ECOVIS Intercontrol AG

Invest in Kosovo: Brief economic overview

04.12.2024

Kosovo is one of the youngest countries in Europe with a lot of potential. With an annual GDP growth rate of around 4%, a skilled workforce and a business-friendly climate, Kosovo is interesting for companies and investors. The economy is primarily driven by services. They account for more than half of GDP, followed by industry and agriculture. The Ecovis experts report on the opportunities the country offers foreign investors and companies.

Why invest in Kosovo?

1. Young and educated workforce: Over 50% of Kosovo’s population is under 30. The youthful workforce is highly educated, with strong expertise in fields such as information technology, engineering, finance, and business services. It is also relatively cost-effective.
2. Tax incentives: With a corporate tax rate of just 10%, Kosovo offers one of the lowest rates among its neighbouring countries. This strategic advantage allows businesses to dramatically reduce tax burdens while benefiting from direct access to a dynamic, growing market. For companies aiming to maximise profitability and operational efficiency, Kosovo’s tax regime presents an unmatched opportunity in the region.
3. Strategic location: Strategically located in the heart of the Balkans, Kosovo serves as a gateway to both regional and broader European markets. The country boasts excellent road connections to neighbouring countries, facilitating seamless trade and movement across borders. As a member of the Central European Free Trade Agreement (CEFTA), Kosovo enjoys preferential access to regional markets, creating a favourable environment for businesses looking to expand. Additionally, Kosovo is progressing steadily on its path towards European Union integration, further enhancing its potential as a future EU-linked market hub. This combination of connectivity and trade advantages makes Kosovo an ideal base for businesses aiming to scale within Europe.
4. Ease of doing business: Kosovo has positioned itself as a regional leader in the ease of doing business. Through comprehensive reforms in key areas such as business registration, property rights, and tax administration, Kosovo has streamlined processes that are crucial for attracting foreign investors. These improvements have significantly reduced bureaucratic hurdles, making market entry smoother, faster, and more cost-effective for international businesses. With these advancements, Kosovo stands out as an increasingly attractive destination for investment in Southeast Europe.
5. Low labour costs: Kosovo offers exceptionally competitive wages, making it one of the most cost-effective options in the region. This advantage is particularly valuable for businesses in labour-intensive sectors, allowing them to access a skilled and highly motivated workforce.

We specialise in auditing, accounting, tax and financial consulting and support companies and investors in establishing themselves in the dynamic market.

Nehale Hajredini, Audit Assistant, ECOVIS UA Kosova SH.P.K., Auditing, Accounting, Tax Services and Financial Consulting, Pristina, Kosovo

High growth industries in Kosovo

1. IT and technology: Kosovo’s tech industry is expanding rapidly, fuelled by a young, tech-savvy population. With a growing number of IT startups and software development firms, Kosovo is becoming a hotspot for outsourcing and technology-related investments. The country is already home to a thriving startup ecosystem and has the potential to be a regional leader in tech innovation.
2. Business services (audit, accounting, and financial consulting): As businesses grow, so does the demand for professional services such as audit, accounting, tax advice, and financial consulting.
3. Renewable energy: Kosovo has immense potential in the renewable energy sector, particularly in wind and solar power. The government is keen to reduce its dependence on coal and is increasing investment in cleaner energy sources. This makes it an exciting sector for investors interested in green technologies.
4. Agriculture: Agriculture continues to play an important role in Kosovo’s economy, with opportunities in organic farming, food processing, and exports. As demand for organic and sustainable products grows globally, Kosovo’s fertile land and low-cost production provide great potential for agriculture-related investments.
5. Construction and real estate: Kosovo’s real estate sector is experiencing growth, especially in urban areas such as Pristina. With increasing demand for both residential and commercial spaces, this sector offers solid returns for investors.

Conclusion

Given its strong economic fundamentals, favourable business environment, and strategic location, Kosovo stands out as a destination with high investment potential.

For further information please contact:

Nehale Hajredini, Audit Assistant, ECOVIS UA Kosova SH.P.K., Auditing, Accounting, Tax Services and Financial Consulting, Pristina, Kosovo
Email: nehale.hajredini@ecovis-uakosova.com

How to manage tax risk in China

02.12.2024

Companies, as well as private individuals, must manage their taxes in order to be able to identify and contain potential risks. The penalties for mistakes are harsh and fearsome. The Ecovis experts explain how tax risks can be managed in China.

