How to Set Up a Subsidiary Company in Kosovo?

Expanding into new markets is a strategic move for businesses aiming to diversify operations, reduce risk, and access emerging opportunities. One such promising destination is Kosovo, a growing market in Southeast Europe that offers favourable tax rates, a young and skilled workforce, and increasing integration with EU-aligned regulations. 

Setting up a subsidiary company in Kosovo allows foreign companies to establish a local legal entity with operational independence, legal protections, and the ability to hire staff, sign contracts, and conduct full business operations.

Key Takeaways

• Corporate tax rate: Flat 10%, one of the lowest in Europe.
• Full foreign ownership is allowed for most business sectors.
• No local director is required, but a local registered address is mandatory.
• Fast registration process: Typically completed in 3–7 business days.
• Skilled, multilingual workforce with competitive labour costs.
• Growing alignment with EU regulations, ideal for companies eyeing regional expansion.

What are the Types of Subsidiaries in Kosovo?

Foreign companies setting up a subsidiary company in Kosovo can choose from different types of subsidiary structures depending on their level of control, business goals, and partnerships. Below are the primary types:

1. Wholly-Owned Subsidiary

A wholly-owned subsidiary is a separate legal entity in which the foreign parent company holds 100% ownership of the capital and voting rights. In Jordan, this structure is typically registered as a Limited Liability Company (LLC) under the Companies Control Department. 

It offers the parent full control over operations, finances, staffing, and strategic direction. This structure allows for full profit retention, streamlined brand alignment, and enhanced legal protection for local operations.

2. Joint Venture Subsidiary

A joint venture subsidiary is a new legal entity formed through a partnership between a foreign company and one or more Jordanian partners. Ownership shares and responsibilities are defined through mutual agreement, such as a 50-50 or 60-40 split. 

Joint ventures enable foreign investors to share financial risk, tap into local market expertise, and benefit from existing distribution channels or government relationships. 

3. Affiliate or Subordinate Subsidiary

An affiliate or subordinate subsidiary is one in which the parent company holds a significant but non-controlling stake. The local entity may still be formed as an LLC, but unlike a wholly-owned entity, day-to-day decisions are often managed by local stakeholders or joint management teams. 

This structure provides the parent company with influence over major strategic directions while allowing the affiliate greater operational independence.

Having information about these is essential when figuring out how to set up a parent company with subsidiaries in Kosovo.

Step-by-Step Guide to Setting Up a Subsidiary in Kosovo

Setting up a subsidiary company in Kosovo is relatively straightforward thanks to its business-friendly environment. Here is a detailed process that you can follow for successful business incorporation:

Step 1: Determine the Legal Structure

Based on your business needs, risk tolerance, and tax planning goals, choose the appropriate legal form, usually a limited liability company (Sh.p.k).

Step 2: Reserve the Company Name

• Submit a name reservation request to the Kosovo Business Registration Agency (KBRA).
• The name must be unique and compliant with Kosovo naming laws.

Step 3: Prepare Incorporation Documents

This business incorporation generally includes:

• Articles of Association (in Albanian or Serbian, and optionally English)
• A formal resolution or decision from the parent company authorising the formation of a subsidiary
• Proof of registered office address (lease or ownership documents)
• Passports or corporate documents of all founding members

Step 4: Register the Company with KBRA

• Submit all the documents to KBRA.
• Upon successful registration, your business receives:
  • A registration certificate
  • A unique business identification number (NUIS)
  • A fiscal number for tax purposes

Step 5: Open a Corporate Bank Account

• Open a business account with a local bank.
• Banks may require a nominal deposit to activate the account.

Step 6: Tax and VAT Registration

• Register with the Tax Administration of Kosovo.
• Obtain a Value-Added Tax (VAT) registration if your annual turnover is expected to exceed the threshold of €25,000.

Step 7: Register for Social Contributions and Employment

• Register the company as an employer with the Labour Inspectorate and relevant pension funds if hiring employees.

