hold an invoice or a customs document. So make any larger purchase by bank transfer and keep the proof of payment together with the invoice.

Each is treated differently: fines, penalties and interest paid to public institutions are not deductible at all. Representation costs — lunches, receptions, entertainment — are recognised only up to a statutory cap set as a percentage of gross income. Promotional gifts to customers can be recognised as an expense if documented as such, but you have no right to deduct the VAT on the goods given away.

No. Income from grants, subsidies and donations is exempt from tax under Article 8, paragraph 1.7 of Law no. 06/L-105, provided it is used in line with the rules of the award. Watch the other side of the coin: the expenses you cover with those funds cannot at the same time be deducted as business expenses — there is no double benefit.

It depends on value and useful life: purchases above €1,000 with a useful life beyond one year are treated as capital assets and depreciated on a straight-line basis by the categories of Article 16 of Law no. 06/L-105 — buildings at 5%, vehicles and office equipment at 20%, other machinery at 10% per year. Purchases below €1,000 are expensed in the period. Depreciation starts only when the asset is placed in use, not while it sits in stock — Fryti Audit keeps the asset register and the depreciation schedule for its clients.

Yes, registering the car in the company's name is allowed — even for expensive cars — and it is depreciated in Category 2 at 20% per year. But if the car is also used privately, expenses such as fuel are recognised only for the share attributable to the business, and you need evidence such as a travel log and mileage records; for dual-use cars the VAT deduction is capped at 50%. Without documentation of business use, TAK can throw the expenses out in an audit.

A finance lease is treated for tax purposes as a purchase, so the depreciation belongs to the lessee — that is, you. The condition is that the contract meets at least one of the criteria of Article 6 of Law no. 06/L-105 — for example a lease term over 75% of the asset's life, transfer of ownership at the end, or a bargain purchase option. If the contract is a plain operating lease, you recognise only the lease instalments as an expense, not depreciation.

Improvements to leased property are not an immediate expense: under Article 16 of Law no. 06/L-105 they are recovered through straight-line depreciation over the term of the lease. If the landlord compensates you for the works — for example by offsetting them against the rent — you must invoice for them, and in that case the right to depreciate stays with the landlord as owner. So the way you draft the lease bears directly on the tax.

A tax loss is not forfeited outright: it is carried forward and offset against the profits of future tax periods, within the limited number of years set by Law no. 06/L-105. Carrying back is not allowed — you cannot use the loss to claim a refund of past years' tax. Watch out also for major changes in the ownership of the business, as they can forfeit the right to carry the loss forward.

No — dividends received by resident and non-resident persons are exempt from tax under Article 7 of the law, because the profit has already been taxed once at 10% at company level. The condition is that the dividend be distributed out of net profit or the retained earnings of prior years, per the approved annual report. If you take the dividend in property rather than cash — say, a commercial unit — it is valued at open market value, as if it were a sale.

Yes, as the payer you are obliged to withhold tax at source: 9% on rent under Article 31 of Law no. 06/L-105, and 10% on interest and royalties. The tax withheld is declared and paid by the 15th of the following month — for rent via the monthly WR return through EDI. For payments to non-residents for services performed in Kosovo the law also provides withholding at a specific rate — Fryti Audit prepares these monthly returns for its clients.

For corporations the capital gain — the difference between the sale price and the asset's remaining tax value — is included in the taxable income of the year and taxed at the regular 10% rate. Two details deserve care: if you sell the asset in the second half of the year, depreciation for the year of sale is allowed only for the first six months, and if the owner withdraws the asset for personal use instead of selling it, the transaction is valued at open market value as if it were a sale. So you cannot escape the tax by 'withdrawing' the asset without payment.