On the 8th of June 2018, the republics of Kosovo and Austria signed the Convention for elimination of double taxation with the purpose to develop their economic relationship and to enhance their co-operation in tax matters. On July 27, 2018, Kosovo ratified the treaty; thus it will be effective from the following year.
The convention will be applied to income tax and corporate tax in Austria and to personal income tax and corporate income tax of Kosovo.
According to the treaty, construction and installation projects in duration exceeding 12 months as well as consultancy services provided through personnel engaged for such purpose in duration exceeding 6 months in a twelve month period will be considered to constitute a permanent establishment.
The treaty defines a maximum withholding tax on dividends at the rate of 15%. Interest will be taxed at 10% while royalties will only be taxed in the state where the beneficial owner is resident.
In regards to the actual elimination of double taxation, both countries will allow deduction from taxes in the amount of tax paid on the other state.
The convention is expected to provide the opportunity to strengthen the Kosovo economy and legal framework and to attract more high-profile Austrian foreign investment into Kosovo. We advise legal entities in both Kosovo and Austria who are trading with the other country to seek professional advice in regards to the implications of the new treaty.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.