Investment in Kosovo 2016 - assets.kpmg
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Investment in Kosovo 2016 | 1
Investment
in Kosovo
2016
KPMG in Kosovo
kpmg.com/al
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.2 | Investment in Kosovo 2016
Investment
in Kosovo
Edition 2016Investment in Kosovo 2016 | 3 Preface Investment in Kosovo is one of a series of booklets published by KPMG member firms to provide information to those considering investing or doing business internationally. Every care has been taken to ensure that the information presented in this publication is correct and reflects the situation as of May 2016 unless otherwise stated. Its purpose is to provide general guidelines on investment and business in Kosovo. As the economic situation in the country continues to undergo changes, further advice should be sought before making any specific decisions. For further information on matters discussed in this publication please contact Gilbert McCaul, Partner. KPMG Albania Shpk Kosovo Branch 6 Pashko Vasa Str. 10 000 Pristina Kosovo Tel: +381 38 246 771 Fax: +381 38 246 772 kpmg.com/al
4 | Investment in Kosovo 2016 Contents General Information........................................................................................................... 6 Geography and population.................................................................................................... 6 Climate ................................................................................................................................ 6 Official language................................................................................................................... 6 A brief history of Kosovo...................................................................................................... 7 Currency............................................................................................................................... 7 Government and political system......................................................................................... 7 Visa system for foreigners traveling to Kosovo..................................................................... 8 Travel.................................................................................................................................... 8 Airport .................................................................................................................................. 9 Investment Environment ................................................................................................ 10 Economy ............................................................................................................................ 10 Labor market...................................................................................................................... 11 Fiscal indicators ................................................................................................................. 11 Trade .................................................................................................................................. 12 Privatization and investment opportunities ........................................................................ 13 Agriculture and farming ..................................................................................................... 13 Tourism............................................................................................................................... 14 Energy ............................................................................................................................... 14 Mining................................................................................................................................. 15 Telecommunications .......................................................................................................... 16 Foreign direct investments ................................................................................................ 16 Business Environment .................................................................................................... 18 Business entities ............................................................................................................... 18 © 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Investment in Kosovo 2016 | 5 Business Registry............................................................................................................... 20 Financial sector .................................................................................................................. 20 Protection of intellectual property rights ........................................................................... 23 Accounting and Auditing ................................................................................................ 24 Accounting regulations and requirements.......................................................................... 24 Audit requirements ............................................................................................................ 25 Taxation ............................................................................................................................ 26 General .............................................................................................................................. 26 Corporate income tax......................................................................................................... 26 Personal income tax........................................................................................................... 29 Value added tax.................................................................................................................. 30 Withholding tax.................................................................................................................. 31 Customs duties and customs code.................................................................................... 31 Excise taxes........................................................................................................................ 32 Local taxes.......................................................................................................................... 32 Double Tax Treaties ............................................................................................................ 32 Employment Regulations................................................................................................ 33 Legislation ......................................................................................................................... 33 Employment contracts....................................................................................................... 33 Termination of employment contracts ............................................................................. 33 Conditions of employment ................................................................................................ 33 Holidays and absence from work....................................................................................... 34 Government Control......................................................................................................... 35 Public procurement............................................................................................................ 35 Competition law................................................................................................................. 36 Environmental laws............................................................................................................ 36 Appendix A Important Links.............................................................................................. 37 © 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
6 | Investment in Kosovo 2016
General Information
Geography and population Kosovo has an estimated population of
Kosovo is located in Southeast Europe, on 1.8 million and its capital, Pristina, has a
the Balkan Peninsula and encompasses population of some 210,000 inhabitants,
10,877 square kilometers. The country according to the latest statistics published
is bordered by the Republic of Serbia in by the Kosovo Agency of Statistics in
the north and east, the Former Yugoslav June 2015. Ethnic Albanians make up the
Republic of Macedonia in the south, the majority of the population (92%) while
the largest minority is represented by
Republic of Albania in the southwest and
Serbians. Other minority groups include
Montenegro in the northwest.
Bosnians, Turks, Roma, Gorans, Ashkali and
The terrain is mostly mountainous Egyptians. Kosovo has one of the youngest
and the highest peak is Gjeravica at populations in Europe with an estimated
2,656 meters (8,714ft) above sea level. The 40% of its citizens below the age of 20.
Sharr Mountains are located in the south The main religions are Muslim, Serbian
and southeast bordering the Republic of Orthodox and Roman Catholic.
Macedonia and the Kopaonik Mountains
are located in the north. The central region Climate
of Drenica and the eastern part of Kosovo, The climate in Kosovo is mostly
known as Gollak or Gallap, are largely hilly continental. The geographic location of
areas. There are two main plains in the the country is the reason for its large
country. Rrafshi i Dukagjinit basin is located annual temperature range. The summer
in the west and the Plain of Kosovo lies temperature highs can reach +38°C
in the east. The low hill area of Drenica (100°F), and the winter temperatures
is between the two basins. The Plain of can be as low as -20°C (-4°F). Kosovo
Kosovo is on average higher than the experiences warm summers and cold and
plain of Rrafshi i Dukagjinit by about snowy winters.
100 meters (328ft).
Official language
The numerous landscapes and other tourist
attractions, two of the most prominent Kosovo has two official languages –
being the Rugova Canyon and the Gadime Albanian and Serbian. Turkish, Bosnian and
Cave, make Kosovo a destination Roma languages have the status of official
worth visiting. languages in certain municipalities.
