Country’s Official Name Republic of Kosovo
Land Area 10,908 km²
Population 1,8 million
Capital Pristina (population 200,000)
On the 17th of February 2008 Kosovo declared its independence, becoming the latest state to emerge following the disintegration of Yugoslavia.
The declaration of independence established Kosovo as a democratic, secular and multi-ethnic Republic promoting the rights of all communities.
In April 2008 the Assembly of the Republic of Kosovo adopted the country’s constitution, which entered into force in June 2008.
Kosovo’s legal system has been continuously re-built since 1999.
Legislation in power includes:
- Legislation and Regulations issued by Assembly of the Republic of Kosovo.
- The regulations promulgated by the Special Representative of the Secretary-General during the United Nations Interims Mission in Kosovo;
- The law in force in Kosovo on the 22nd of March, 1989.
Financial Sector
Two tier banking system consisting of the Central Bank of the Republic of Kosovo, 10 private Banks, 15 Insurance companies, 2 pension systems (public and private), 18 micro finance institutions.
Enterprises
Over 40,000 SMEs were active in 2015, app. 50 % of these were engaged in trade and industry. The number of SOEs in PAK’s portfolio is 589, out of which 406 SOEs were partially privatised, resulting in the sale of 763 new companies and 451 assets sold through liquidation sales.
Labor Market
The Kosovo advantages is due to operation law cost of labor market. Net monthly salary is between 300 and 400 euros.
Geographical Location
Kosovo is located in the heart of Balkans, and it borders with Albania, Macedonia, Montenegro, and Serbia
Health Care
There are six regional hospitals situated in the Kosovo’s major towns. Furthermore, these are supported by health centers in each of the country’s 38 municipalities.
Apart from the Public Health System, there are numerous private hospitals. Well-equipped pharmacies may be found in every town throughout Kosovo, some of which are open 24 hours.
Time Zone Central European Time (GMT+1).
Economic Profile
The business environment in the Republic of Kosovo is becoming one of the most competitive in the region. An excellent tax system, abundance of natural resources, quick and easy business registration methods, a transparent law on foreign investments, are just a few advantages making this country an attractive and friendly environment for foreign investors.
The Republic of Kosovo is distinguished as the country with the greatest opportunities for investment in the Balkans, hence a strong reason appealing at international investors as a primary place for their investments.
GDP: 2015(%): 4.1
GDP per capita: € 3,277
Free Trade:
- Stabilization and Association Agreement – SAA with European Union
- Central European Free Trade Agreement –CEFTA
- Generalized System of Preferences (GSP) Program with US, Japan and Norway
- Free Trade Agreement with Turkey (waiting for ratification from the side of Kosovo)
A Strategic place
Located in the heart of the Balkans, Kosovo offers an easy access in European Union (EU), through air, road, railway transport and three see ports, such as:
– Thessaloniki, Greece: 329.0 km
– Durres, Albania: 262 km
– Trivet, Montenegro: 299 km
Business Environment in Kosovo
The business environment in Kosovo is becoming one of the most competitive in the region. Advantages such as an excellent tax system, abundant natural resources, quick and easy business registration, and transparent laws on foreign investment, make Kosovo an attractive and friendly environment for foreign investors. For companies looking to invest in a low cost location with easy access to the EU, Central European and Balkan markets, Kosovo represents a highly attractive option.
For the first time in Kosovo, an investor can register a business in 2 days, free of charge with zero chartered capital (for LLCs).
In the World Bank Doing Business indicator report, Kosovo is ranked in the 60th position in the world, by confirming a huge progress made by Kosovo in applying reforms and improvement country’s doing business environment.
Liberal Trade Regime
- Stabilization and Association Agreement (SAA) with European Union (EU) –is signed in October 2015 and is in power from 1st April 2016.
- Free Trade Agreement with EU (28 countries).
- A market above 500 million – third largest in the world with population, after China and India
CEFTA (2006) - The Central European Free Trade Agreement (CEFTA) that includes 7 non-EU member states: Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Moldova, Montenegro and Serbia.
Population: 21 million
Free Trade Agreement with Turkey (awaiting ratification from Kosovo)
Economic Stability
The real development of the country, measured by the gross domestic product (GDP), has been favorable the past years, showing a positive and continuously increasing trends, despite the effects of the international crisis.
The private sector consumption and investments are the most important factors behind economic growth. These investments are mainly being driven by the quickly expanding financial sector. Moreover. Kosovo’s Government runs a stable and forward-looking policy. The tax revenue base has been widened, thus enabling Government expenditures to increase and, in turn, support economic growth.
Kosovo runs a very stable monetary policy. Kosovo is one of the few countries outside the EU-zone that has introduced the Euro as its official currency. By eliminating the exchange rate risk, transaction costs have been reduced, facilitating the promotion of trade and investment. Due to the absence of monetary instruments resulting from the use of the Euro, Kosovo dose not run any monetary policy risk either. Prixes are expected to remain stable in the future.
