Republika
Republika Kosova - Reptrllic of Kosovo
Qeveria - Vlada - Government
Ministria e Financave - MirListarstvo za Finansije - Mi]ristry of Finance
Administrata Tatirnore e Kosov€s - Poreska Administracija Kosovo J.I'ax Adrninistration of Kosovo
lPursuant
e Kosov€s -
to the provisions of Article 9 of the Law
lProcedures, the D jirector of Tax Administration issues:
No. 03lI)-222 on the Tax Administration and
PUBLIC EXPLAI\A ORY DECISION NO. 5/2014
TAX TRI|,ATMENT OF'BENEFITS IN NAT'1IJRE/MEALS FOR THE
EMPLOYEES
PURPOSE
lfhe purpose of this Public Explanatory Decision is to clarify fax liabilities, respectively the way
of declaration ofld payments of VAT, Personal Income Tax a1,rd Corporate Income Tax for the
taxpayers that give benefits in nature - meals for their employees.
DEFINITIONS
For purpose of this Public Explanatory Decision, the followirlg definitions have this meaning:
VAT
-
Tax on Added Value includes application of overall tax in consumption for goods and
VAT is calculated
in this cost according to the applicable norm, it is loaded in different phases of the
produotion, delivery and living cycle of the trade with goods and services and in the end it
is carried forward from the la t consumer.
services that is exactly proportional with the cost of goods and services.
Employer - any person who pays wages and includes:
r { public authority;
o A business organization;
o { permanent establishment of a non-resident as deflrred in the Corporate Income Tax
legislation;
o A non-go'vertrmental organization;
. An international organization;
o A foreign government; and
o A physica.l person rvho pays wages in the course of calrying on business irL Kosovo.
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Employee - natural person who performs work for wages ulrder the direction
and control of an
employer, regardless of whether the work is performe,C under a contract or any
other form
of agreeme,nt, whether in writins or rrot.
'raxable supply any supply of goods r:r ser.vices made
ln the furtherance of'any economic
activity derreloped in Kosovo, other than an exempt su11ply.
Exempted suptrrly - any supply of goods or services made in furtherance o[
any economic
activity calried on in Kosovo, for which the taxable p,etro.t supplier is not entitled to
charge
VA'I to the customer.
-
Iryages financial and ottrer kind of compensation, including goods, bonuses, fa.,uors,
services or
barter paid in connec:tion with employmen in Kosovo. I
llaxable wages
wages.
- wages paid by discounting those amountd exclurJed from gross income from
llenefits in nature (also l<nown as Benefits in things) - vdrious compensations not given with
wage of Lhe employees, except therir normal wage. tliven into goods, items or services
than in cash.
I,EGAL BASE
Arlicle 19, paragraph 8, of the Law No,
citation:
03/tr
-222 on Trfr Administration and procedures.
