Tax Law
What the exam tests
This domain covers the tax procedure, the main taxes (personal income, corporate income, value added), the powers of the tax administration and the taxpayer's remedies.
Procedure and powers
The taxpayer self-assesses, files returns and pays within statutory deadlines. The administration may register, audit, request documents, assess additional tax, charge interest and impose penalties. Assessment is limited by the statutory limitation period. Assessments must be reasoned and notified, since only a notified decision starts the appeal clock.
Substantive taxes
- Corporate income tax is levied on profits at the standard rate and on non-residents' Kosovo-source income; transfer pricing follows the arm's length principle, and a permanent establishment triggers liability.
- Personal income tax is progressive on employment and business income, with withholding by the payer; dividends, rent and similar income are subject to withholding.
- VAT has a standard rate with a reduced rate for specified supplies; a taxable person charges output VAT, deducts input VAT on business purchases supported by valid invoices, and files periodic returns. Exempt supplies carry no input credit, while zero-rated supplies do.
Worked example
A company deducts input VAT on a director's private holiday. The expense is not for business purposes, so the deduction fails; the administration reassesses, requires payment with interest and imposes a penalty. The company must appeal first through the administrative reconsideration route before going to court.
Traps that cost marks
- Filing a court claim without exhausting the mandatory administrative appeal.
- Confusing exemption with zero rating when calculating input VAT.
- Forgetting withholding duties on wages, rent and dividends.
- Ignoring the limitation period running from the taxable period.