On June 8 2018, Kosovo and Austria signed the Convention for Elimination of Double Taxation with the purpose of developing their economic relationship and enhancing their co-operation in tax matters. On July 27 2018, Kosovo ratified the treaty; thus it will be effective from next year.
The convention will be applied to income tax and corporate tax in Austria and to personal income tax and corporate income tax in Kosovo.
According to the treaty, construction and installation projects in progress for more than 12 months, and consultancy services provided through personnel engaged for such purposes in progress for more than six months, in a 12-month period will be considered as constituting 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.
As regards the actual elimination of double taxation, both countries will allow deduction from taxes in the amount of tax paid in 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 that are trading with the other country to seek professional advice as regards the implications of the new treaty.