Frequently asked questions on personal income tax (PIT)

Personal income tax (PIT) is the tax applied to the income of natural persons: salaries, rent, self-employment, interest, capital gains and more, under Law 05/L-028, as amended by Law 08/L-142. Kosovo residents are taxed on income earned both inside and outside the country, while non-residents are taxed only on Kosovo-source income. So it affects you both as an employee and as the owner of an individual business — only companies (LLCs) are taxed under the separate corporate law.

No, the tax is progressive and is applied in brackets to portions of the salary, after deducting the 5% pension contribution. Under the amendments introduced by Law 08/L-142, the portion up to €250 per month is taxed at 0%, the portion from €250 to €450 at 8% and the portion above €450 at 10%. Only the primary employer applies the progressive brackets; every other employer withholds tax at the full 10% rate.

Article 8 of Law 05/L-028 exempts from tax, among other things: grants, subsidies and donations used in line with the conditions of the award, gifts between spouses and between parents and children, income from expropriations in the public interest and compensation awarded by a final court decision. Also exempt are the salaries of persons with special needs, with proof from the competent authority, as well as the salaries of external staff of international organizations with public benefit status. Be careful: if grant funds are not used in accordance with the agreement, they become taxable income.

No. Dividends paid to or received by resident and non-resident persons are exempt from tax in Kosovo, so no tax is withheld at source and you have no personal liability for them. The condition is that the dividend is paid out of net profit or the retained earnings of previous years, according to the approved annual report — that is, after the LLC has paid the 10% corporate income tax.

It depends on the tenant. If the premises are rented by a business or a legal person, it withholds 9% tax at source at the moment of payment, declares it on the WR form and pays it by the 15th of the following month — as the owner you have nothing to declare for that rent. If the tenant is a natural person not in business, you declare and pay the tax yourself as the landlord, and you are allowed a deduction of 10% of the rent as an expense.

Individual businesses with gross annual turnover of up to €50,000 are taxed on turnover: 3% for trade, transport and agriculture, 9% for services, crafts and the professions, according to the registered activity code. Filing is done every quarter on the IS form through the EDI system, combined with the owner's contributions. Even when a quarter ends with no income, the return must be filed — Fryti Audit prepares and files the quarterly returns for its clients.

Once gross annual income exceeds €50,000, an individual business is required to keep books and be taxed on real profit; below that threshold you may also opt for the real basis voluntarily. Do not confuse this figure with the VAT registration threshold, which is €30,000, nor with the simplified-regime threshold for companies, which is also €30,000. On the real basis you are taxed at the progressive rates on profit, but documented expenses, depreciation of assets and paid contributions are recognized — which often works out more favourable than 9% on turnover for businesses with low margins. We assess which basis costs you less with concrete calculations before the decision.

The self-employed pay a 10% pension contribution for themselves — the employer's and the employee's share combined — on a quarterly basis. The quarterly minimum is 30% of the minimum wage, while the ceiling on the mandatory contribution is also set by law. Final adjustments, if actual income turns out different from the estimate, are made with corrective returns at the end of the year.

Yes. Compensation for the professional services of natural persons not in business is treated as a salary: as the payer you withhold the tax at source at the moment of payment and declare it on the monthly WM payroll statement. If you are the person's primary employer, the tax is calculated at the progressive rates; if the person has another primary employer, 10% is withheld as secondary. The form of the contract does not change the obligation — even a contract paid purely as a percentage of sales is taxed the same way.

Yes, if the internship is paid: an intern's pay is not considered exempt income, so the employer withholds tax at source and pays pension contributions as for any employee. Only when the internship is entirely unpaid do no obligations arise, but this must be evidenced with a written agreement. This applies even when the compensation is covered by an NGO or a training programme.

In one tax period a person can have only one primary employer — the employee chooses it themselves. The primary employer calculates the tax at the progressive rates, while every other employer withholds 10% tax on the taxable compensation, without brackets. Since the overall tax may not come out exactly right this way, a person with two salaries may have to settle the difference with the annual PD return.

Per diems within the official rates for accommodation, meals and minor expenses are not taxed, under Decision No. 30/2018. Any amount paid beyond the official rates is considered taxable income and must be included in the gross salary, where it is subject to withholding tax. That is why it is important to document trips with travel orders and travel reports.

If your only income is from an employer who withholds your tax every month, you normally have no annual filing obligation. The PD is filed from 1 January to 31 March by those with income on which tax has not been fully withheld at source: businesses taxed on the real basis, persons with income from abroad, capital gains, self-declared rent or more than one employer. Fryti Audit prepares the annual PD returns for clients and files them through the EDI system.

Yes. The borrower paying interest is required to withhold tax at source at the 10% rate at the moment of payment and declare it on the WR form. Be careful also with interest-free loans or loans below market rates: if the interest rate has not been set at open market value, the loan may be treated as taxable income. Interest on bank deposits is withheld by the bank itself at the same rate.

Transfers from a spouse and those between parents and children are exempt from tax regardless of the amount. Gifts from other persons count as other income only when they exceed €5,000 within the tax period. So typical family remittances carry no tax liability, but it is worth keeping proof of the transfers for any eventual verification.

Yes. For payments to natural persons not in business — farmers, growers, collectors of recyclable materials, forest fruits and medicinal plants — the buyer withholds tax at source at the moment of payment: 3% when the buyer is an individual business and 1% when the buyer is a legal person, according to the guidelines of TAK (the Kosovo tax authority). The withheld tax is declared and paid by the 15th of the following month, while by 31 March the annual report is filed and certificates are issued to the persons from whom the purchases were made. Fryti Audit handles these monthly filings for trading and processing clients.

The contracted net amount must be converted to gross, because the 9% tax is withheld from the gross rent: for a net rent of €1,000, the gross is €1,098.90 and the tax payable €98.90. The same 9% withholding also applies to the deposit under the rental contract and to the rental of vehicles and equipment, not just premises. On the WR form for vehicles, the floor-area field is filled in with a symbolic value (1 m²) because the system does not allow it to be left blank.

The sale is treated as a capital gain: the difference between the sale price and the cost is included in taxable income and declared on the annual PD return from 1 January to 31 March of the following year. If you have no documentation of the construction cost, 80% of the sale value is recognized as cost, so only 20% of it is taxed. For property received as a family gift, the market value in the notarized gift contract is recognized as cost — Fryti Audit performs the capital gain calculation and declaration for clients before any sale.

As a Kosovo resident you are taxed on income from inside and outside the country; since the foreign employer does not withhold tax at source here, you declare and pay the liability yourself. This is done either with the annual PD return by 31 March, or with monthly filing through the EDI system and payment from the 1st to the 15th of the following month. If you have paid tax abroad on the same income, the foreign tax credit applies and treaties for the elimination of double taxation take precedence — Fryti Audit structures the filing for remote employees of foreign companies.

For salary tax, yes: the employer withholds the tax at source in the same way, and the person becomes a tax resident if they stay in Kosovo for more than 183 days in any 12-month period. The difference is in pension contributions: for foreign employees on a temporary stay they are not permitted under Law 04/L-101, so the no-pension-contributions option is selected on the payroll statement in EDI. For nationals of countries with a treaty for the elimination of double taxation, the treaty takes precedence over domestic law.