Tax penalties in Kosovo: the exact amounts and how to reduce them

Who this guide is for

This guide is for the owner who has just received a notice, for the one who knows something was left undeclared and is weighing what to do, and for the one who simply wants to know what a mistake costs before making it.

The legal basis is Law No. 08/L-257 on Tax Administration Procedures, whose full text is on the legislation page. Only the penalties businesses meet most often are set out here.

One thing before we go on: a penalty and interest are two separate things. The penalty sanctions the breach; interest compensates for time. They are calculated separately and reduced separately.

1. Failure to file — a fixed amount per return

Where a required return is not filed within the deadline and results in a tax liability, the penalty is a fixed amount, not a percentage (Article 99):

• EUR 50 for a business natural person — a sole proprietorship — for each unfiled return.
• EUR 150 for a legal person — an LLC and other companies — for each unfiled return.
• EUR 20 for a non-business natural person, for each unfiled return.

Note the words per return. An LLC that has not filed VAT for six months does not face one penalty of EUR 150; it faces six. This is why small repeated delay costs more than one large single mistake.

2. Understatement — a percentage of the difference

Where the amount declared is lower than the correct one, or a refund or credit is overstated, the penalty is calculated on the difference (Article 100):

• 15% of the difference, where the understatement or overstatement is up to 10% of the correct amount of tax.
• 25% of the difference, where it is more than 10% of the correct amount.

So the threshold separating 15% from 25% is not a euro figure — it is the proportion of the error to the correct tax. An error of EUR 900 on tax of EUR 10,000 falls under 15%; the same error on tax of EUR 5,000 falls under 25%.

3. VAT — two situations that cost the same

Article 108 treats two different breaches with the same percentages.

Making supplies without being registered, where the conditions for registration were met: in addition to the VAT liability on those supplies, the penalty is 15% of that liability where the taxable supplies are below EUR 10,000, and 25% where they exceed EUR 10,000 (Article 108(1)).

Failure to issue an invoice, or an incorrect invoice, where this reduces the VAT liability or increases the credit claimed: the person is liable for that reduction or increase, plus a penalty of 15% for negligence, or 25% for gross disregard where the failure to issue an invoice for a taxable supply exceeds EUR 1,000 (Article 108(2)).

4. Fiscal devices — the penalty depends on your turnover

Anyone required to use an electronic fiscal device to record transactions who has not installed one is fined according to turnover — the basis being the turnover of the previous fiscal year, or the actual turnover of the current year for new businesses (Article 106(2)):

• Up to EUR 30,000 annual turnover — penalty EUR 250
• From 30,000.01 to EUR 200,000 — penalty EUR 500
• From 200,000.01 to EUR 500,000 — penalty EUR 1,000
• From 500,000.01 to EUR 5,000,000 — penalty EUR 2,000
• Above EUR 5,000,000 — penalty EUR 3,000

And a line that is no longer a penalty at all: anyone who attempts to manipulate or interfere with the programming of the device or the data entered into it, in order to record inaccurate data, is subject to criminal prosecution under the applicable criminal legislation (Article 106(3)).

If you are wondering which applies to you at all — device or software — see the guide to fiscalisation and SEF.

5. Interest — separate from the penalty, and stoppable

Interest is payable on any tax not paid by the final payment date. It is calculated monthly, for each month or part of a month, from the date the tax became due until it is paid — but for no more than ten years (Article 24(1) and (2)).

The rate is set by the Minister at least once a year and must be higher than the lending rate of commercial banks in Kosovo. It is published by the Tax Administration (Article 24(3)). This is why this page gives no fixed percentage: it changes, and the valid figure is the one published for your period.

Here is the part that changes decisions: where an instalment agreement is concluded with the Tax Administration, interest does not accrue from the month following the month of conclusion, for as long as the agreement is fully observed (Article 24(5)). If the agreement is broken, interest is reinstated; and where a second agreement is sought for the same liability, this relief no longer applies (Article 24(6)).

So the first agreement stops the clock. The second does not. That is why an agreement should be entered into only when you are confident you can keep it.

6. Five routes to reduce the penalties

Article 110 provides five distinct options. They do not stack automatically and each has its own condition:

1. Voluntary disclosure before notice — 25%. Where you voluntarily inform the Tax Administration of your liability before being notified of a possible tax inspection, the penalties fall to 25% of what would have applied (paragraph 1).
2. Voluntary disclosure after notice, before inspection — 50%. Where you inform after being notified of an inspection but before it begins, the maximum penalties are 50% (paragraph 2).
3. Single payment — 30%. Where the outstanding liability is paid together with interest in a single payment, the penalties are reduced to 30%, except those under Article 104 (paragraph 3).
4. Instalment agreement — 50%. Where a written agreement is concluded to pay in two or more instalments, its terms are met, and all other tax obligations are met on time during that period, the penalties are reduced to 50%, except those under Article 103 (paragraph 4).
5. Payment within 15 days — 50%. Any penalty applied, except those under Article 103, if paid within fifteen calendar days of the date of the notice applying the penalty, is paid at only 50% of its value (paragraph 7).

The fifth is the least known and the fastest. It requires no agreement, no request and no justification — only that payment is made within fifteen calendar days. The notice arrives, is set aside for "next week", and the half-price window closes without anyone knowing it existed.

Beyond these, the Tax Administration may reduce or waive any assessed or proposed penalty, case by case, where the person demonstrates reasonable cause, good faith, great hardship or other reasons that would enhance its effectiveness (paragraph 5). Requests are examined and decided on a review of the facts and circumstances (paragraph 6).

What we would do, in this order

1. If you have not yet received a notice and you know something is outstanding — voluntary disclosure is the cheapest route there is. 25% against 100%.
2. If you have received notice of an inspection that has not begun — the window is still open, but at 50%. It closes the day the inspection starts.
3. If the penalty has already been applied — check the date of the notice before anything else. If you are within fifteen days, immediate payment halves it.
4. If you cannot pay it all at once — an instalment agreement does two things at once: it reduces penalties to 50% and it stops interest. But only if it is kept, and only the first time.

If you have something outstanding from earlier periods, we start with an inventory of the position — what has been declared, what is left, and which of the five routes is cheapest for you. We tell you the amount before we begin.

Frequently asked questions on tax penalties