"For determination of taxarble income, the taxpayer is alloweil a reductionfrom gross
income
for costs paidin rtr outside the country, if these costs infull o;\inpart are in connectionwith
economic activity performed during that tax period and if thoqet costs are supportetl by evidence
to prove the costs incurced and the payments made"
Article 23, pangraph 1 of Administrative Instruction No. I5,120I0 on Tax Administration
Procedures, citati,rn:
and
"As
provided in relevant tax legislation, the taxpayer is allowp,C a recluction from p,ross income
,for those costs paid or acct'ued during the tax period related te economi, oriirity in that tax
period, if these costs in full or in part are in conn,ection with ebonomic activity performed during
that tax periocl.. Si'milarly, a taxpayer is allowed a credit on a V'AT declaration in accordance
with VATlegislation inforce. To be allowed, such expenses/cle'dits must be supported by
evidence, including, but not limited to the fo,llowing;
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l.I Invoices
on which the fiscal number of the seller/jprovider must appear
L2 Contracts
1.3 Customs declarations, if accompanied by documentation proving the cbst and
ownershil,p of the item(s) irnported
1.4 Receipts on wltich the fiscal nurnber of the seller/fi;,ovider must appear
L5 Paymtent documents
1.6 Bqnk documents
1.7 Payroll record,s
1.8 Tickets
1.9 Vouchers
Ll0. Transfer orders
L l I Other relevant documents
Article 36,paragraph 2, of the Law No. 03lL-146 on vAT, ciltation:
"Unless otherwise stipulat,ed by this Law, a taxable person rnby deductfront
his VAT liabi,tity, the
VAT due or VAT paid in respect of purchases of goods or seryices - hereinafter indicated qs' input
VAT - provided he used or will use such goods or servii,e's for the pirporu of his taxibte
transactions "
Article ll,paragraph
of the Law No. 03lL-I61 on Personal Income Tax, citation:
1
"Subiect to the p,rovisions of this Article, there shall be allowqd as a deductionfrom gross
income
ted
le properfy, rents or business activitlets those expenses paid or incurred
the
at are wholly, exclusively and directt)t related to such income generating
€s,
miums for health insurance paid in behall" of an employee and those
dependents eligib'!,e to be in,:luded on the insurance policy of th<z emplq)e;',.
Article 30,paragt:aph
"
1
of the LawNo. 0311,-16l on Personal Income Tax, citation:
1. No deduction shall be allowed for;
l. Cost of land actVuisition;
I '2. Fines and penalties, and related costs and interest
J,b,r any violation of law or
L
admini s tr trt iv e pr o c tz dur e ;
paid or accrued (does not include taxetg withheld frorn employees);
Taxfor which the taxpayer claims a rebate or credit for cliductible tax
under the legislation on Value Added Tax,
l. 5. Personal, living, or family expenses,.
L6. Any lc,ss from the sale or exchange of property betw€en related persons,. and
1.7. Amusement or recreation expenses, unless they are ,ih'curued in connection with the
taxpayer";; business of providing amwsement or recreatifin activities.
1.8, Expenses not do,cumented per requirements set out iin a subJegal act issued by the
lv{inister shall be considered as unallowable exoenses. "
L 3. Incomte taxes
I "4. Value Added
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Article 9,paragraph
1
of the LawNo. 03lL-162 on Corporat{ Income Tax, citation:
"Subiect to the limitations in the present Law, in determinini4 taxable
income, a taxpayer shall be
allowed as a detJuction frctm gross income expenses paid or ilytcurred during the fax period wholty
exclusively i'n connection with its economic activities, inb,l.uding premiims paid on the healih
'and
insurance in beholf of an employee and tho,se dependents elig,i.$le to be included irt the potiQy of the
employee".
Article
B, paragraph 1
of the Law No. 031L,-I62 on Corporatti Income Tax, citation:
"1. In determining taxable income, thefollotuing are disallowed as expenses;
L L Cost of acquisition and improvernent of land;
l'2' Cost of acquisition, improvement, renewal andrecdnstruction of assets that are
capitalized, depreciated or amortized under the provisiQns of the present Latv,.
1.3. Finest, penaltie, costs and interest related to them,.
1.4. Incor,ne taxes p'aid or accruedfor the current or prelvious tax period and any intenest or
'
late penalty incurredfor late payment of it,.
1.5. Value added taxfor which the taxpayer claims a refiote or creditfor input tax under
legislation on Value Added Tax in Kosovo; and
1.6. Any loss from the sale or exchange of property betuteten related persons.
1.7. Pension contributions above the maximum amount a,llowed by the Kosotto pensioh Law.
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V
TREATMET{T oF I'/TEALS FoR THr0 EMpr,or.EES
FoR vAr,uE ADDBD
TAX. VAT
'rhe right to deduct
vAT is regulated ,h.orgh Article 35, pitragraph 2 ofthe
Law No. 03/L-146
on vAT" with this paragr:aph there are determined
terms
fqr
realiz:ing
the
right to dedupt input
'VAT, as followirrg:
"
"' a taxable person may deduct from his vAT liability, the, vAT due or vAT paid in reppect
of
purchases of goods or set,vices - hereinafter
indicated qs iy,tp,ut VAT _ provided he used or will
use such goods or services'for the purposes
of his taxabre transactions...,,.
lfherefore' based on above-mentioned legal pro'rzision,
in casg of giving benefits in nature (meals
fbr the employees), if they will be provided for the emfloyees
that are related directly in
realizing taxable supplies, it will be allowed the
right to dedudrl. input vAT.