Kosovo is in the Central European time
zone and hence is one hour ahead of
Greenwich Mean Time (GMT).
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.Investment in Kosovo 2016 | 7
A brief history of Kosovo The war ended on 10 June 1999. A
The Kosovo region in the Balkans in the NATO-led Kosovo Force (KFOR) entered
ancient past was known as Dardania and the province following the Kosovo War,
its inhabitants as Dardans. After the Roman tasked with providing security to the
conquest, the region became part of the United Nations (UN) Interim Administration
Moesia Superior province in the Mission in Kosovo (UNMIK). In accordance
1st century AD and then part of the with UN Security Council Resolution 1244
(1999) which placed the country under
Byzantine Empire. Kosovo was first
a transitional administration, Serbia’s
absorbed into Serbia in the late 12th
territorial integrity was protected, but it
century, and was part of the Serbian
was UNMIK that assumed responsibility for
Empire from 1346 to 1371. The Serbian
governing Kosovo. On 17 February 2008,
Empire was defeated by the Ottoman Turks
Kosovo’s Assembly declared independence
and the Ottoman Empire took control of
from Serbia. As of May 2016, 111 UN states
today’s territory of Kosovo in 1455. It ruled
recognize the independence of Kosovo.
in the region for almost 500 years.
It has become a member country of the
After the First Balkan War of 1912, most of International Monetary Fund (IMF) and
the country’s territory was internationally the World Bank and, in December 2012, it
recognized as part of the Kingdom of became the 66th member country of the
Serbia, while the region of Rrafshi i European Bank for Reconstruction and
Dukagjinit as part of the Kingdom of Development (EBRD). Kosovo aspires to be
Montenegro in the Treaty of London of part of the European Union.
May 1913. In 1918, Serbia became part
of the newly-formed Kingdom of Serbs, Currency
Croats and Slovenes. During the Second The euro was declared the official currency
World War, most of the territory of Kosovo of Kosovo from 1 January 2002. This
was awarded to the Italians who occupied was undertaken to replace the previous
Greater Albania and a smaller part in the widespread use of the German mark which
north to the Germans who occupied Serbia. had been the measurement currency in the
Following the end of the war, Kosovo country before 2002. Today, the euro is the
became part of the Socialist Republic of most widely used currency in Kosovo with
Serbia within the Socialist Federal Republic the Serbian dinar still in circulation in the
of Yugoslavia and enjoyed a certain degree Serbian enclaves.
of autonomy during the period 1974-90.
The Yugoslav Republic began to break up Government and political system
in the early 1990s. An upsurge in Kosovo The Assembly of Kosovo has 120 seats
followed, which drew the attention of the and all members serve a four-year term.
international community in 1998. After Currently, the seats are held as follows: the
the breakdown of negotiations between Democratic Party of Kosovo has 35 seats,
Serbian and Albanian representatives, the the Democratic League of Kosovo has
North Atlantic Treaty Organization (NATO) 33 seats, the Group Vetevendosje has
intervened on 24 March 1999 launching a 17 seats, the Alliance for the Future of
campaign of heavy bombing against Serbia. Kosovo has 8 seats, the Srpska List Party
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.8 | Investment in Kosovo 2016
has 11 seats, the Initiative for Kosovo Party to Kosovo, foreigners need to be informed
has 6 seats, and the remaining 10 seats whether they need a visa to enter it.
are held by minority groups and non-
Citizens of countries such as Albania,
affiliated individuals.
Australia, Canada, European Union (EU)
The Head of State is the President of the Member States, USA, South Africa, and
Republic of Kosovo who, according to the Turkey do not need a visa. However,
Constitution of the country, is elected by Kosovo is starting to implement a stricter
the Assembly for a five-year term. In visa regime. Individuals are required to
April 2016, Kosovo’s Assembly elected register with the police if they are present
Hashim Thaci as President. in the country for more than 90 days and
to prove to the border police at the time of
The President proposes to the Assembly a
entry that they have a legitimate reason to
candidate for Prime Minister, who is finally enter Kosovo. According to Law
approved by the Assembly. In accordance No. 04/L-219 on Foreigners, a foreigner
with Kosovo’s Constitution, the basic unit shall not engage in paid employment in the
of local government is the municipality. Republic of Kosovo on the basis of a visa
Currently, there are 38 municipalities alone. If foreigners stay in Kosovo for more
established in Kosovo. than 90 days in a year, they must apply for
The judicial system consists of the a residence permit. This will facilitate their
Constitutional Court, the Supreme Court, entry into and exit out of Kosovo.
the Appeal Court and the District Court.
