Questions and Answers on Tax Debts

TAK, in order to accomplish its responsibilities provided for by law, has focused all its efforts on the voluntary compliance of tax liabilities by taxpayers. A taxpayer who does not settle its tax liability shall consequently create a tax debt when:

• declares and does not pay;
• declares and pays late;
• TAK makes an additional determination for non-declaration, under-declaration, penalty or interest.

For the created tax debt, which has become payable, is determined a case for compulsory collection, which, within the given authorizations, will collect the tax debt and will request the missing declarations. The deadline for tax debt collection is six (6) years from the date of tax assessment. This period may be extended if:

• a complaint has been submitted to the Complaints Division of TAK;
• a complaint has been filed in a court of competent jurisdiction;
• a written settlement has been made with TAK to extend the period, but not more than twenty-four (24) months;
• the person has stayed abroad for more than three (3) months.

The above-mentioned period, for Socially-Owned Enterprises, may be extended until their liquidation, while for Public Enterprises the aforementioned period does not apply, as they do not have a fixed time limit.

If the debt has not been paid in full or an agreement for payment in instalments has not been reached, TAK shall notify the taxpayer through the final Notice for payment (payment deadline of ten (10) days) that the compulsory collection procedures shall commence. In case the debt is not paid within the stipulated deadline, then basic collection actions are taken, such as:

• Levy on banks;
• Levy on treasury;
• Levy on accounts receivable;
• Blockage at the customs;
• Non-permission to cross the border, etc.

Generally, payments shall initially be applied to the tax period that has the earliest assessment date, regardless of the tax period involved. When payments have started to be applied in a particular tax period, the entire amount of that tax period, including penalty and interest, shall be paid before the beginning of the application of payments in a subsequent tax period.

The amount of any tax paid shall be distributed in the following order:

• Collection expenses;
• Amount of each tax liability;
• Sanctions and punitive payments;
• Interest

In cases where the taxpayer has financial difficulties and proves them to TAK, TAK may provide him/her the opportunity to submit a request to enter into an agreement to pay liabilities in instalments, in accordance with the terms and conditions of the agreement.

If a person who is obliged to pay any tax to Tax Administration, according to the applicable legislation in Kosovo, ignores or refuses to pay that tax within ten (10) days after the submission of the notice-assessment, as foreseen in the Law on Tax Administration and Procedures, a tax lien will arise on movable and immovable property.

If a person who is liable to pay any tax neglects or refuses to pay within ten (10) days after delivery of an assessment notice, it shall be lawful for the Director General or officer authorized in writing by the Director General, to collect such amount (and such further amount as shall be sufficient to cover the expenses of the levy) by seizure on property belonging to such person (whether in the physical possession of the taxpayer or a third person).

TAK will take care of the implementation of forced debt collection procedures, such as: seizure of the taxpayer’s property and organization of sale of that seized property through the procedures defined by the applicable tax legislation.

Only that property necessary and sufficient to meet the taxpayer’s current tax obligations may be subject to enforced collection action. The following forms of a taxpayer’s property shall be exempt from levies and seizures: child support and social assistance payments; essential clothing; basic food; basic furniture; basic personal effects, excluding luxury items; and any other property specified in an Administrative Instruction.

When someone has been responsible or has helped in the non-fulfilment of tax obligations, TAK has authorisations to make a tax assessment against those persons and follow all the procedures that are required as against any other taxpayer who is liable to TAK. They can be:

• The responsible person in a business, who has had the responsibility to fulfil tax obligations;
• Transferee, the person who has enabled the transfer of the taxpayer’s assets;
• Beneficial owner, who enjoys the benefits of domain and control of titled assets owned by someone else;
• Nominee, the person who is nominated on behalf of someone else.