Low Operating Costs
The main advantages of the Kosovo labor force is its low operating cost. With the average monthly salary between 300 and 400 €.
The new fiscal package (from September 2015) is aiming to stimulate formal economy
Standard VAT rate 8% (for services and food basket) and 18 % for other products
Dividend tax 0%.
Import liberalization:
- Production lines and equipment’s for productions
- Row material (not produced in Kosovo)
- Information Technology (IT) equipment
- E-Procurement System
- Tax Corporative Income: 10%
- Personal Income Tax: 0 – 10 % (progressive)
- Required Pension contribution: 5%
Specific taxation cod for impairment
According to article 15 of the Law on Tax Corporative Income (no. 03/L-165), the allowed as a depreciation deduction for the tax period shall be defined by applying the following percentages to the capital accounts through discount balancing method:
Category 1: Buildings; five percent (5%)
Category 2: Vehicles and office equipment; twenty percent (20%)
Category 3: Heavy transportation machinery and vehicles; fifteen percent (15%)
Investment Environment
Legislation and Agreements
The Legal framework is rebuild from 1999 in accordance with EU legislation.
The Law on Foreign Investment, December 2013 (Law no. 04/2013) ensures equal treatment of local and foreign investors
- Non-discriminatory treatment
- Constant protection and security
- Compensation in case of nationalization and expropriation, including payment of interest
- Compensation in case of violation of applicable law and international law attributable to Kosovo
- Freely transferable and otherwise unrestricted use of income
- Protection against retroactive application of laws
- Legal or non-legal actions
Bilateral agreements are concluded with a numerous countries in regard to investment protection, as with: USA (OPIC), Austria, Turkey, Albania, Switzerland, Belgium, Luxemburg, United Arab Emirates and Macedonia.
Agreements provides:
- Investment protection and security
- Free Funds Transfer
- Free Profit and Dividends Repatriation
- Protection against retroactive application of laws
- Protection from expropriation
Investment Opportunities
Information Technology and Communication – ITC
ITC offers high quality services and the latest technologies to their consumers both local as well as to foreign companies who want to outsource their software development and/or call and support centers.
Kosovo has the youngest population in Europe. It is both skilled and multilingual, with English being only just short of an official language to high international presence.
Internet penetration based on users is 76.6%, and based on households is 84.8%. This is the highest rate in the region and is comparable to the most development countries in Europe.
Food Processing and Packaging
Out of total surface area of 1.1 million hectares approximately 588,000 hectares is agricultural land with fertility, nutrient –rich soils.
- Agriculture contributes about 13% of overall GDP
- Agricultural products counts 18% of exports
- A strong tradition in agribusiness
- Dairy products
- Fruits and Vegetables
- Meat products
- Winemaking
- Other Beverages
- Packaging
The Government of Kosovo, together with its partners, provides grants and subsidies for the agriculture sector.
Mining and metal processing
Kosovo has an enviable endowment of natural resources. At 14.7 milliard ton, Kosovo possesses the world’s fifth proven reserves of lignite.
It also has reserves of other minerals such as: aluminum, gold, lead, zinc, copper, bauxite, magnesium, asbestos, chromite, limestone, marble and quartz.
As estimated by the World Bank While, the majority of Kosovo’s natural resources remain unused, its huge reserves are a great potential for future growth.
Trepca Mines: about 23,000 employees, at a time it was one of the largest companies in Yugoslavia. Kosovo’s government is working on a new strategy for Trepca.
Energy
Kosovo has a significant potential of Renewable Energy Sources (RES), including: hydro energy, wind energy, solar energy, biomass, thermal energy, etc.
Textile and Leather processing
The Government is working to bring in life the textile sector.
Imports of goods for past year is 100 million euro; export is 25 million euro
Kosovo offers three major benefits for investors:
A cheap, well skilled and experienced work force;
A solid base of technology that can be acquired through the ongoing process
Numerous subcontracting and outsourcing possibilities (with know-how, labor force and other comparative advantages than the country offers, including the friendly business and investment environment);
The textile industry in Kosovo has therefore the potential to become highly comparative internationally.
Wood processing
Wood work is considered one of the most strategic sectors with great potential for growth.
The total standing volume on public forest is estimated at about 53 million m³. Statistic data shows that 75% of wood processing companies produces final products; 18% of produces semi-final products; and 10% produce row material. Most of wood processing companies has shown positive results during these past years (turnover growth, value added production, increase on employment number, growth in export).
Main exporting destinations: Germany, Austria, Switzerland, (mainly export of doors, windows, kitchens and furniture), also other countries of the region.
Tourism
The natural wealth of Kosovo represents high quality tourism resources. The mountains south of Kosovo has great potential for winter tourism. One of the most interesting is the ski resort Brezovica in the Sharr Mountains. The resort, situated between 1.700 and 2.500 m above sea level. It offers excellent weather and snow conditions, as well as long ski seasons from November to May.
