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For income generated inside and outside of Kosovo and for which no tax withholding is required, a naturanon-business l person is obliged to declare and pay taxes through the PD annual declaration or through the EDI electronic system, which should include all income generated inside and outside the country.
Pursuant to Article 13 of Law No. 03/L-222 on Tax Administration and Procedures and Article 4 of Administrative Instruction No. 02/2018, all persons who make supplies of goods/services at premises, units or locations accessible to the public are obliged to use FED and other equipment obligatory for recording and confirming the supply of such goods and services, except when it is required to issue a tax invoice in accordance with tax legislation. Quote:
“1.1. All persons who make supplies of goods and/or services or at premises, units or locations accessible for public are obligated to use FED and other equipment obligatory for recording and confirming the supply with goods and services.”
So, the business is obliged to issue a fiscal coupon for all supplies that are dedicated to the final consumer (natural persons), both when the payment is made through the POS and the bank account. While for business-to-business transactions, regardless of the payment method, you are required to issue a tax invoice under the tax legislation but you are not required to issue a fiscal coupon.
Article 22, paragraph 1, of Administrative Instruction No. 15/2010 on Implementation of Law No. 03/L-222 on Tax Administration and Procedures provides for the manner of payment for transactions over €500.00. Quote:
“Paragraph 7 of Article 13 of The Law provides that all persons, who make transactions in the course of their economic activity in respect of the supply of goods or services between persons in excess of 500 (Five Hundred) Euro must make payment in respect of such transactions through a bank transfer.”
The venue of supply of goods is determined by paragraphs 1 and 2 of Article 19 of Law No. 05/L-037 on Value Added Tax. Goods can be purchased in Croatia and then be sold directly to Germany, i.e. without the goods having to come to Kosovo, and there will be no VAT implications in Kosovo for this. Quote:
2.1. when goods are dispatched or transported by the supplier, or customer, or by a third person, the venue of supply shall be deemed to be the venue where the goods are located at the time when dispatch or transport of the goods to the customer begins;
2.2. when goods dispatched or transported by the supplier, by the customer or by a third person are installed or assembled, with or without a trial run, by or on behalf of the supplier, the venue of supply shall be deemed to be the venue where the goods are installed or assembled.
If the goods do not come to Kosovo at all, there are no VAT implications, so they should not be indicated in the VAT Declaration. You may categorize the sale of such goods, for purposes of Corporate Income Tax, as COGS, while the income thereof should be treated like all other income.
The application of the flat rate for farmers is defined in Article 60 of Law No. 05/L-037 on Value Added Tax and Article 76 of Administrative Instruction No. 03/2015.
Article 76, paragraph 3, of the Administrative Instruction gives the definition of who may be subject to this scheme for which the buyer is required to be registered for VAT whereas the supplier is not required to be registered for VAT.
To benefit from the flat rate scheme, agricultural producers should be equipped with a certificate issued by the Ministry of Agriculture, Forestry and Rural Development confirming their agricultural production activity.
The flat rate for agricultural producers is 8%, while the calculation for agricultural producers is done by the purchaser – taxable person, against supplies of goods carried out. The flat rate shall be considered within the calculated price of the purchase of goods.
In order to apply the flat rate scheme, the purchaser (taxable person) purchasing goods from the agricultural producer should issue a tax invoice to the vendor (agricultural producer) indicating the value of the purchase of goods in which the VAT was calculated. VAT calculated within the value for the goods that the taxable person (purchaser) paid to the agricultural producer (vendor) is a deductible VAT for the taxable person, according to conditions stipulated in Article 36 of the Law on VAT.
Taxable person (purchaser) issuing an invoice to the agricultural producer (vendor) should indicate in the invoice at least the following data:
The invoice should be signed by both parties, i.e. the vendor and the purchaser.
List of products to which the following flat rate scheme is applied:
o Overall primary agricultural products;
o Natural and greenhouse decorative, aromatic and curing plants;
o Production of mushrooms and forest fruits;
o Production of seedlings (cultivation of orchards and new vegetables for sale) and seeds.
o Milk and dairy by-products;
The taxable person “M” (agricultural enterprise) has purchased 100 units of agricultural products from the agricultural producer “N” at a price of €10 per unit, whereas he/she sells the same, after processing, at a price of €11 per unit including VAT.
|Compensation rate: 8%|
|Price per unit||b||10 €|
|Value||c= a x b||1,000.00 €|
|VAT reimbursed||d= c / 13.5||74.07 €|
|Value without VAT||e= c-d||925.93 €|
When the Taxable Person sells
|Selling price with VAT||b||11 €|
|Value with VAT||c= a x b||1,100.00 €|
|Calculated VAT||e= c / 13.5||81.48 €|
|Value without VAT||f= c – e||1,018.52 €|
Impact on VAT (on the Taxable Person)
|Calculated VAT||a||81.48 €|
|Deductible VAT||b||74.07 €|
|VAT to be paid||c= a – b||7.41 €|
Impact on Income Tax on the Taxable Person
|Revenues from sales||a||1,018.52 €|
|Gross profit||c = a – b||92.59 €|
Impact on Income Tax on the Agricultural Producer
|Income for the agricultural producer||1,000 €|
Income for the agricultural producer will be considered to be in the amount of €1,000 and will be treated according to the Law on Personal Income Tax.
For example, if you buy raspberries in gross value of €1,000 from a farmer who is equipped with a document issued by the MAFRD, you are obliged to withhold the 3% tax at source on the gross payment of €1,000. So, €1,000 x 3% = €30 Tax Withheld at Source. Net payment for the farmer will be €970.
The flat rate for farmers is 8% and should be applied within the gross amount of €1,000, as follows:
1000/13.05=€74.07 Deductible VAT for the business.
Sale of raspberries is at the rate of 18%.
COGS is the value of €925.93 and not €1,000 since the deductible VAT is recognized as g €74.07.
For €1,000 purchases from farmers, the COGS would be €1,000 only when the flat rate cannot be applied.
Regardless of whether the flat rate is applied or not, the tax withheld at source should be in the gross amount of €1,000.
In paragraphs 1 and 2 of Article 47 of Law No. 03/L-222 on Tax Administration and Procedures, barter transactions are considered as cash transactions. Quote:
“1. Barter transactions shall be considered as a sale of goods or the result of work or services at market values.
2.Tax invoices must be issued for barter transactions in the same manner as they are issued for cash transactions. If the value of a barter transaction indicated in a tax invoice is a reduced value, the Director General may adjust the value of the transaction to reflect market values”.
Article 16, paragraph 9, of Administrative Instruction No. 01/2016 Implementing the Law No. 05/L-028 on Personal Income Tax clarifies the treatment of barter transactions as part of long-term contracts. Quote:
“9. Where there are barter transactions as part of a long-term construction contract, such transactions shall be recognized as income or expense at market values at the time exchange transaction occurs, in accordance with the Law on Tax Administration and Procedures.”
Barter transactions are recognized as income or expense at market value at the time the barter transaction occurs.