• TAK will initiate criminal charges, and will initiate Liquidation procedures with the Competent Court regarding non-payment of debt;
• TAK will handle the cases that meet legal conditions for passivation or even cancellation of debts.
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With regards to tax collection, the Tax Administration of Kosovo has numerous authorizations which are foreseen by the tax laws, and they are as follows:

• Requesting information about your property both from you and from other parties;
• Registration of the lien (on all movable and immovable property), ten (10) days after the creation of the tax debt with effect of six (6) years;
• Blocking of bank accounts and seizure of funds in them;
• Blocking and seizure of funds received from your clients or employers;
• Blocking of import or export goods;
• Non-permission to leave Kosovo;
• Seizure of movable and immovable property (with the exception of basic household items);
• Sale of seized property;
• Criminal prosecution.

TAK has the authority to transfer a tax assessment to another entity after the transfer of assets (movable or immovable) in the following circumstances:

• the taxpayer has transferred the funds to another entity either in anticipation of the tax debt creation or after the tax debt creation;
• the transfer of funds was less than the open market value of the assets;
• the transfer of assets has left the taxpayer unable to pay the tax debt; and
• TAK has notified the taxpayer and the other entity of the determination that the transfer of assets will result in an assessment against the third party and providing the third party the right to appeal.

If TAK deems that the tax payment that will become compulsory for payment is at risk, may issue an order for tax at risk when:

• The taxpayer is preparing to leave Kosovo;
• The taxpayer is ready to cease the business;
• The taxpayer is ready to transfer the property; or
• Other similar documented reasons.

When a tax at risk order has been issued, notice is given to any person who owes money or property to the taxpayer to set aside that taxpayer’s money or property until further notice.

Lien is an official public document under the tax legislation applicable in Kosovo. Lien shall imply the right of the Tax Administration of Kosovo to take and hold property of the taxpayer as security for payment of any tax and the right to sell such property and apply the proceeds of the sale to that tax. So, this document will protect the right of the Tax Administration for the payment of debts with special priority.

The levy is a legal document under the tax legislation applicable in Kosovo. The procedures for the asset acquisition of tax liabilities begin only after all measures have been taken against the taxpayer, who has not paid the debts, and the notification procedures mentioned in the Law on Tax Administration have been respected.

If you were on an instalment agreement and did not respect it, interest will be retroactively re-established to the date the agreement was signed. If you fail on an instalment agreement and wish to re-establish another instalment agreement for the same tax liability, the subsequent instalment agreement will not include the waiver of interest. Interest will continue to accrue on each subsequent instalment agreement for the duration of the agreement.

If any amount of any tax administered by TAK under legislation applicable in Kosovo is not paid by the last date prescribed for payment, the taxpayer shall be liable for interest according to percentage (%) determined by the Ministry of Finance, Labour and Transfers.

When a person is required to submit a tax declaration under applicable legislation in the Republic of Kosovo, and fails to submit it by the required date, such person shall be subject to an administrative penalty of five percent (5%) of the unpaid tax for each month or part of the month for which it is delayed, with a maximum administrative penalty for payment of twenty-five percent (25%) of the tax liability.

When a person is required to pay a tax under applicable legislation in the Republic of Kosovo, and fails to pay all or part of such tax by the required date, such person shall be subject to an administrative penalty of one percent (1%) of the tax liability for each month or part of the month for which that payment is delayed, up to a maximum of twelve (12) months.

So, the penalties for late declaration and payment are as follows:

• Interest – according to the percentage (%) determined by the Ministry of Finance, labour and Transfers;
• Penalty for failure to submit the tax declaration of five percent (5%) or maximum of twenty-five percent (25%);
• Penalty for non-payment of tax of one percent (1%) or maximum of twelve percent (12%).

Taxpayers are entitled to request de-registration only after they have paid all tax liabilities and submitted the closing balance.

As long as the tax liability cannot be paid in full, you can ask TAK to enable you to pay the tax by an instalment agreement, where the interest will not accrue from the month following the month in which the agreement was established until it has been fully observed.

TAK must ensure the collection of tax in compliance with all relevant means of collection that may be applied to the taxpayer according to the tax legislation in force.