Brezovica can be reached in an hour by car from both airports, from international airports Pristina (60 km) and from Skopje (70 km), and its located in the National Park of Sharr in the Republic of Kosovo, the chain of Brezovica mountains lies in 39,000 hectares of ground alpine high mountain and forest.
Also, in the Sharr Mountains in the very south of the country, bordering Macedonia and Albania, Kosovo is offering about 22.000 hectares of largely land in the mountains area, belonging to the SOE “Sharrprodhimi” for privatization.
The region offers excellent tourism opportunities, such as skiing, eco-tourism, paragliding, mountain biking, rock climbing, trekking, kayaking, house riding, etc.
The land of Dragash municipality is stunningly beautiful. It is clearly a remarkable property for eco-tourism. Other investment opportunities are Sky Center in Rugova Mountain, while Kosovo is generally rich with mountains, artificial lakes and rivers and therefore also offers possibilities for hunting and fishing.
The widespread production of rare artisan crafts in Kosovo, such as the Filigree (silver), represents an attraction for foreign tourism.
In addition, Kosovo has the potential to develop cultural tourism with numerous religious and other sites with extraordinary cultural and historical value.
The numerous thermal springs of Kosovo are well known in the region for their healing effects. Foreign investors in the field will find high demand in the regional and domestic market.
Taxes
The tax policy in Kosovo is oriented towards simple regulations that ensure broad tax basis and prevent tax evasion.
Taxes differ based on type of business and annual turnover.
The tax administration applies three main tax regimens:
Value Added Tax (VAT)
Corporate Income Tax (CIT)
Personal Income Tax (PIT)
Value Added Tax (VAT)
Value Added Tax in Kosovo is the lowest in the region. Value Added Tax (Law No. 05 / L-37) applies to all importers and businesses with annual turnover greater than € 30,000. VAT rate is 8% for basic products (services and food baskets) and 18% for other products. VAT will be reimbursed fully to exporters for exported goods.
Import liberalization:
- Production lines and equipment’s for productions
- Row material (not produced in Kosovo)
- Information Technology (IT) equipment
Dividend tax: 0%
Corporate Income Tax
This tax is paid every three months depending on the annual turnover. The corporate tax rate for annual turnover over 50,000€ is 10%.
Personal Income Tax
Personal Income Tax (Law no. 05/L-028) is applied to natural persons who receive personal income from Kosovo sources and foreign incomes of Kosovar citizens. Personal Income tax rate 0 -10 % (Progressive tax)
This type of tax is applied on incomes from wages, business, rent, interest, real estate, etc. Tax rates for personal income from wages are normally progressive based on the level of earned salary and lower rates in the region and countries of EU.
Specific taxation cod for impairment
According to article 15 of the Law on Tax Corporative Income (no. 05/L-029), the allowed as a depreciation deduction for the tax period shall be defined by applying the following percentages to the capital accounts through discount balancing method:
Category 1: Buildings; five percent (5%)
Category 2: Vehicles and office equipment; twenty percent (20%)
Category 3: Heavy transportation machinery and vehicles; fifteen percent (15%)
Customs
The Custom Service controls the imports and exports by enabling protection of the economy and trademark, as well as generates accurate statistics on foreign trade.
Border taxes and customs duties are regulated by the Customs and Excise Code of Kosovo, Law No. 03 / L-109. Also specific laws issued by the customs taxes (partial or final) are applied by customs.
Kosovo’s customs tax on the imports is 10% and 0% for export.
According to the Stabilization and Stability Agreement (SAA) with the European Union (EU), for goods with EU origin, tax of 9% are variable depending on other levels of the stages, depending on the year of agreement and the tariff number.
0% for goods imported from CEFTA state countries
8 – 18% added value tax
Variable excise taxes on products such as tobacco, oil, alcohol, etc.
Telecommunication
The telecom sector in Kosovo is provided by the Post and Telecommunication of Kosovo (PTK) and Ipko. PTK is Social Owned Enterprise and provides various telecommunications services as services of fixed phone, as well as mobile phones services internet.
Fixed telephony- currently is consisting of 57,332 telephony lines. Furthermore, there are 328 payphones pints located in public places and post offices. There are 5 authorized operators: Telekom Kosovo, IPKO, Kujtesa.Net, Fiber Link and cones. Telecom of Kosovo covers 80.5% of the market.
Mobile network – GSM services in Kosovo currently are provided by Telecom of Kosovo (TiK) and IPKO-
a company owned by Slovenia Telecom and two licensed operators, Z-mobile virtual and D3mobile. In addition TK and IPKO offer UMTS and LTE services. ICT has over 1,018,324 users, while IPKO has reached 592.876 users. Both cover about 90% of the market.
Postal services – Besides PTK, postal services are provided by many foreign companies that operate in Kosovo, such as UPS, TNT, FEDEX, and DHL.
Internet –Kosovo has over 54 authorized providers of internet (ISP) of which four of them have a direct connection to the international network. Penetration of Internet services for houses during Q1 2016 was about 74%.
Source: Regulatory Authority of Electronic and Postal Communications of Kosovo.