Key Benefits of Establishing a Subsidiary in Kosovo

Setting up a subsidiary company in Kosovo offers a range of compelling advantages for foreign businesses, from strategic geographic positioning to a favorable tax regime and supportive legal environment. These benefits make Kosovo an attractive destination for companies aiming to expand into Southeast Europe:

1. Market Access and Strategic Location

Kosovo’s geographic position in Southeast Europe makes it an ideal hub for accessing broader regional markets. The country is a member of the Central European Free Trade Agreement (CEFTA) and has signed a Stabilisation and Association Agreement (SAA) with the European Union, providing preferential trade access.

2. Attractive Tax Regime

Kosovo offers one of the most competitive tax environments in Europe, featuring a flat corporate income tax rate of just 10%. In addition, certain economic zones and priority industries may qualify for tax holidays, customs exemptions, or VAT incentives.

3. Business-Friendly Environment

The business environment in Kosovo is increasingly modern and transparent. Foreign investors benefit from streamlined procedures, including online company registration and clear legal pathways under the Law on Business Organizations. 

The legal infrastructure is aligned with EU standards and provides a relatively smooth experience for setting up and running a subsidiary.

4. Legal Protection and Ownership Rights

Kosovo’s Law on Foreign Investments guarantees fair treatment for international businesses. Foreign investors are allowed to own 100% of a local company in most sectors, and their rights are protected under both domestic and international arbitration systems. 

The law also protects investors against nationalization or expropriation, ensuring long-term stability and confidence.

5. Competitive Labour Market

Kosovo has a young, dynamic, and educated workforce, with strong proficiency in multiple languages including Albanian, Serbian, and English. The population is largely tech-savvy and adaptable, making it suitable for modern service industries. 

Additionally, labour costs remain low compared to Western Europe, enabling cost-efficient scaling of operations across sectors like IT, manufacturing, and customer support.

Essential Documents for Registering a Subsidiary

Having the right documents will make your process easier and will ensure compliance while setting up a subsidiary company in Kosovo. To ensure smooth registration, gather and prepare the following documents:

• Articles of Association: Includes company objectives, capital structure, and management responsibilities.
• Founders’ Identification Documents: Valid passports for individuals and business registration documents for corporate shareholders.
• Decision by the Parent Company: A board resolution approving the formation of a subsidiary in Kosovo.
• Lease or Property Agreement: Evidence of a physical business address in Kosovo.
• Power of Attorney (if applicable): Required if a legal representative is handling the process on behalf of the parent company.
• KBRA Registration Forms: Completed forms are available at the KBRA or the online portal.
• Proof of Payment of Fees: Payment receipt for registration and any applicable administrative charges.

Legal Structures Available for Subsidiaries in Kosovo

Kosovo offers a range of legal entity types that foreign companies can use to establish their local presence. Each structure varies in terms of liability, capital requirements, governance, and operational scope, allowing businesses to choose the format best suited to their goals and investment strategy.

1. Limited Liability Company (Sh.p.k – Shoqëri me përgjegjësi të kufizuar)

The Limited Liability Company, or Sh.p.k, is the most common and preferred legal structure for foreign subsidiaries in Kosovo. It is highly flexible and well-suited for small to medium-sized enterprises. 

This structure requires only one shareholder, who can be either an individual or a legal entity, and the shareholder’s liability is limited to their capital contribution. 

2. Joint Stock Company (Sh.a – Shoqëri Aksionare)

The Joint Stock Company (Sh.a) is designed for larger businesses or subsidiaries that anticipate raising capital through the issuance of shares. A minimum share capital of €25,000 is required, and the company must have at least one shareholder and a formal board of directors. 

This structure is appropriate for entities planning long-term investments, public listings, or significant operations across multiple sectors.

3. General Partnership (O.P.)

A General Partnership (O.P.) is a company formed by two or more individuals or entities that agree to share profits and liabilities equally. This structure is rarely used for foreign subsidiaries due to the shared and unlimited liability it imposes on partners. 

However, it may be suitable in select cases, particularly for joint ventures between foreign firms and local businesses where equal involvement and risk-sharing are central to the partnership.

4. Limited Partnership (K.P.)

In a Limited Partnership (K.P.), the business consists of at least one general partner with unlimited liability and one or more limited partners whose liability is restricted to the amount of capital they contribute. 

This hybrid model is best suited for investment-focused ventures or financial projects where one party provides capital while another manages operations.

