Is it fair that the Single Administrative Document (SAD), reassessed by Kosovo Customs and accepted for VAT and customs duties, is not accepted by the Tax Administration of Kosovo (TAK) for Corporate Income Tax (CIT) purposes?
In practice, Kosovo Customs declares the supplier’s invoice invalid and reassesses the goods based on different values, while TAK accepts only the invoice for CIT purposes.
This approach, arising from a TAK Explanatory Decision, creates unequal treatment and an unfair burden on businesses. This practice must be corrected to ensure fairness and consistency in the treatment of tax documents.
How Did This Problem Begin?
The problem originates from TAK Explanatory Decision No. 3/2016, which provides that only the supplier’s invoice, rather than the value reassessed by Kosovo Customs and reflected in the SAD, serves as the basis for calculating CIT.
This creates a situation in which taxpayers are required to comply with two different standards:
- Kosovo Customs declares the invoice invalid and reassesses the goods, using the value reflected in the SAD for VAT and customs duties.
- TAK accepts only the invoice as the basis for CIT purposes, disregarding the value reflected in the SAD.
This situation not only creates unequal treatment for businesses but also demonstrates a lack of a harmonized approach between the institutions.
Legal Provisions Supporting the Use of the SAD
The relevant laws and administrative instructions clearly indicate that the SAD should be the primary valid document for all tax purposes:
1. Article 19, paragraph 1, of Administrative Instruction No. 15/2010:
“The key document for TAK purposes is the SAD, which constitutes acceptable evidence that the goods have crossed the border and have undergone customs procedures.”
2. Article 25, paragraph 1.1, of Law No. 05/L-037 on Value Added Tax:
“The taxable amount shall be the value for customs purposes, determined in accordance with the customs legislation of Kosovo in force.”
These provisions clearly demonstrate that the SAD is a valid document and should be used as the basis for all taxes, including CIT.
TAK Explanatory Decision No. 3/2016, which provides for the exclusive use of the invoice for CIT purposes, contradicts these provisions.
Why Is This Practice Problematic?
This approach creates numerous consequences for taxpayers and the tax system:
1. Double Financial Burden on Businesses
Taxpayers pay VAT and customs duties based on the value reassessed by Kosovo Customs and reflected in the SAD. However, for CIT purposes, TAK accepts only the invoice as the basis for calculating deductible expenses.
This unequal treatment creates a significant financial burden on businesses, as the expenses reflected in the SAD are not recognized for CIT purposes.
2. Lack of Legal Consistency
If Kosovo Customs declares an invoice invalid and uses the SAD as the basis for calculating VAT and customs duties, it is unfair for TAK to disregard the SAD and rely on the invoice for CIT purposes.
This inconsistent treatment creates legal uncertainty and confusion for taxpayers.
3. Loss of Confidence in the Tax System
TAK’s practice creates a sense of injustice among businesses, which feel penalized by the different standards applied by tax authorities.
A Concrete Example That Speaks for Itself
An example addressed in TAK Decision No. 468/22 illustrates this problem in practice:
- Supplier’s invoice value: EUR 13,000.
- Customs reassessed value (SAD): EUR 20,304.
In this case, Kosovo Customs declared the invoice invalid and calculated VAT and customs duties based on the reassessed value of EUR 20,304, as reflected in the SAD.
However, TAK accepted only the invoice value of EUR 13,000 as a deductible expense for CIT purposes, rejecting the difference of EUR 7,304 reflected in the SAD.
This treatment creates an additional burden on the business and highlights the need for harmonization between the institutions.
The decision has been published and is accessible on TAK’s official website.
What Should TAK Do?
TAK should correct Explanatory Decision No. 3/2016 and harmonize its treatment of tax documents with Kosovo Customs.
If Kosovo Customs declares an invoice invalid and uses the SAD as the basis for VAT and customs duties, TAK should follow the same approach and accept the SAD for CIT calculation purposes.
Relying on an invoice that has been declared invalid by Kosovo Customs creates unequal treatment for businesses.
Harmonizing these approaches is essential to ensuring tax fairness and eliminating uncertainty for taxpayers.
Conclusion: SAD or Invoice?
TAK’s current practices create unnecessary inequalities and negatively affect the business environment in Kosovo.
Taxpayers have the right to expect a fair and consistent tax system in which all institutions follow clear and harmonized standards.
SAD or invoice?
For taxpayers, the answer is clear: there should be one consistent standard, and that standard should be tax fairness.
TAK has a responsibility to correct this practice and ensure that businesses are no longer penalized.
Author: Florin Lata
