Author: Senat Elshani
On 28 January 2024, Law No. 08/L-257 on Tax Procedure Administration entered into force in the Republic of Kosovo.
The new law establishes a comprehensive legal framework governing tax obligations, rules, and procedures in Kosovo.
Repeal of Previous Legislation
With the entry into force of the new law, the following laws have been repealed:
- Law No. 03/L-222 on Tax Administration and Procedures;
- Law No. 04/L-102 on Amending and Supplementing Law No. 03/L-222 on Tax Administration and Procedures;
- Law No. 04/L-223 on Amending and Supplementing Law No. 03/L-222 on Tax Administration and Procedures, as amended and supplemented by Law No. 04/L-102.
Reduction of Procedural Deadlines
The new law aims to improve administrative efficiency by reducing several procedural deadlines:
- The deadline for the Tax Administration of Kosovo (TAK) to review an appeal has been reduced from 60 to 45 days.
- The deadline for reviewing tax refund requests has been reduced from 60 to 30 days.
- The deadline for submitting a request for a tax credit or refund of overpaid tax has been reduced from six to three years, calculated from the date the tax was paid or the right to deduction arose.
- The period after which interest begins to accrue on delayed tax refunds has been shortened from the 61st to the 31st day.
- The period within which taxpayers may amend or correct their tax returns has been reduced from six to three years.
Obligation to Notify TAK of Employment Contracts
Under the new law, every employer is required to notify TAK of the conclusion of an employment contract one day before the employee begins work.
This notification must be submitted in the form prescribed by TAK.
Employers who fail to comply with this obligation are subject to a fine of EUR 500 for each undeclared employee.
Payment of Salaries Through Financial Institutions
The new law introduces a provision requiring all salaries paid to employees to be processed through a licensed financial institution.
Obligation to Make Transactions Exceeding EUR 300 Through Banks or Electronic Payment Methods
Under the new law, transactions exceeding EUR 300 between persons engaged in economic activities must be conducted through bank accounts or other electronic payment methods.
The applicable threshold has therefore been reduced from EUR 500 to EUR 300.
Furthermore, where a transaction exceeds EUR 100 and is settled partly in cash and partly through compensation or offsetting, the monetary portion must be paid through a bank account or another electronic payment method.
Appeals Before the Tax Administration of Kosovo
A person who disagrees with a tax assessment or another official determination issued by TAK may submit a request for reconsideration to the Appeals Unit.
The request must be submitted within 30 days of receiving notification of the assessment or other official determination.
The request must be made in writing and must include the reasons and supporting documentation on which the taxpayer relies.
Appeals Before the Appeals Board
A taxpayer who disagrees with a decision issued by the Appeals Unit may submit an appeal to the Appeals Board within 30 days of receiving notification of that decision.
The parties to the appeal proceedings before the Board are TAK or Kosovo Customs, depending on which authority issued the contested decision, and the taxpayer who submitted the appeal.
Establishment and Competences of the Appeals Board
The new Law on Tax Procedure Administration introduces provisions establishing an Appeals Board within the Ministry to review appeals against decisions issued by the Appeals Units of TAK and Kosovo Customs concerning tax and customs matters.
The Board has jurisdiction to review decisions issued by the relevant appeals units under the applicable tax and customs legislation of the Republic of Kosovo.
The Board conducts hearings at which the parties are heard and evidence is examined, as well as closed sessions.
Appeals must be reviewed within 30 days of receipt.
If the appellant does not receive a decision from the Board within 30 days, they may initiate proceedings before the competent court.
Decisions of the Appeals Board are final within the administrative procedure and may be challenged by filing a lawsuit before the competent court.
Obligation to Pay Tax Liabilities During Appeal Proceedings
Unfortunately, the new law reintroduces a provision stipulating that submitting an appeal to the Appeals Unit or the Appeals Board, or filing a lawsuit before the competent court, does not suspend the obligation to pay tax liabilities.
A similar provision had previously been in force but was subsequently deleted through Article 91 of Law No. 08/L-176.