Kosovo’s Constitution provides that the Travel
Supreme Court of Kosovo is the highest Skopje and Tirana are one and a half
judicial authority. The Kosovo Judicial hours and three and a half hours by road,
Council elects a Chair and Vice Chair from respectively, from Pristina. Additionally,
its members, both for a term of three there are regular bus lines from these two
years. Elections to these offices do not cities to Pristina.
extend the mandate of the members of the
There are bus connections from Belgrade
Kosovo Judicial Council.
and Nis to Pristina and Prizren and from all
The European Union Rule of Law Mission, major towns in Serbia to the northern parts
EULEX, is acting to strengthen Kosovo’s of Kosovo.
institutions, judicial authorities and law As Serbia does not currently recognize
enforcement agencies. Following the Kosovo, travelers will not be given a
Kosovo War in 1999, KFOR, a military force Serbian exit stamp if they enter Kosovo
under NATO command, is working with from Serbia. In addition, if the Serbian
Kosovo’s authorities to provide security authorities find any Kosovo stamps in the
within the country. travelers’ passports, the stamps will be
crossed out, although it is unlikely that
Visa system for foreigners traveling travelers will be denied entry because of
to Kosovo them. However, if one lives in or intends
Kosovo is relatively easy to access and a to travel frequently to Serbia, it has been
valid passport is required. Before traveling suggested to obtain matching pairs of entry
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.Investment in Kosovo 2016 | 9 and exit stamps; this means backtracking and leaving Serbia via a recognized border checkpoint, such as Belgrade Airport. Airport Pristina International Airport Adem Jashari is the only civilian airport in Kosovo. It takes a 20-minute drive from Pristina to get there. Many recognized European airlines operate via it including: Austrian Airlines, Turkish Airlines, Hamburg International, Adria Airways, Germania, Croatia Airlines, EasyJet, Scandinavian Airlines, Norwegian, Helvetic Airways, Germanwings, Edelweiss Air, AtlasJet, and Pegasus Airlines. The Airport has direct flights to: Berlin, Dusseldorf, Hamburg, Hannover, Istanbul, Ljubljana, London, Munich, Stuttgart, Vienna and Zurich. Airlines and flight destinations are liable to change, often depending on the season. © 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
10 | Investment in Kosovo 2016
Investment Environment
Economy compared to EUR 2,935 in 2013. However, it
Despite the challenges faced by other still continues to be low compared to other
countries due to fluctuations in the global countries in the region such as Albania,
economy and particularly in Europe, Kosovo’s Bosnia and Herzegovina and Serbia as each
economy has experienced positive growth exceeds EUR 4,000.
during recent years. However, the economy In 2014, the inflation rate or consumer price
of the country is characterized by a high index (CPI) dropped to 0.6%, which is less
reliance on the import of goods which than the rate of 1.8% over the same period
negatively affects the growth rate and the in 2013. This decline is attributed to the
current account balance. price decrease of the imported goods which
In 2014, Kosovo experienced a real gross reflects the interrelation between the price
domestic product (GDP) growth of 1.2% developments in Kosovo and the prices in
which is lower compared to previous years. international markets.
This growth is due mainly to the increased The growth of domestic demand in 2014
consumption and the level of investments. had an impact on the import growth and,
In 2015, the Central Bank of Kosovo consequently, on the deficit growth of the
estimated a growth rate of 0.4% which is current account. In 2014, the position of the
mostly attributed to consumption and private current account in Kosovo deteriorated due
investments while it is still lower than the to a higher deficit in trade of goods, while
previous year. Investments are estimated to the positive balance in services trade and
register growth. categories as primary and secondary income
continues to contribute to the narrowing of
Kosovo’s GDP per capita incurred a slight this deficit.
increase in 2014 reaching EUR 2,989
2010 2011 2012 2013 2014 2015(e)
GDP at market prices, EUR million 4,402 4,815 5,058 5,327 5,568 5,707
Real GDP growth rate (%) 3.30 4.40 2.80 3.4 1.2 3.00
GDP per capita in EUR 2,480 2,672 2,799 2,935 2,989 3,055
Inflation rate (%) 3.50 7.30 2.50 1.80 0.6 0.40
Current account in EUR million (516) (658) (380) (339) (438) (541)
Source: 2015 Macroeconomic Development Report, issue 3, 2016 Macroeconomic Development
Report, issue 4 and 2015 IMF Country Report
Note: (e) for estimate
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.Investment in Kosovo 2016 | 11
Labor market increase of 18.8% in comparison to 2014.
The unemployment rate in Kosovo is Non-tax revenues amounted to
estimated to be 35.3%, according to the EUR 188.1 million or 9.8% higher
latest available statistics from the Kosovo than the previous year.
2014 Labor Force Survey carried out by the Budget expenditure in 2015, not including
Kosovo Agency of Statistics. Unemployment designated donor grants and trust funds,
is higher among youth and women. stood at EUR 1.57 billion and recorded an
The situation is not expected to improve annual growth of 6.2%.
quickly given that Kosovo has the youngest
population in Europe and these individuals Capital expenditures in 2015 absorbed
enter the labor market each year finding 25.8% of the total expenditure reaching
limited employment options. On the other EUR 404 million, which represents a
hand, the labor market offers a work force decrease of 1.8% from the previous year.
with varied skills and levels of education Most of the capital expenditure in 2014
and training. and 2015 was intended for infrastructure
investments, which largely consisted of
An important component of Kosovar life and the construction of the Pristina-Hani i Elezit
the labor market is migration. Traditionally, highway, which began in July 2014.
migration has been very high, which in turn
has alleviated some of the labor market According to the Central Bank of Kosovo,
pressures. Another positive influence from during 2015 Kosovo’s budget recorded
migration is the fact that returning migrants a primary deficit of EUR 110.2 million,
bring to the local market their experience compared with the deficit budget balance of
and skills gained abroad. EUR 143 million in 2014. In the same period,
general government debt amounted to
Fiscal indicators EUR 748.9 million, or 12.98% of GDP
(10.63% in 2014). This increase in public
The state budget during 2015 experienced
debt in 2015 is mainly accounted for by the
an increase of revenue and expenses.
growth of domestic debt of 47.3% which
Revenue increased by 9.3% to
reached EUR 378 million, while the external
EUR 1.46 billion. Revenues collected at the
debt increased significantly by 13.7%,
borders continue to dominate the structure
reaching EUR 371 million. While in previous
of budget revenues, and represented 65%
years public debt was dominated by external
of the total revenues in 2015. Revenues
debt, at the end of 2015 domestic debt had a
collected from border taxes reached
higher share (50.4%) of the total public debt.