5. Representative Office

A Representative Office is not a subsidiary or independent legal entity. It serves solely as a liaison or administrative presence in Kosovo and is restricted from conducting commercial or revenue-generating activities. 

Although it must be registered, its primary functions include market research, promotional efforts, and facilitating communication between the parent company and local contacts.

Taxation Rules and Incentives for Subsidiaries in Kosovo

The tax environment is relatively simple for setting up a subsidiary company in Kosovo. However, foreign-owned subsidiaries are subject to specific corporate tax regulations. Here is more about this in detail:

Corporate Tax Rates

• Kosovo applies a flat corporate income tax rate of 10% on net profits, which is among the lowest in Europe.
• This rate applies uniformly to all resident companies, including subsidiaries.

Tax Exemptions and Incentives

• Start-ups and new businesses may benefit from certain incentives depending on their sector, such as exemptions or reduced rates for the first years of operation, especially in IT, manufacturing, and export-oriented businesses.
• Kosovo’s free economic zones (FEZs) provide additional tax relief, including exemptions from customs duties, VAT, and corporate taxes, to encourage investment.
• Kosovo has signed Double Taxation Avoidance Agreements (DTAs) with several countries to prevent double taxation on income and dividends.

Withholding Taxes

• Dividends paid to foreign parent companies are subject to a withholding tax of 10%.
• Interest and royalties may also be subject to withholding tax, subject to DTA provisions.

These are important to understand and ensure when figuring out how to start a parent company in Kosovo.

Regulatory and Compliance Requirements

Subsidiaries operating in Kosovo must adhere to a comprehensive framework of regulatory, tax, and legal obligations to remain in good standing. These compliance requirements ensure transparency, operational legitimacy, and long-term success in the local market.

1. Annual Financial Reporting

All Kosovo-registered companies must prepare and submit annual financial statements that align with Kosovo Accounting Standards. Audited financial statements are mandatory for larger subsidiaries that exceed specific thresholds in terms of revenue, assets, or employee count. 

These must be filed with the relevant authorities within the stipulated deadlines to avoid penalties and ensure regulatory transparency.

2. Tax Filings

Subsidiaries must comply with all local tax obligations, including filing an annual corporate income tax return. Companies registered for VAT must also submit VAT returns either monthly or quarterly, depending on their size and activity. 

Additionally, businesses are required to process and file payroll taxes and social security contributions on behalf of their employees, typically every month.

3. Employment Compliance

Labour law compliance is an essential part of operating in Kosovo. Subsidiaries must offer written employment contracts, follow rules regarding working hours, adhere to health and safety standards, and maintain accurate employment records. 

Furthermore, employers are obligated to file monthly social contribution reports and ensure that employee rights and benefits are properly administered under national labour legislation.

4. Business Licence Renewals

Depending on the nature of the business, subsidiaries may need to obtain and annually renew sector-specific licenses or permits. Regulatory bodies oversee compliance in areas such as construction, telecommunications, energy, and finance. Ensuring timely renewals helps maintain uninterrupted operations and regulatory approval.

5. Data Protection and Reporting

With the growing importance of data privacy, subsidiaries must assess whether they fall under data protection obligations, especially if they handle personal or sensitive customer information. Businesses in certain sectors, such as financial services or healthcare, may also be subject to industry-specific reporting standards or disclosures. Compliance with these requirements is crucial to avoid reputational risks and financial penalties.

Failure to meet these obligations can result in penalties, fines, or business suspension.

Do You Need a Physical Address for a Subsidiary in Kosovo?

Yes, a physical registered office address is mandatory for opening a subsidiary in Kosovo. This address:

• Is required for company registration with the Kosovo Business Registration Agency (KBRA).
• Serves as the official location for receiving legal documents, government correspondence, and tax notifications.
• Must be a commercial or business address in Kosovo (residential addresses are usually not accepted unless used for small business operations).

Alternative Options:

• Some companies use virtual offices or co-working spaces that provide a legal business address and mail handling services.
• Using a trusted local service provider or legal advisor’s address is also common for subsidiaries that don’t immediately require a full physical office setup.

