Legal Framework

How do I look after my money and do I have to pay tax? Banking Services

There are now several banks operating in Kosovo. The services vary and so far no banks provide ATM services for their customers. It should be noted that the use of credit cards in Kosovo is rare. Visitors are advised to bring denominations of Euro with them.

The first bank to gain a BPK (Banking and Payments Authority of Kosovo) license was the Micro-Enterprise Bank (MEB). MEB is a joint venture of the European Bank for Reconstruction and Development (EBRD), Commerzbank AG, International Finance Corporation (IFC), Nederlandse Financieringsmaatschappij voor Ontwikkelingslanden (FMO), International Micro Investitionen (IMI), and Kreditanstalt fur Wiederaufbau (KFW). MEB has 7 branches across Kosovo. As of October 2001, MEB had 350 million DEM in deposits and 17.5 million DEM in loans. The bank also offers the Western Union transfer service and to cash travellers cheques and Eurocheques. Other cheques are taken for collection. The bank is currently installing a network of ATMs that will be operational at the beginning of 2002.

A number of local banks have also opened up with official licences from the BPK. These include the New Bank of Kosovo, Bank for Private Business and the Economic Bank, which offer similar banking services.

Taxation

VAT was introduced in Kosovo on July 1, 2001 replacing the sales tax. It currently only applies to imports and domestic transactions by businesses who have an annual turnover of more than DM 200,000. The rate of VAT has been established at 15% of the value of goods and services. There is 0% VAT on exports (including on goods going to FRY) and international transport of goods and passengers.

A 20% tax on business profits will begin in January 2002 for businesses with annual turnover of DM 200,000 or more. Small businesses may have the option of paying either the profits tax or the presumptive tax of 3% turnover. The profits tax is a tax on bottom line profit rather than turnover. Deductions on profits tax include:- business expenses; indirect taxes paid; depreciation; allowance for new investments; purchase of raw materials, intermediate goods, electricity, office supplies; repair, payment of staff salaries.

A progressive rate wage tax is likely to be instituted in January 2002. It will have a maximum rate of 10% in 2002 and 20% in 2003 onwards. It will serve as a framework to collect social security contributions. Internationals working in businesses, local or multinational will pay the wage tax.

Profits are freely repatriated.