EUR 944.9 million, marking an annual
Kosovo Government budget overview
EUR million 2010 2011 2012 2013 2014 2015
Revenue 1,177 1,302 1,537 1,356 1,370 1,460
Expenses (1,270) (1,386) (1,466) (1,490) (1,500) (1,570)
Budget (deficit)/surplus (93) (84) 71 (135) (130) (110)
Source: 2014 Annual report and Quarterly Assessment of the Economy No. 13, Q IV/2015 of Central
Bank of Kosovo
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.12 | Investment in Kosovo 2016
Trade accounted for 42% (2013: 11%) and
The negative trade balance in Kosovo 15% (2013: 19%) of the total exports
worsened in 2014 influenced by the high respectively. In 2015, the Kosovo Agency
dependence on imports and the low level of Statistics estimates that the 28 EU
of exports. countries will account for 20% of exports
(2014: 14%) while Asian countries will
The construction of the Merdare-Morine decline to 18% (2014: 42%).
highway is now finished. The construction
of the Pristina-Skopje highway began at the Other countries with a high share of
end of 2014. The first part of this highway exports are the neighboring Macedonia and
between Pristina and Skopje opened for Montenegro with respective shares of 10%
traffic in the second half of 2015. and 5%.
Both highways are considered to be of Unlike exports, EU countries account for
high strategic importance for the country, the largest share of imports, with 43% for
primarily since they provide Kosovo with 2014. Meanwhile, neighboring countries
access to the sea via the Albanian coast such as Serbia and Albania account for
and with the market of Macedonia. 21% of all imports with respective shares
of 14% and 7%. As in previous periods, a
Exports are mainly metal related goods, similar trend continued in 2015.
which in total represent around 52% and
49% of exports for the years 2014 and Food items, livestock, oil and oil derivatives
2013 respectively. The remaining exports make up around 33% of imports in 2014
relate to agricultural products, beverages (2013: 37% of all imports), while machinery
and tobacco, machinery, mechanical and and equipment as well as metals represent
electrical equipment, as well as chemical 21% of the total imports in 2014 (2013:
exports. In 2015, the Central Bank of 20%). The value of imported mineral
Kosovo estimates that exports will continue products is estimated to decline to 10%
to be dominated by the base metals in 2015. Besides the category of mineral
category which, for the first 9 months of products, all other categories of imports
2015, increased approximately 7%. were characterized by a slight increase in
the first 9 months of 2015.
In 2014, the main destinations for exports
were Asian countries and Albania which
Trade balance
EUR million 2010 2011 2012 2013 2014 2015(e)
Exports 296 319 276 294 325 325
Imports 2,158 2,492 2,508 2,450 2,539 2,635
Trade balance (1,862) (2,173) (2,232) (2,156) (2,214) (2,310)
Coverage ratio 14% 13% 11% 12% 13% 12%
Source: Kosovo Agency of Statistics
Note: Coverage ratio is computed as export over imports ratio, (e) for estimate
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.Investment in Kosovo 2016 | 13
Privatization and investment extended from 3 to 4 years for investments
opportunities ranging from EUR 2 to 5 million, and from
The privatization process is administered 1 to 3 years for investments under
by the Privatization Agency of Kosovo EUR 2 million.
(PAK). PAK has been established as an In addition, the Government of Kosovo
independent public body which manages has prepared a Draft Law on Strategic
the privatization of so-called socially-owned Investments in the Republic of Kosovo.
enterprises (SOEs). As reported by PAK, in Its aim is to facilitate, attract, and
2012, more than 590 SOEs were privatized create the necessary conditions for the
in the last 56 rounds of privatization via the implementation of strategic investments
“spin-off” privatization method. Most of in Kosovo. The law will also regulate
the SOEs subject to privatization operated administrative procedures and the criteria
in the agriculture sector with a share of for evaluation, selection and supervision of
21.3%, followed by trading companies with strategic projects, as well as administrative
a share of 11.5%. procedures for granting the use of the
During 2012, the total revenue from property of the Republic of Kosovo with the
privatization through spin-off was aim of implementing strategic investment
EUR 552 million whilst revenue from sale projects. The Assembly of the Republic of
of SOEs through liquidation was Kosovo is expected to approve this law
EUR 62 million. In 2013, 136 contracts in 2016.
