Questions and Answers on Tax Debts

TAK, in order to discharge the responsibilities vested under the law, has focused all its efforts on the taxpayers’ voluntary compliance with tax obligations. The taxpayer who fails to comply with tax obligations, consequently creates a tax debt when:

• files and fails to pay;
• files and pays late;
• TAK makes an additional determination for non-filing, under-filing, fines or interest.

For the created tax debt that has become due, the case is set for compulsory collection, which, within the authorizations given, will consist of tax debt collection and seeking the declarations that are lacking. The deadline for collecting a tax debt is ten (10) years from the date of tax assessment. This period can be extended if:

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

For Socially-Owned Enterprises, the above-mentioned period can be extended until their liquidation, while for Publicly-Owned 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 concluded, TAK will notify the taxpayer through the final Notice for payment (10 days for payment) that the compulsory collection procedures will begin. In case the debt is not paid within the stipulated period, then basic collection actions are taken, such as:

1. Levy on banks;
2. Levy on accounts receivable;
3. Embargo on Imports/Exports, etc.

Generally, payments will be firstly applied for the tax period with the earliest assessment date, regardless of the tax period involved. When the payments have started to be applied in a particular tax period, the entire amount of that tax period, including interest and penalty/fine, will be paid before the application of payments in a subsequent tax period begins.

The amount of any tax paid will be allocated in the following order:

• collection expenses;
• amount of any tax obligation;
• interest; and
• penalties/fines.

In cases when the taxpayer experiences financial difficulties, then TAK may offer him/her the opportunity to submit a request to enter into an agreement to pay the obligations in instalments, in accordance with the terms and conditions of the agreement.

If a person, who is obliged to pay any tax to TAK according to the legislation in force, fails to pay that tax within ten (10) calendar days after the delivery of the assessment notice, a tax lien arises in the property or in the property right belonging to that person, whether movable or immovable, corporeal or incorporeal.

TAK has the right to impose a tax lien on the entire property of the person, including property purchased by the person after the tax lien has been imposed, to secure the unpaid tax obligation, which includes unpaid tax, penalties/fines, and interest and collection expenses.

In cases when a person, who is obliged to pay a type of tax, fails to pay or refuses to pay within ten (10) days after the delivery of a notice of assessment, TAK collects such amount and other amounts sufficient to cover the costs of the property confiscation measure, applying the measure for confiscation of the property belonging to such person, owned by the taxpayer or a third person.

TAK will ensure the implementation of forced debt collection procedures, such as: confiscation of the taxpayer’s property and the organization of the sale of that confiscated property employing the procedures defined by the applicable tax legislation.

Only the property that is necessary and sufficient to meet the taxpayer’s current tax obligations may be subject to confiscation. The types of taxpayer’s property that are exempt from seizure and confiscation are as follows: child alimony payments, payments from social schemes and state aid for exceptional cases, basic clothing, basic food, basic furniture, basic personal items, excluding luxury items, as well as any other assets specified with a sub-legal act.

When someone has been responsible or has helped in the non-compliance with tax obligations, TAK has the authority to make a tax assessment against those persons and follow all the procedures required as against any other taxpayer who is liable to TAK. They may be:

• the responsible person in the business, who had the responsibility to fulfil the tax obligations;
• transferee, the person who enabled the transfer of the taxpayer’s assets;
• beneficiary owner, who enjoys benefits from the domain and control over assets titled in ownership of someone else;
• appointee, the person who is appointed to act for someone else.

TAK will initiate criminal charges, as well as initiate the liquidation procedures before the Competent Court in relation to the failure to pay the debt. TAK will handle cases that meet the legal conditions for passivation or even cancellation of debts.

As for tax collection, the Tax Administration of Kosovo has numerous authorizations foreseen under the tax laws, including:

• seeking information about the taxpayer’s assets, both from him/her and from other parties, including banks;
• registration of the tax lien (on all movable and immovable property), ten (10) days after the creation of the tax debt with effect of ten (10) years;
• blocking the bank accounts and confiscation of funds contained therein;
• blocking and confiscation of funds expected from the taxpayer’s clients or employers;
• blocking of goods for import or export;
• confiscation of movable and immovable property, with the exception of basic household items;
• sale of confiscated property, etc.