Consequently, the new law restores the rule that filing an appeal does not suspend the obligation to pay the disputed tax liabilities.
This places taxpayers in a particularly difficult position, as TAK may initiate and enforce tax collection procedures regardless of whether the taxpayer has submitted an appeal.
Burden of Proof
The new law introduces a provision governing the burden of proof, establishing that:
- The appellant bears the burden of proving that the contested decision, assessment, or determination is incorrect.
- The Tax Administration of Kosovo and Kosovo Customs bear the obligation to establish the facts supporting their decisions and opposing the taxpayer’s claims.
Collection of Information and Evidence
The new law introduces several provisions concerning the collection of information and evidence for tax purposes:
- Financial institutions must provide TAK with information concerning domestic and international transactions, in domestic and foreign currencies, involving the accounts of legal entities, business individuals, and non-business individuals, including savings deposits.
- Notaries must provide TAK with information concerning sale and purchase agreements concluded by legal entities, business individuals, and non-business individuals.
- Banking information may be requested from licensed financial institutions individually, collectively, or through other methods permitted under applicable Kosovo legislation.
- TAK may use photographs, screenshots, and video recordings obtained from taxpayers’ publications for tax purposes.
Re-Audits
Where a re-audit is ordered following a decision of the Appeals Unit, Appeals Board, or competent court, the re-audit may not be conducted by the tax officer or their direct supervisor who participated in the initial assessment.
Mandatory Electronic Submission of Purchase and Sales Books
Under Article 43, paragraph 3, of the new law, persons engaged in economic and other activities are required to submit their purchase and sales books electronically to TAK.
The submission deadlines are as follows:
- VAT-registered persons: monthly submission.
- Other persons: submission every three months.
Temporary Closure of Business Premises for Repeated Failure to Issue Fiscal Receipts
The new law provides for the temporary suspension of business activities at points of sale where repeated penalties have been imposed for failure to issue fiscal receipts through fiscal electronic devices, fiscal systems, or software.
The closure periods are:
- Seven calendar days where three penalties have been imposed on different dates within the same calendar year.
- Fifteen calendar days where four penalties have been imposed on different dates within the same calendar year.
Goods Without Supporting Documentation
The new law increases the applicable penalty for possessing goods without purchase documentation from 25% to 30% of their market value.
Accordingly, a person engaged in economic activities who possesses goods without documentation establishing their purchase is subject to a fine equivalent to 30% of the market value of those goods.
Reduction of Penalties
The new law introduces two provisions concerning the reduction of tax penalties:
- Where a taxpayer with outstanding tax liabilities pays the entire outstanding amount, together with the applicable interest, in a single payment, the penalties imposed under the law, except those under Article 104, are reduced to 30%.
- Where a taxpayer with outstanding tax liabilities enters into a written agreement to pay the outstanding tax in two or more instalments, complies with the agreement, and pays all other tax obligations on time during its implementation, the penalties imposed under the law, except those under Article 103, are reduced to 50%.
Tax Liens
Under the new law, TAK is entitled to establish a tax lien over all property belonging to a taxpayer, including property acquired after the lien has been established.
The purpose of the lien is to secure unpaid tax liabilities, including unpaid taxes, penalties, interest, and collection costs.
The duration of a tax lien has been extended from six to ten years from the date of the tax assessment and establishment of the tax liability.
The law also introduces a provision allowing TAK, after the tenth year following the establishment of the tax lien, to reassess the encumbered property.
Property that is assessed as fully or partially covering the outstanding liability and that has been seized through compulsory collection procedures may become state property.
Transitional Provisions
The new law provides that appeals falling within the jurisdiction of the Appeals Board shall be submitted to the Board six months after the law enters into force.
The Fiscal Division of the competent court continues to examine all appeals received before the entry into force of the law and may continue receiving appeals for a further six months thereafter.
All proceedings initiated before the entry into force of the new law shall continue to be conducted in accordance with the legislation applicable at the time those proceedings were initiated.