(liquidation 105, spin-off 31) were
completed, while in 2014, in total 145 Agriculture and farming
contracts were completed. During 2015, Agriculture has traditionally been an
PAK did not execute any asset sale due important economic activity in Kosovo.
to the lack of Board of Directors. The total In fact, as reported by the World Bank,
amount of the sales proceeds during the it previously accounted for as much as a
entire process (June 2002 – December quarter of the total domestic output, while
2015) is EUR 660,223,469. it significantly decreased in recent times,
to less than 20%. In addition, average
Several sectors present good investment
agricultural land per person is around
opportunities to take advantage of the
0.15–0.18 hectares, less than half the
young population, the growing economy
EU average.
and the fairly untapped natural resources of
the country. The dissolution of state-owned agricultural
enterprises has significantly fragmented
The Government of Kosovo decided to
the farm structure and has led to a decline
amend its tax policies in order to provide
in arable land and irrigation, which results
tax incentives for new investments; for
in lower agricultural production and
example, depending on the size of the
subsequent economic losses. In any case,
investment, 0% corporate income and
about 53% of the total surface area of the
value added tax rates may be applied. The
country is considered to be arable land.
decision will begin to be implemented once
the respective administrative instruction There is a substantial scope for future
is signed by the Minister of Finance. The investments in this sector and ample
time frame for these incentives has been opportunities for marketing products,
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.14 | Investment in Kosovo 2016
both domestically and abroad, given the providing good prospects to develop
limited investor attention it has received cultural tourism.
to date. Recent studies from the Kosovo
Agency of Statistics indicate that some Energy
140,000–150,000 people are employed Energy production is largely based on
in agriculture. The development of the thermal power plants utilizing coal (lignite)
agriculture sector would also present and to a smaller extent hydropower
additional opportunities for investments in generation. The Kosovo Energy Corporation
the food processing industry, horticulture JSC (KEK) is the sole power corporation in
sector (i.e. production of fruits and Kosovo for energy production. Currently,
vegetables), and livestock subsector. the local energy production is realized
by two thermal power plants, Kosova A
Tourism and Kosova B, with an installed capacity
The country’s natural resources include of 800 MW and 678 MW, respectively.
mountains, lakes, and rivers and represent As per data from the Energy Regulatory
tourism opportunities. Kosovo’s potential in Office of Kosovo, both thermal power
tourism is closely related to the country’s plants contributed 97% of the total energy
geographical position. The mountainous produced in 2014.
south offers good opportunities for
In addition, the hydropower plant (HPP) of
winter tourism and the most important
Ujman with an installed capacity of 35 MW
sites are the Mountains of Sharr, Cursed
and other small distributive hydropower
Mountains where Brezovica and Rugova
plants with a total installed capacity of
are distinguished as skiing and recreational
10.84 MW account for the remaining
centers, Luboteni Peak, and Gjeravica Peak
energy production.
which is the highest peak in Kosovo.
Kosovo has launched a project to build a
In April 2015, Kosovo’s Trade and Industry
coal-fired power plant, Kosova e Re, with
Ministry signed a contract with a French
an installed capacity of 500 MW. The
consortium, which includes several
new thermal power will be built by the
international and local companies for
US power company Contour Global. It is
the development of Brezovica. The total
expected that around 10,000 jobs would
amount expected to be invested is around
be created during the construction of the
EUR 410 million over the next 17 years
plant which would employ 500 people once
to make Brezovica one of the largest
it comes on stream. The project received
mountain resorts in the Balkans.
support from the World Bank and the
In addition, the wellness tourism has European Union. The construction will start
a great potential for development. The during 2016, and is expected to be finished
numerous thermal springs are renowned in 2020-2021. The project cost is estimated
in the region for their healing effects and to be approximately EUR 1.4 billion.
the most famous ones are Kllokoti spa and
KEK has been unbundled into production
Peja spa.
named KEK JSC (Kosovo Energy
There are also plentiful religious and Corporation), transmission named KOSTT
other sites of cultural and historical value JSC and a distribution and supply division
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.Investment in Kosovo 2016 | 15
named KEDS (Kosovo Energy Distribution Mining
Services JSC). In 2012, the Government Kosovo has vast mineable quantities of
of Kosovo privatized KEDS through an lignite, lead-zinc-silver, nickel, chrome,
international tender, which was won by the
aluminum, magnesium and a wide variety
consortium Çalik Holding & Limak
of construction materials.
from Turkey.
Lignite is of high importance to Kosovo.
Following the privatization, in line with legal
According to the Ministry of Mining and
requirements, the electricity distribution
Energy, at 14,700 megatons, Kosovo
business was unbundled from the supply
possesses the world’s fifth largest proven
business. The result is that Kosovo
reserves of lignite. Lignite is deposited
Electricity Supply Company JSC (KESCO)
across the Kosovo Basin, Dukagjin and
was established from January 2015. It is
Drenica Basins, although mining has so far
the only public supplier of electricity in
been restricted mostly to the Kosovo Basin.
Kosovo and is responsible for customer
contracts, purchases, sales and the supply Meanwhile, lead, zinc, and silver mining
of electricity. Meanwhile, KEDS continues have proved popular. These mining
to operate as the distribution system activities have been based on a series
operator. This separation was in anticipation of nine mines, five of which comprise
of the liberalization of the energy sector today’s Trepca Complex. Active mining in
in Kosovo. these five mines ceased at the beginning
of the Serbian-Kosovo conflict and offers
Two of the main problems for the energy
sector in Kosovo remain the high level very good investment opportunities. In
of technical and commercial losses and fact, Trepca is a frequently discussed
the level of energy production which is privatization topic. However, its sale is
insufficient to cover the increasing energy complicated by ownership problems. In the
demand. In this regard, investments in beginning of 2016, the Prime Minister of
the energy sector are needed. Similarly, Kosovo stated that Trepca is not required to
the neighboring country Albania is faced remain a socially-owned enterprise within
with problems in the energy sector as well the scope of the Privatization Agency of
due to the high dependency on the water Kosovo; yet, Trepca should not be allowed
reserves in the country. to be liquidated and its status can be
discussed in terms of future ownership
Given these conditions, the governments with a combination of public ownership and
of both countries have considered the co-ownership, or part of private ownership
integration of the energy sector in Albania,
and privatization of those assets which
almost entirely HPP based, with that
Trepca no longer needs. The Government of
of Kosovo, which is coal power plant
Kosovo has determined that the Assembly
based, as two complementary systems.
will approve a special law for Trepca in
Moreover, the importance of the energy
2016, and within it, technological and
system unification in both countries further
environmental development of alternatives
increases with the construction of the
and other options which will be harmonized
interconnection line of 400 KV between
with European Union rules.