In case the taxpayer with an outstanding tax liability enters into a written agreement to pay the outstanding tax in two or more instalments, meets the terms of the written agreement and timely fulfils all other tax liabilities during the term of that agreement, the financial sanctions that would otherwise be applied in relation to late declaration and payment, shall be deducted at the rate of two percent (2%) of the tax liability and the interest determined will remain payable, unless other provisions provided by law apply.

It is the right of every taxpayer to be informed about his/her tax status. You may be informed about the tax status every day through the Electronic EDI System or by visiting the relevant Regional office of the Taxpayers Service.

You can download the debt payment slip through the Electronic EDI System or the debt payment reminder letter you can only get it at the relevant TAK regional office.

Through the electronic EDI system, you can receive the Payment Slip for the unpaid debt.

Your bank account was blocked by TAK, as you have not respected the agreement on debt payment in instalments. If you have funds in your account, then the bank is obliged to transfer those funds to TAK’s account to the extent of the debt. After receiving the confirmation for the transfer from the bank, TAK will unblock your account.

Uncollectible debt is declared when the debt is older than six (6) years, provided that there are no circumstances that will extend this deadline.

Depending on where TAK places the lien, it must be registered at the relevant offices:

• For movable property – the lien must be submitted to the Pledge registration office, which is located within the Ministry of Industry, Entrepreneurship and Trade.
• For immovable property – the lien must be registered at the municipal cadastral office, where the immovable property is located.

To enter into an instalment agreement, you must pay at least 20% of the total debt included in the agreement.

Interest is not waived, but may be stopped when:

• You are in a regular agreement for debt payment in instalments;
• You do not terminate the payment agreement;
• You do not create new debts during the agreement; and
• You have regular declarations.

TAK may enter into instalment agreements with taxpayers, through which a taxpayer can pay his/her tax debt, in accordance with the terms and conditions of the agreement, regardless of the amount of the tax liability.

If the payment from the Treasury has been transferred to the TAK account, please go to the relevant Taxpayer Service and Education office, where you can adjust your tax account at the TAK.

Lien ends six (6) years from the assessment date of the tax liability.

For this category of taxpayers, the period of six (6) years of imposing lien does not apply, but the lien does not expire until the liabilities have been fully repaid.

Lien is imposed regardless of whether the taxpayer is in an agreement to pay the debt in instalments or not, and remains as such until the full payment of the tax obligation.

According to the tax legislation, there is no limitation on the enforcement collection procedures even if the taxpayer has submitted a complaint to the Appeals Division, except of the limitation on confiscation of immovable property.

The taxpayer must first fulfil the tax obligations, and then provide proof of payment to the relevant collection office, which, after verifying the payments, will unblock the bank account.

The tax legislation does not stipulate the minimum value of the debt to block the taxpayer’s bank account. The blocking of the bank account can be done for any unpaid debt.

Any seized property, whether movable or immovable, can be auctioned by TAK.

The seized property must be announced for sale at least ten (10) days before the scheduled sale date, but not more than twenty (20) days before the scheduled sale date.

Property seizure measures are taken by TAK ten (10) days after the final notice for debt payment has been submitted. So, after the final notice for the debt payment is submitted, the taxpayer shall have ten (10) days to pay, otherwise a property seizure notice is issued.

When the taxpayer’s property has been seized, it must be sold within a period beginning thirty (30) days from the date of seizure and ending sixty (60) days from the date of seizure. The period for the sale of the property can be extended if circumstances require, such as postponement of the sale, which requires the re-announcement of the sale. TAK is authorized to start announcing the sale of seized property before the thirty (30) day deadline expires, provided that the date of sale is not less than thirty (30) days from the date of seizure. The date of seizure is the date on which TAK took possession of the property by issuing the Notice of Levy and the Notice of Seizure.

Reduction of assessed tax either by an audit adjustment or a voluntary corrective declaration submitted by the taxpayer does not require a new lien and does not establish a new six (6) year collection period.

TAK may enter into installment agreements with taxpayers, through which a taxpayer can pay his/her tax debt, in accordance with the terms and conditions of the agreement. Starting from the month after the month in which an installment agreement has been signed, until the tax liability is settled, no interest will accrue on the tax debt. In general, the instalment agreement may be concluded for a maximum of twelve (12) months.