The world of tax and audits in China not only involves the tax office. There is also a broad collaboration that includes the Ministry of Public Security, China Customs, the People’s Bank of China, the Supreme People’s Procuratorate and the State Administration of Foreign Exchange.

Risk prevention and control

Within a company, alongside the financial officer and legal representative, the shareholder(s), as well as those who write invoices and prepare the tax, are responsible for risk-prevention and control. To identify tax issues in a company, it is first necessary to understand how the tax audit procedure works.

In the context of big data, tax audit procedures follow a structured process. First, an electronic system automatically collects and analyses data, identifying potential tax risks. When issues are flagged by this system, the tax authority informs the taxpayer about these specific concerns. Following this notification, a tax audit or inspection is conducted to examine the taxpayer’s records in detail. Based on the findings, the taxpayer is required to file any outstanding taxes and pay late payment interest, if applicable. Finally, if the taxpayer disagrees with the audit result, they may seek administrative reconsideration of the decision.

Companies should ensure that all information on taxes and audits is consistent and logically linked. We can provide support with tax check-ups.

Pingwen Hu, Senior Partner and Certified Public Accountant, ECOVIS Ruide Certified Public Accountants Co., Ltd, Shanghai, China

How to identify potential tax problems

Based on our extensive experience, companies should:

• Evaluate their own operations: Assess whether there are any unusual business activities, and review the company’s growth and overall position within the industry (e.g., excessive profits or prolonged losses).
• Examine VAT invoices: Identify any discrepancies in input and output data, spot abnormal invoices, or note any inconsistencies between the goods received and invoiced amounts.
• Facilitate interdepartmental information sharing: Review information from various government departments and analyse bank statements alongside business data to ensure alignment and accuracy.

For further information please contact:

Pingwen Hu, Senior Partner and Certified Public Accountant, ECOVIS Ruide Certified Public Accountants Co., Ltd, Shanghai, China
Email: pingwen.hu@ecovis.cn

Global minimum tax Brazil: Government proposes additional taxation

29.11.2024

Multinational companies with a global annual turnover of more than EUR 750 million will have to pay an additional social security contribution on their net profits (CSLL) in Brazil from the 2025 tax year. Affected companies should therefore review their tax planning strategy. The consultants at Ecovis know the details of the new global minimum tax.

Provisional Measure No. 2,265 of 2024 aligns Brazilian tax rules with international standards by adopting Pillar 2 of the OECD’s Global Anti-Base Erosion (GloBE) rules, which sets a minimum income tax rate of 15% for all jurisdictions in which business entities operate. This additional taxation will take effect from the 2025 tax year, with payments expected by the last business day of July of the following fiscal year.

With the introduction of the CSLL in Brazil, multinational companies must rethink their tax planning strategy. We can support them in this.

Mauricio Nucci, Partner Tax Law, Vaz de Almeida Advogados – Member of ECOVIS International, Sao Paulo, Brazil

The background for the additional social security contribution

This measure is aimed at curbing fiscal competition among countries by imposing a minimum tax across jurisdictions. Essentially, GloBE rules discourage profit remittance to countries offering tax benefits that artificially suppress or reduce the tax incidence on profit. In addition, the Government also issued Normative Ruling RFB No. 2,228, which regulates the matter within the scope of the Brazilian tax administration and includes an additional Social Contribution on Net Profit (CSLL).

As a provisional measure, the Government’s proposal must be confirmed by Congress within 120 days from its publication. If not confirmed within the legal period (or if rejected by the Federal Legislature), the provisional measure will automatically lose its effect.

How to calculate the CSLL surcharge

The calculation for the base amount for the CSLL takes into account the sum of a company’s taxes and its adjusted income or loss attributable to the jurisdiction for the fiscal year. If the rate falls below 15%, the tax will apply to the so-called company excess profits. Excess profits are determined from the company’s net profit, adjusted by excluding amounts related to tangible investments and payroll expenses.

It should be noted that companies subject to the CSLL surcharge who fail to provide information within the defined deadlines will face a fine of 0.2% of total revenue for each month of delay, up to a maximum of 10% of total revenue or BRL 10 million, plus a penalty of 5% of the omitted, inaccurate, or incorrect amount.

For further information please contact:

Mauricio Nucci, Partner Tax Law, Vaz de Almeida Advogados – Member of ECOVIS International, Sao Paulo, Brazil
Email: mauricio.nucci@vazdealmeida.com

Rafael Maniero, Tax Law Attorney, Vaz de Almeida Advogados – Member of ECOVIS International, Sao Paulo, Brazil
Email: rafael.maniero@vazdealmeida.com