Albania and Kosovo which will start
operating during 2016.
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.16 | Investment in Kosovo 2016
Telecommunications technology and communication sector
in Kosovo and offers services in mobile
Kosovo has not yet received a country code
communications, fixed telephony, digital
from the International Telecommunication
cable television, internet services, as well
Union and, for this reason, the providers
as media. IPKO is the first mobile operator
in the country use three country codes:
which offered fast-speed mobile internet
Monaco (+377), Slovenia (+386) and
3.75G network in Kosovo.
Serbia (+381).
Kujtesa Net LTD is an internet services
In 2013, during the negotiation process
and cable TV provider which is also
between Kosovo and Serbia which was
located in Kosovo. It is ranked as the third
facilitated by the European Union, the
telecommunication provider in the country.
two governments provisionally agreed for
Kosovo to have its own code. According to
Foreign direct investments
the Brussels agreement, the International
Telecommunications Organization (ITO) Foreign direct investments (FDI) received
has agreed that the new code (+383) for in Kosovo in 2014 reached the lowest value
Kosovo is expected to be available in 2016. of euro or almost half less than in 2013.
The failed telecom privatization, a weak
Post and Telecommunications of Kosovo business environment, and domestic
JSC (PTK) is composed of two business political turbulence in 2014 were among the
units: Kosovo Telecom and Vala mobile factors that contributed to the substantial
network operator. PTK offers fixed decline of net FDI in 2014. The state is
and mobile phone services, as well looking to improve impeding factors in
as internet services, and is a leader of attracting foreign investments, such as
telecommunication services in the country corruption, organized crime, and the
serving over 1.2 million customers. PTK judicial system.
has approximately 2,400 employees and
the Government of the Republic of Kosovo The higher level of FDI in 2015 presents
holds 100% of its shares. signs of a solid recovery. The increase
of FDI in 2015 is due to higher inflow of
Meanwhile, from 2008, Z-Mobile has investments but FDI in Kosovo continues
been licensed to carry out mobile to be highly dependent to developments in
telecommunication services, functioning as the economies of the Eurozone countries,
a virtual operator using the network of PTK. where most of the FDI comes from.
During 2014 and 2015, PTK invested
more than EUR 100 million in upgrading
the network to support 3G and 4G
technologies. As a result, approximately
1 million customers of Vala have benefited
from this.
IPKO Telecommunications LLC (IPKO), a
subsidiary of Telekom Slovenia, is one of
the main companies in the information
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.Investment in Kosovo 2016 | 17
Foreign direct investments by country
EUR million 2008 2009 2010 2011 2012 2013 2014 2015
Top five countries
Switzerland 32 23 35 31 44 42 38 76
Turkey 24 15 5 35 66 89 20 69
Albania 22 23 20 11 5 19 20 41
United Kingdom 37 6 39 80 14 11 (40) 35
Germany 44 75 92 67 50 22 29 33
Total top five countries 158 142 191 224 178 182 69 254
Other countries 212 154 178 161 51 98 83 84
Total 370 296 369 384 229 280 151 338
Source: Monthly Statistics Bulletin, March 2016, issue 175 of the Central Bank of Kosovo
FDI in Kosovo during 2008-2015 are In January 2014, the Assembly of the
predominantly concentrated in the Republic of Kosovo approved a new law
following economic sectors with on Foreign Investment, Law No. 04/L-220.
respective averages: real estate with 40%, Its purpose is to protect, promote and
construction with 11% and the financial encourage foreign investments in the
sector with 17%, followed by the transport Republic of Kosovo. This law also provides
and telecommunications sector with 6% of foreign investors with a set of fundamental
the total FDI. rights and guarantees and, as such, it plays
During this period, real estate and a significant role in attracting and protecting
construction recorded the highest increase foreign investments.
whereas transport and telecommunications
incurred a substantial decrease, from 14%
of FDI in 2008 to negative 2.0% in 2015.
Foreign Direct Investments by sectors
400
350
300
EUR million
250
200
150
100
50
-
2008 2009 2010 2011 2012 2013
Real estate Construction
Transport & Telecommunication Production
Financial services Other sectors
Source: Central Bank of Kosovo
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.18 | Investment in Kosovo 2016
Business Environment
Business entities other obligations incurred by, or imposed
by law or contract on such an individual
Types of business entities business. Even though an individual
According to Law No. 02/L-123 of the business is not a legal entity, it may
Assembly of Kosovo dated 27 September contract, hold property and sue or be sued
2007, the business entities which may be in its own name or in the name of
registered with the Business Registry in its owner.
Kosovo are:
To register an individual business, the
• Individual business owner must sign and submit to the
Registry a form containing information
• Overall partnership
about the organization and the purpose of
• Limited partnership the business as well as the written consent
of the registered agent to serve in such
• Limited liability company
a capacity.