The lien arises when a person obliged to pay a tax liability does not pay it within ten (10) days after the delivery of the assessment notice.

So, if the taxpayer does not pay or refuses to pay the assessed tax liability, then the lien is considered to be retroactive to the date of assessment, and applies starting from: 16:00 in the afternoon of the date when the tax was assessed.

The enforced collection procedures shall be initiated for the taxpayer who does not fulfil the tax liabilities within ten (10) days after receiving the final notice of debt payment.

If the taxpayer is not able to perfume immediate payment for the entire tax debt, TAK enables payment in instalments by initially concluding an agreement with the taxpayer.

To enter into an installment agreement, the following conditions must be met:

• The agreement cannot be for a period longer than twelve (12) months, starting from the date the agreement is signed;
• The first payment according to the agreement must be at least 20% of the total debt included in the agreement;
• The taxpayer must agree to remain regular in all other tax obligations, including timely and accurate quarterly advance payments (if applicable), VAT registration, when required (if applicable), as well as submission of required declarations which are paid in full on or before the provided date;
• The taxpayer must make all payments on or before the date provided in the agreement. The agreement determines the date on which the periodic payment must be made;

The periodic payment is not mandatory to be scheduled on a monthly basis, but a payment must be scheduled at least once every three months.

When a taxpayer with a tax debt enters into an agreement and fulfils all the provisions of the agreement, the penalties imposed for late submission of a tax declaration and late tax payment shall be reduced to two percent (2%) of the tax liability.

Any taxpayer who has failed to withhold or pay withhold tax and pension contributions shall be subject to an administrative penalty of twenty-five percent (25%) on the difference between the exact amount of tax/contribution required to be paid and the exact amount of tax/contribution actually paid. It is not allowed to remove the penalties applied with control (25%) for not withholding tax and Pension Contributions. Other penalties applied for non-declaration and non-payment may be waived if the taxpayer provides reasonable cause for late submission of the tax return and/or late payment. Otherwise, if the taxpayer does not provide reliable reason for non-declaration and non-payment, the penalties cannot be waived.

Any person who fails to hand over or refuses to hand over the property subject to levy shall be subject to an administrative penalty equal to fifty percent (50%) of the amount of property subject to levy.

TAK may transfer a tax debt to a passive file to remove it from the active collection database when it has been determined through documented efforts that the tax is not collectable in time, and TAK may transfer a tax debt to a passive file to remove it from the active collection database when it has been determined through documented efforts that the tax is not collectable at the time of determination. Such determination may be made in cases such as, but not limited to, the inability to locate the taxpayer or his/her assets; business operations have ceased without leaving assets; a deceased taxpayer when there are no transfers of assets from which tax can be collected; a business that has been declared bankrupt and all collection measures have been taken; a taxpayer who is unable to pay the tax debt based on a complete analysis of the taxpayer’s financial situation; and determinations of a similar nature.

Placing the tax debt in a passive file does not relieve the tax debt or disturb the priority of TAK’s lien. If new sources of collection become known, TAK will return the tax debt to active collection status.

The taxpayer is exempt from lien after fulfilling all tax liabilities, for which the lien has been imposed.

Until the full payment of the tax liability is made, the taxpayer cannot be exempt from lien.

The property seizure notice shall state:

• the taxpayer whose property is being seized;
• the location of the property;
• the type of liability;
• the tax period for which the liability arose; and
• the amount of tax assessed.

TAK can record a lien against assets of a Socially-Owned Enterprise that has a tax debt even though the Socially-Owned Enterprise is under the jurisdiction of the Privatization Agency of Kosovo (PAK).

For the amount of up to five hundred euros (€500) considered as a bad debt, it is not required to initiate proceedings with the judicial bodies.

Any taxpayer who wishes to postpone the tax collection action before filing a complaint with the competent court, may submit a bank guarantee or other form of security acceptable to the Tax Administration, for an amount sufficient to cover the tax, fine, plus such interest as may accrue on any subsequent action.