KOSOVO: Insurers exempted from taxation on collected premiums

5 September 2019 — Cosmin CONCEATU
Insurance companies from Kosovo were exempted from paying the tax of 5% on turnover, including the 1% share that was redirected to the Red Cross of Kosovo.

Up until July 2019, insurance companies from Kosovo were subject to an extra tax of 5% applied to the total premiums written, adding up to the other fiscal obligations that insurance companies already had. No other business in Kosovo was compelled to such a tax, other than insurance companies. This was a big issue, since the 5% tax was not correlated to the actual profit of the insurer - and insurance companies in Kosovo have really struggled in the past years to stay afloat on profit.

The Insurance Association of Kosovo has estimated a total amount of EUR 60 million spent on this tax over the years, in the context where the total profit margin of all local insurers, summed up, was always under EUR 5 million threshold monthly in the past 2 years, insurers frequently running on loss the years before 2017.

At the insistence of the Central Bank of Kosovo (CBK) and the Insurance Association of Kosovo, which repeatedly advocated to the competent institutions of the Republic of Kosovo that insurance companies in the country are subject to a discriminatory tax, Members of the Assembly of Kosovo rectified the concerned law, liberating Kosovar insurers from the extra burden.

"It is very clear that the way taxation worked in the past has not achieved one of the key objectives that taxation has - to promote economic development and to allocate efficiently the resources of the economy," stated Fehmi MEHMETI, Governor of the CBK, regarding the repeal of 5% tax on insurers.

At the end of March 2019, Constitutional Court of Kosovo repealed paragraph 1.7 of Article 14 of the Law on the Red Cross of Kosovo, according to which insurance companies had to pay 1% from their premiums to the institution, being classified as unconstitutional.

"The fair treatment of the insurance sector, regarding the Red Cross obligations and the manner of taxation, will strengthen the financial position of insurers, which will offer them a greater capacity to meet their obligations and will enhance product development," emphasized Sami MAZREKU, Executive Director of the Insurance Association of Kosovo.

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