Operational Setup for a Subsidiary in Kosovo

Once your subsidiary is legally registered, setting up its operations in Kosovo involves several practical steps to ensure it is fully functional and compliant. This phase includes staffing, securing office space, implementing administrative systems, and aligning with local operational norms. Here’s a detailed look:

Staffing

• Kosovo offers a young, skilled, and multilingual workforce with competitive labour costs.
• You must register your employees with the tax authorities and the social security system.
• Labour laws regulate contracts, minimum wage, working hours, and employee rights.

Office Setup

• Depending on your business needs, you can lease commercial office space, rent coworking space, or start with a virtual office address.
• Infrastructure such as the internet, utilities, and telecommunications are widely available in urban centres like Pristina.

Other Operational Considerations

• Establish internal policies complying with Kosovo’s legal framework.
• Set up accounting and payroll systems either in-house or through local service providers.
• Consider hiring local consultants or legal advisors familiar with Kosovo’s business environment.

How to Open a Business Bank Account for a Subsidiary in Kosovo?

Opening a corporate bank account is a critical step in operationalizing your subsidiary in Kosovo. It enables you to manage financial transactions, pay suppliers and employees, and comply with local business regulations. The process is relatively straightforward but requires attention to documentation and local procedures.

Step 1: Choose a Bank

Begin by selecting a bank that offers reliable business banking services. Kosovo is served by both local and international institutions, such as Raiffeisen Bank, ProCredit Bank, and NLB Banka. It’s important to compare their corporate offerings, including account fees, online banking features, and customer support before deciding.

Step 2: Prepare Required Documents

Once a bank is chosen, you’ll need to gather and prepare all necessary documentation. Typically, banks request:

• A certificate of incorporation or business registration from the Kosovo Business Registration Agency (KBRA), 
• The company’s Articles of Association 
• Valid identification for directors and beneficial owners (such as passports or national IDs), 
• Board resolution authorizing the opening of the account.

Step 3: Submit Application

With all documents in hand, visit the chosen bank branch to submit your application. You’ll be required to:

• Complete the bank’s corporate account opening forms
• Participate in an in-person interview or verification process with company representatives.

Step 4: Deposit Initial Funds

After the application is approved, the bank may ask for a minimum deposit to activate the account. The exact amount varies depending on the bank and type of account selected. Once the initial deposit is confirmed, the account becomes fully operational.

Step 5: Additional Services Setup

After the account is active, you can proceed to set up online banking platforms, enable payment processing systems, and request debit or credit cards for your company. These services help streamline day-to-day financial management and ensure the subsidiary can operate efficiently in the local market.

These steps are essential when understanding how to establish a subsidiary company in the Kosovo market. 

Is an Operating Agreement Necessary for a Subsidiary in Kosovo?

In Kosovo, the most common subsidiary structure is the Limited Liability Company (Sh.p.k.), which does not legally require a formal Operating Agreement (also called a Shareholders’ Agreement). Instead, the company operates primarily under its Articles of Association, which are filed during registration.

When Is an Operating Agreement Needed?

While not always legally required in Kosovo, an operating agreement is highly recommended for subsidiaries. Here is when:

• Multiple shareholders: An Operating Agreement is strongly recommended if the subsidiary has more than one shareholder (especially when foreign and local investors partner). This document outlines:
  • Ownership percentages and capital contributions.
  • Profit distribution and dividend policies.
  • Management and voting rights.
  • Procedures for dispute resolution and shareholder exit.
• Joint ventures: When two or more companies form a subsidiary, this agreement ensures clarity on governance and operational control.
• Complex structures: If the subsidiary has multiple classes of shares or intends to raise further investment, an Operating Agreement helps establish terms upfront.

Why Is It Important?

An operating agreement plays a critical role in defining the internal rules and structure of a subsidiary. Here are detailed reasons: 

• Prevents conflicts: Clearly defines rights and duties, avoiding misunderstandings.
• Provides legal recourse: Establishes binding mechanisms for resolving disputes.
• Supports governance: Helps in decision-making, especially for major business decisions requiring shareholder approval.
• While optional legally, it functions as a critical internal governance tool in Kosovo.

Opening a Branch vs. a Subsidiary in Kosovo: What’s the Difference?

When expanding into Kosovo, businesses can choose between establishing a branch office or setting up a subsidiary. Each has distinct legal, tax, and operational implications.