• Joint-stock company.
Overall partnership
Apart from the above entities, foreign
entities may also register through a branch An overall partnership is a business
office in Kosovo. Since the branch has no organization which comes into existence
separate legal personality, its rights and as a result of an association of two or
obligations pertain to the parent company. more persons and/or companies for the
purpose of engaging in business, either
Any non-resident person who is subject by registration or by conducting business
to taxation in accordance with the tax without being registered with the Registry.
legislation of the Republic of Kosovo These persons are considered to be overall
must appoint a fiscal representative partners. Every overall partner is, and all
prior to starting any economic activity overall partners are, jointly and severally
in the Republic of Kosovo. The fiscal liable for all debts and other obligations
representative must register with the Tax incurred by, or imposed by law or contract
Administration of Kosovo within five days on, the overall partnership. Such liability
of being named. is unlimited.
Individual business An overall partnership is not a legal entity.
Nevertheless, it has the right to contract,
A person owning an individual business,
hold property and sue or be sued in its
whether registered or unregistered, has
own name.
unlimited personal liability for all debts and
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.Investment in Kosovo 2016 | 19
To register an overall partnership, an A limited liability company may come into
overall partner or a person authorized by existence only upon registration with the
them signs and submits to the Registry Registry. To establish and register a limited
an “overall partnership memorandum” liability company, a founder must sign
providing information about the and submit to the Registry the statute of
organization and the purpose of the the limited liability company, which must
business as well as the written consent of contain information about the organization
the registered agent to serve in such and purpose of the business, a copy of the
a capacity. company’s bylaws and the written consent
of the registered agent to serve in such
Limited partnership a capacity.
A limited partnership is a partnership
having one or more partners with unlimited Joint-stock company
liability and one or more partners who A joint-stock company is a legal entity
are liable only to the extent of their which is owned by its shareholders but is
contributions to the limited partnership. legally separate and distinct from them.
A limited partnership is not a legal entity. A shareholder of a joint-stock company is
Nevertheless, it has the right to contract, not a co-owner of, and has no transferable
hold property and sue or be sued in its interest in any property or assets of such
own name. a company. A joint-stock company may
have a sole shareholder. The shares of a
A limited partnership is created only upon
joint-stock company may be transferred by
the registration of its limited partnership
the owner(s) without the approval of other
memorandum with the Registry along with
shareholders or the company. The initial
a copy of the company’s bylaws and the
capital of a joint-stock company must be at
written consent of the registered agent
least EUR 10,000.
to serve in such a capacity. The limited
partnership memorandum is the founding A joint-stock company may come into
and constitutive document of a existence only by registering with the
limited partnership. Registry. To register and establish a joint-
stock company, a founder must sign and
Limited liability company submit to the Registry the charter of the
A limited liability company is a legal entity joint-stock company, which must contain
which is legally separate and distinct from information about the organization and the
its owners. An owner of a limited liability purpose of the business, a copy of the
company is not a co-owner of, and has company’s bylaws and the written consent
no transferable interest in, the property of the registered agent to serve in such
owned by the limited liability company. a capacity.
The shares of a limited liability company
are distributed only to its founders and the Foreign business organization
company cannot conduct a public offering A foreign business organization, as defined
of its shares. in the Law on Business Organizations,
may engage in business activity in
Foreign entities are permitted to own and
Kosovo to the same extent as a local
participate in a limited liability company.
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.20 | Investment in Kosovo 2016
business organization. It has to register The Business Registry is responsible for:
with the Registry as a “foreign business
• Registration of new companies
organization” and comply with the
requirements of the Law. • Registration of trade names
A foreign business organization is subject • Registration of branches of foreign
to registration if it, or any agent, employee companies
or representative acting on its behalf,
• Receipt of annual financial statements
engages in any type of business activity
and business reports of limited liability
in Kosovo. A foreign business organization
companies and joint-stock companies.
is not required by the law to register in
the Registry if its business activity is
Financial sector
exclusively limited to exporting to Kosovo
of products or services that are imported Supervision of the Central Bank of
by a consumer or purchaser established or Kosovo over the activities of banks and
residing in Kosovo. other financial institutions
To establish a branch, an authorized person Pursuant to Law No. 04/L-093 on Banks,
of the foreign business organization must Microfinance Institutions and Non-banking
sign and submit a standard application Financial Institutions (“Banking Law”),
form, a “foreign business organization the Central Bank of Kosovo (CBK) is the
memorandum” containing information licensing and supervising authority for
and details about the organization, capital banks, microfinance institutions, non-
structure and purpose of the parent banking financial institutions, foreign
company, structure and purpose of the exchange offices and money transfer
branch, and the registration certificate of agencies. The CBK exercises supervision
the foreign organization in the jurisdiction over compliance of the activities of banks
of incorporation. and financial institutions with the rules
established by the Banking Law and the
In the case of a wholly owned subsidiary
regulatory framework of the CBK.
in Kosovo, a new company incorporated
under the provisions of the country’s Licenses for banking activities are issued
legislation must be established. by the CBK. In order to perform services,
the financial institutions are obliged to
Business Registry obtain licenses from the CBK for the
The Business Registry is a central performance of their activities.
register which maintains the records of all The CBK was established according to
registered companies. Law No. 03/L-074 dated 5 June 2008 on
Each registered company can be found the Central Bank of the Republic of Kosovo
online by entering the company which was revoked and replaced by Law
name or business ID number on No. 03/L-209 dated 22 July 2010. The CBK’s
http://www.arbk.org/arbk/. Application legal independence and main duties are
forms are also available on this website, provided for in a separate article of the
although many of them are now out of date Constitution. The CBK’s main objectives
and not accepted by the Registry. are to:
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.Investment in Kosovo 2016 | 21
• Foster and maintain a stable financial • Cooperate with and participate in
system, including a safe, sound and international councils and organizations
efficient payment system concerning matters which are within its
fields of competence and
• Contribute to achieving and maintaining
domestic price stability • Carry out any ancillary activities
incidental to the exercise of its tasks.