TAK has the right 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 assets to the other entity either in anticipation of the tax debt creation or after the tax debt has been created;
• the transfer of funds was less than the open market value of the assets;
• the transfer of assets has rendered 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 results in an assessment against the third party, with the right of appeal for the third party.

If TAK considers that the collection of the tax or penalty that becomes a payable obligation is at risk, it can issue an order for the at-risk tax, when:

• the taxpayer is preparing to leave the Republic of Kosovo;
• the taxpayer is ready to cease the business;
• the taxpayer is ready to transfer the property; or
• other similar documented reasons.

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

The tax lien is an official public document under the tax legislation applicable in Kosovo. Tax lien means the right of the Tax Administration of Kosovo to take and hold the taxpayer property as security for any tax payment and the right to sell such property and use the proceeds of the sale for the payment of that tax. That is, this document will protect the right of the Tax Administration to pay the debts with special priority.

The levy is a legal document under the tax legislation applicable in Kosovo. The procedures for levy to satisfy a tax liability begin only after all measures have been taken against the taxpayer, who has failed to pay the debts, and the notification procedures mentioned in the Law on the Administration of Tax Procedures have been complied with.

If the taxpayer has concluded an agreement with TAK to pay the debt in instalments and failed to comply with the same, the interest will be retroactively restored until the date when the agreement was signed. If a taxpayer fails to implement the terms of an agreement for debt payment by instalments and is willing to re-establish another agreement for instalments payment for the same tax liability, the following instalment payment agreement will not include an interest waiver. The interest will continue to accrue in any following instalment payment agreement for the agreement duration.

If any amount of any tax administered by TAK according to the legislation applicable in Kosovo has not been paid by the last date set for payment, the taxpayer will be obliged to pay interest according to the percentage (%) set by the Minister of the Ministry of Finance, Labour and Transfers.

When a person is required to submit a tax return according to the legislation applicable in the Republic of Kosovo, and does not submit it by the specified deadline, which results in a tax liability, he/she is subject to a fine of:

• fifty euros (€50.00) for the business natural person, for each non-filed return;
• one hundred and fifty euros (€150.00) for the legal entity, for each non-filed return;
• twenty euros (€20.00) for the non-business natural person, for each non-filed return.

That is, fines for late filing are set according to the taxpayer’s status and are:

• for an individual business, a fine of fifty euros (€50);
• for a legal person, a fine of one hundred and fifty euros (€150);
• for a non-business natural person, a fine of twenty euros (€20).
• interest – according to the percentage (%) determined by the Minister of the Ministry of Finance, Labour and Transfers, is applied regardless of the status of the taxpayer;

Taxpayers have the right to request de-registration only after they have paid all tax obligations and after they have submitted the closing balance sheet and de-registered the EFD/FS.

Until the tax liability can be paid in full, you can ask TAK to enable you to pay the tax in instalments by concluding an agreement with TAK, where interest will not accrue from the month following the month in which the agreement is concluded until it is fully implemented.

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

If the taxpayer with unpaid tax liability pays the tax liability together with the interest in an one-off payment, the penalties applied according to the law, except the penalties for failure to hand over the property subject to the measure of taking and setting aside the money, will be reduced to thirty percent (30%).

If the taxpayer with an outstanding tax liability enters into a written agreement to pay the outstanding tax in two or more instalments, fulfils the terms of the written agreement and timely fulfils all other tax obligations during the term of that agreement, except for the fines imposed due to the failure to handover the property subject to the measure of taking and setting aside money, other fines will be reduced to fifty percent (50%).

Every taxpayer has the right to be informed about his/her tax status. You can be informed about the tax status every day through the Electronic EDI System or by visiting the relevant Regional Taxpayer Service Office.

You can download the debt payment slip through the electronic EDI system, while the debt payment reminder letter can only be obtained at the relevant TAK regional office.

You can receive the payment slip for the unpaid debt through the electronic EDI system.