Feature	Branch	Subsidiary
Legal Status	Not a separate legal entity; extension of the parent company	Separate legal entity incorporated in Kosovo
Liability	Parent company is fully liable for the branch operations	Liability limited to the subsidiary’s assets
Taxation	Income is taxed as part of the parent company, but the branch may have local tax obligations	Subject to Kosovo corporate tax (10%) on its profits
Registration	Registered with KBRA as a branch office; less complex	Full company registration process required
Control & Autonomy	Operates under the direct control of the parent company	Has independent management and governance
Compliance	Branch must comply with local reporting and tax laws, but is dependent on the parent company	Subsidiary files its own financial statements, tax returns, and complies independently
Suitability	Best for short-term or limited local presence	Best for long-term, substantial operations and risk isolation

How Commenda Can Help You Expand in Kosovo

Commenda is a comprehensive business services provider that simplifies market entry and subsidiary setup in Kosovo through:

• Company Registration Assistance: Expert guidance on registering your subsidiary with the KBRA and preparing and submitting all required documentation accurately and quickly.
• Legal & Compliance Support: Assistance in drafting Articles of Association, Operating Agreements, and ensuring ongoing compliance with Kosovo’s corporate laws.
• Tax Registration & Advisory: Helping you obtain Tax Identification Numbers (NUIS), register for VAT, and navigate Kosovo’s tax landscape efficiently.
• Bank Account Setup: Facilitating introductions to local banks and supporting documentation preparation for corporate bank account opening.
• Local Market Insights: Providing valuable information about Kosovo’s regulatory environment, labour laws, and business customs to ensure a smooth operational start.
• Post-Setup Services: Ongoing corporate secretarial services, tax filings, bookkeeping, payroll management, and HR advisory to keep your subsidiary compliant and running smoothly.
• Tailored Solutions: Whether you’re setting up a wholly owned subsidiary, joint venture, or branch, Commenda offers customised solutions to suit your strategic goals.

Want to get started with your business expansion without any interruptions? Book a demo with us today!

FAQs

Q: How much does it cost to set up a subsidiary in Kosovo?
A: The official company registration fee, along with costs such as notary fees, translation services, legal consultations, and obtaining required licenses, may bring total expenses to between €11,000 and €12,000, depending on the complexity of your business and the services you engage.

Q: How long does it take to register a subsidiary in Kosovo?
A: Typically, the registration process takes 3 to 7 business days from submission of complete documentation to the KBRA, making it convenient to learn how to form a subsidiary in Kosovo.

Q: Can a foreigner fully own a subsidiary in Kosovo?
A: Yes. Kosovo’s legal framework permits 100% foreign ownership of subsidiaries across nearly all sectors, with no nationality restrictions, making the process of learning how to create a subsidiary in Kosovo easy.

Q: What are the common challenges when opening a subsidiary in Kosovo?
A: Challenges often include:

• Language barriers, as official documents must be in Albanian or Serbian.
• Navigating unfamiliar local labour regulations.
• Understanding ongoing tax compliance and reporting requirements.
• Establishing reliable local partnerships and bank relationships.
• Managing administrative procedures that may differ from other jurisdictions.

Q: Do subsidiaries in Kosovo need a local director or representative?
A: Legally, there is no obligation to appoint a local director. However, having a local representative or manager is advisable for operational efficiency and effective communication with local authorities.

Q: What are the annual compliance requirements for subsidiaries in Kosovo?
A: Subsidiaries must:

• Prepare and file annual financial statements.
• Submit corporate income tax returns.
• File VAT returns if registered for VAT.
• Pay social security and payroll taxes on employees.
• Renew any required licences.
  Failure to comply may result in penalties or fines.

Q: Can a subsidiary hire employees directly in Kosovo?
A: Yes. Subsidiaries can employ staff directly under Kosovo labour law, which includes obligations such as employment contracts, social security registration, and compliance with working conditions and minimum wage standards.

Q: What happens if a subsidiary fails to meet compliance rules in Kosovo?
A: Consequences may include:

• Financial penalties or fines imposed by tax authorities.
• Interest charges on overdue tax payments.
• Legal actions, including the suspension of business operations.
• Damage to business reputation and challenges in future licensing or banking.