• Support the general economic policies
of the Government The CBK is exclusively responsible for
the regulation, licensing, registration and
• Act in accordance with the principle
supervision of banks and other financial
of an open market economy with
institutions as further specified in the
free competition, favoring an efficient
relevant Laws.
allocation of resources.
The staff of the CBK, and other qualified
Pursuant to the above objectives, the CBK’s
persons appointed by the Executive Board,
main tasks as per Law No.03/L-209 are to:
may visit the offices of financial institutions
• Determine and implement a financial to examine such accounts, books,
system stability policy, including documents and other records, to obtain
oversight of a deposit insurance such information and records from them,
scheme, conducting market operations, and to take such other action as the CBK
and providing emergency liquidity may deem necessary or advisable.
• Regulate, license, register and The CBK established the Credit Registry to
supervise financial institutions collect and provide information to facilitate
reduced risks of lending and to improve
• Promote and oversee safe, sound
access to credit while ensuring maximum
and efficient payment, clearing and
protection of personal data. Credit
securities settlement systems
reporting is mandatory for all financial
• Maintain an appropriate supply of institutions operating in Kosovo.
banknotes and coins in Kosovo
All financial institutions are required to file
• Hold and manage the international with the Credit Registry all information on
reserves their credits and credit products, borrower
repayment history, and guarantees. CBK
• Collect and produce statistics
regulations and operational instructions
• Contribute to achieving and maintaining provide for details on compliance,
domestic price stability penalties, credit reports, and borrower
rights. Information about mortgages,
• Inform the Assembly, Government and
pledges and other collateral can be
the public at large about its policies,
additionally reported to the Credit Registry.
tasks and operations
• Act as banker, financial advisor and Banking sector
fiscal agent for the Government and The banking and financial system structure
to any other public bodies and public in Kosovo consists of commercial banks,
organizations of Kosovo branches of foreign banks, microfinance
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.22 | Investment in Kosovo 2016
institutions, non-banking financial Raiffeisen Bank, Turkiye Is Bankasi, Ziraat
institutions, foreign exchange offices and Bank and TEB Bank.
money transfer agencies.
Foreign banks dominate the market both
Pursuant to the Banking Law, a Kosovo in terms of the number of banks and their
bank must be established in the legal form share of the total banking sector assets.
of a joint-stock company issuing shares
with a fully paid-up minimum registered Other financial intermediaries
capital of EUR 7 million. Banking activities In addition to commercial banks,
in Kosovo may be performed only upon microfinance institutions (MFIs) represent
obtaining a bank license, issued by the another important lending source in
Central Bank of Kosovo. Kosovo. Currently, there are 18 MFIs in
A foreign bank registered in another operation. The main beneficiaries
country may perform banking activities of MFI loans are small enterprises
in Kosovo only upon opening a branch in and households.
Kosovo and obtaining a license issued by Other financial intermediaries in Kosovo
the CBK. are exchange offices and money
Microfinance institutions are legal entities transfer agencies.
organized as either a non-governmental
organization (NGO) under the NGO Law or Insurance
as a joint-stock company under the Law on Pursuant to Law No. 05/L-045 on
Business Organizations which provides, as Insurance (“Insurance Law”), the Central
its primary business, loans and a limited Bank of Kosovo (CBK) is the licensing
number of financial services to micro and and supervising authority for insurance
small legal entities, low-income households companies, reinsurance companies and
and low-income persons. intermediary companies in insurance
activities. The CBK exercises supervision
Non-banking financial institutions are legal
over the compliance of the activities
entities which are neither a bank nor a
of insurance companies with the rules
microfinance institution and which are
established by the Insurance Law and the
licensed by the CBK to engage in activities
regulatory framework of the CBK.
specified in the Banking Law.
At the end of 2015, there were 15
Pursuant to the Banking Law, the Central
insurance companies operating in Kosovo,
Bank of Kosovo determines the rules of
of which 12 offer non-life insurance
licensing, supervision and functioning for
products, while the other three offer only
microfinance and non-banking financial
life insurance products. Eleven are foreign
institutions, taking into consideration the
owned insurance companies, while the
specifics of their financial activity.
remaining three are locally owned.
There are ten banks operating in Kosovo:
The total assets of the insurance sector in
Bank for Business, Banka Kombetare
Kosovo amounted to EUR 152.7 million in
Tregtare – Kosovo Branch, Economic Bank,
December 2015, marking an annual growth
Komercijalna Banka ad Beograd – Mitrovica
of 9.1% compared to 2014.
Branch, NLB Prishtina, Procredit Bank,
© 2016 KPMG Albania Shpk Kosovo Branch, a branch of KPMG Albania Shpk, an Albanian limited liability company and
a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity. All rights reserved.You can also read