Your bank account has been blocked by TAK because you have not complied with the agreement to pay the debt in instalments. If you have funds in your account, then, upon your request, the bank is obliged to transfer those funds to TAK’s account in the amount of the debt. After receiving the transfer confirmation from the bank, TAK will unblock your account.

A debt is declared uncollectible when it is older than ten (10) years, provided that there are no circumstances that will extend this term.

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.

TAK can enter into instalment payment 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.

The first payment under the agreement must be at least 20% of the total debt included in the agreement.

Interest is not waived, but ceases to run when:

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

The lien ends ten (10) years from the date of assessment of tax liability.

For this category of taxpayers, the period of ten (10) years of imposing the tax lien does not apply, however, the tax lien does not expire until the liabilities have been fully repaid.

The tax lien is imposed regardless of whether the taxpayer is in an agreement to pay the debt in instalments or not. Likewise, the tax lien is imposed before the conclusion of the agreement for payment in instalments, in order to ensure compliance with the agreement.

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

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

The tax legislation does not define what is 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.

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 payment of the debt is submitted, the taxpayer shall have ten (10) days to pay, otherwise a notice for the seizure of the property 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 seizure date is the date on which TAK has taken possession of the property by issuing the Notice of Levy and the Notice of Seizure.

The 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 ten (10) year collection period.

TAK may enter into an instalment payment agreement with the taxpayer, through which a taxpayer may 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 instalment agreement has been signed, until the tax liability is settled, no interest will accrue on the tax debt.

The tax lien arises when a person obliged to pay a tax liability fails to pay it within ten (10) days after the delivery of the assessment notice.

So, if the taxpayer fails to pay or refuses to pay the assessed tax liability, then the lien is considered to be retroactive to the assessment date and applies starting from: 16:00 in the afternoon of the date when the tax was assessed.

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

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

To conclude an agreement for payment in instalments, the following conditions must be met:

• the agreement cannot last for a period longer than twelve (12) months, starting from the date it 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 properly comply with all other tax liabilities, 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; and
• 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.

Any person who fails to surrender property subject to seizure shall be imposed a fine equal to fifty percent (50%) of the amount of property subject to levy.

• In the event that the taxpayer with unpaid tax liability pays the tax liability together with the interest in a one-off payment, the fines applied according to the law, in addition to the fines for failure to surrender the property subject to levy and setting aside money, will benefit from a thirty percent (30%) reduction.

• In the event that the taxpayer with unpaid tax liability enters into a written agreement to pay the unpaid tax in two or more instalments, fulfils the terms of the written agreement and timely fulfils all other tax liabilities during the term of that agreement, the fines applied under this Law, in addition to the fines for failure to surrender property subject to levy and setting aside money, will benefit from a reduction of fifty percent (50%).

• In the event that the taxpayer, for any tax, proves reasonable causes, good faith, great difficulty or other reasons that will increase the effectiveness of TAK, the Tax Administration of Kosovo examines requests for reduction of fines and makes a decision based on re-examination of the facts and circumstances.

• In the event that the taxpayer pays for any penalty applied under this Law, except for fines for failure to surrender property subject to levy and setting aside money, within fifteen (15) calendar days from the date of notice of the application of the fine, the taxpayer shall pay only fifty percent (50%) of the value of the fine applied.

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:

• inability to locate the taxpayer or his/her assets;
• business operations have ceased without leaving assets;
• a taxpayer as a deceased natural person when there are no transfers of assets from which the tax can be collected;
• a taxpayer who has been declared bankrupt according to the applicable law 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 returns 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 or if it is determined that the lien has been wrongly imposed.

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

The property seizure notice shall contain:

• data of the taxpayer whose property was seized;
• location of the property;
• type of liability;
• tax period for which the liability arose;
• amount of tax assessed; and
• other information.

TAK can register a tax lien against the 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 up to five hundred euros (€500) treated as bad debt, it is not required to initiate proceedings with judicial bodies.

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

TAK shall, after the tenth (10^th) year from the imposition of the tax lien, be entitled to reassess the property with the tax lien and, the property which is estimated to cover the unpaid liability and which is seized based on the compulsory collection procedures becomes state property.