Also the right to deduct vAT when from the businesf
are provided supply of mixed
goods/services,
s'c also taxable supplies and exempted sr-rppJies
paragraph 4 of thr: same LaLw, as followins:
is regulated throggh Article 3d,
"As regards goods ctnd services used
or to be used by a ta4,able pterson both
for transhction,g
hs 2
hw which VAT may be deducted, andfot,
VAT
le to
fu suc,h a praportion of tlte VAT may be
Therefore, based r:n above-mentioned legal provision,
in case of giving benefits i1 nature (meals
for the employees), if they will be provided .tor the emp.lpyees
that are relajed direotly in
reahzing mixed supplies, it will be allowed the right
to deduci input vAT only when it concerns
taxable supplies.
Also it should be understood that in cases of giving benefits
i]rL nature (meals fbrr employees),
if
they are provided for the ernployees that are direotly
related r,,gith realizing exempted supplies, it
will not be allowable the right to deduct input VAT.
Based on above-mentioned clarificalions, taxpayer
is allowed {o use input VAT fbr all purchases
regarding to goods or services if they are in function
of taxable sales.
Therefore' when organizing
of business that aims to enz
related with providing meals
within business it is completely in the function
vAT due and vAT puia in purr;hases that are
r business, is allowabi. u. irrp.rt VAT.
If employees choose to have meals outside of company and ardtrr from
employer tg refund meals
inrzoices then providing meals in these ca^ses is
treated as a persbnal
car;es
it is not recognized VAT crediting for rneals provided'to
benefit of employee. In these
dlrose ernployees.
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MEAL T'REATMENT FOR THE EMPLOXIIES
FOR PIT AND CIT
il:1J:tlfff#ffits
for the emplovees is regulated with
$rtict e e, paragraph2.4.of ihe Law
Gross income from wages shall
not include:
"Gains in kind in.form of meal provided
by the employer to
in money".
erltq
le,ee,
exe
mpting the compq nsation
lfhe above Provision determine that benefit in nature
in. form of meals provided from the
employer for the benefiter (the employee), is
not considered irpcome rrom wase.
Paragraph 2.7 of the same article, emphasize
that:
"such reimbursement or giving of the
benefits in nature shatl nd,t be considered as business
dQducted
reimbursement
or benefirs in nature, an even rhey
'f:;::,")!r,
y
wiu not be
will
deducted as expense
of any kind"
":7_n:T:::.,o{,.::1,,
Based on above parugraph, when employees
have meals outs{cle of company as independent and
provide to the employer meals invoices for reimbursement,
srrfch invoices will not be recognized
as expenses of company if rthey are reimbursed.
Subject to limitations of the Law on personal Inc
determining taxable incomes, the taxpayers hav;
aim of exercising economic activity including
me
llncome Tax, in
created with an
ness polipies.
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CONCLUSION
The right to deduct input VAT will be allowable
only in
for the employoes), whether provided through canteen
from any business that provides ready meals, if they are
related directly with realizing taxable supplies.
Also for issues of direct taxes (PIT and CIT), taxpayers
meals provided for employees, that are created in function
of giving benefits in naturo (meals
business or purchases df meals
ided for the employees lthat are
s the
right to recognize as b*p"nre
erxercising economic activitv.
ENTRY INTO F'ORCE
This Public Explanatory Decision shall enter into force
Director of TAK.
nate:
!fi
the date signed by the eeneral
:! 4 tzor+
Pristina
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