Could you please post output of `qdbus org.kde.KWin /KWin supportInformation`?

https://paste.kde.org/pbovbtnkc

If you select "No Borders" in System Settings > Application Style > Window Decorations > Border Size, does this issue occur?

(In reply to Vlad Zagorodniy from comment #3)
> If you select "No Borders" in System Settings > Application Style > Window
> Decorations > Border Size, does this issue occur?

Yes

Hmm, interesting... Does this issue occur with other decoration themes, e.g. Oxygen?

Also, could you please the support information here. paste.kde.org is nearly dead.

* could you please post the support ...

Issue does not occur with the "Oxygen" or "Plastik" window decorations.

KWin Support Information:
The following information should be used when requesting support on e.g. http://forum.kde.org.
It provides information about the currently running instance, which options are used,
what OpenGL driver and which effects are running.
Please post the information provided underneath this introductory text to a paste bin service
like http://paste.kde.org instead of pasting into support threads.

==========================

Version
=======
KWin version: 5.14.5
Qt Version: 5.12.1
Qt compile version: 5.12.1
XCB compile version: 1.13.1

Operation Mode: X11 only

Build Options
=============
KWIN_BUILD_DECORATIONS: yes
KWIN_BUILD_TABBOX: yes
KWIN_BUILD_ACTIVITIES: yes
HAVE_DRM: yes
HAVE_GBM: yes
HAVE_X11_XCB: yes
HAVE_EPOXY_GLX: yes
HAVE_WAYLAND_EGL: yes

X11
===
Vendor: The X.Org Foundation
Vendor Release: 12003000
Protocol Version/Revision: 11/0
SHAPE: yes; Version: 0x11
RANDR: yes; Version: 0x14
DAMAGE: yes; Version: 0x11
Composite: yes; Version: 0x4
RENDER: yes; Version: 0xb
XFIXES: yes; Version: 0x50
SYNC: yes; Version: 0x31
GLX: yes; Version: 0x0

Decoration
==========
Plugin: org.kde.breeze
Theme: 
Blur: 0
onAllDesktopsAvailable: true
alphaChannelSupported: true
closeOnDoubleClickOnMenu: false
decorationButtonsLeft: 0, 2
decorationButtonsRight: 7, 3, 4, 5
borderSize: 3
gridUnit: 10
font: Noto Sans,10,-1,5,50,0,0,0,0,0
smallSpacing: 2
largeSpacing: 10

Platform
==========
Name: KWin::X11StandalonePlatform

Options
=======
focusPolicy: 0
nextFocusPrefersMouse: false
clickRaise: true
autoRaise: false
autoRaiseInterval: 0
delayFocusInterval: 0
shadeHover: false
shadeHoverInterval: 250
separateScreenFocus: true
placement: 4
focusPolicyIsReasonable: true
borderSnapZone: 10
windowSnapZone: 10
centerSnapZone: 0
snapOnlyWhenOverlapping: false
rollOverDesktops: true
focusStealingPreventionLevel: 1
legacyFullscreenSupport: false
operationTitlebarDblClick: 5000
operationMaxButtonLeftClick: 5000
operationMaxButtonMiddleClick: 5015
operationMaxButtonRightClick: 5014
commandActiveTitlebar1: 0
commandActiveTitlebar2: 30
commandActiveTitlebar3: 2
commandInactiveTitlebar1: 4
commandInactiveTitlebar2: 30
commandInactiveTitlebar3: 2
commandWindow1: 7
commandWindow2: 8
commandWindow3: 8
commandWindowWheel: 31
commandAll1: 10
commandAll2: 3
commandAll3: 14
keyCmdAllModKey: 16777251
showGeometryTip: false
condensedTitle: false
electricBorderMaximize: true
electricBorderTiling: true
electricBorderCornerRatio: 0.25
borderlessMaximizedWindows: false
killPingTimeout: 5000
hideUtilityWindowsForInactive: true
inactiveTabsSkipTaskbar: false
autogroupSimilarWindows: false
autogroupInForeground: true
compositingMode: 1
useCompositing: true
compositingInitialized: true
hiddenPreviews: 1
glSmoothScale: 2
xrenderSmoothScale: true
maxFpsInterval: 16666666
refreshRate: 0
vBlankTime: 6000000
glStrictBinding: false
glStrictBindingFollowsDriver: true
glCoreProfile: true
glPreferBufferSwap: 99
glPlatformInterface: 1
windowsBlockCompositing: true

Screen Edges
============
desktopSwitching: false
desktopSwitchingMovingClients: false
cursorPushBackDistance: 1x1
timeThreshold: 150
reActivateThreshold: 350
actionTopLeft: 0
actionTop: 0
actionTopRight: 0
actionRight: 0
actionBottomRight: 0
actionBottom: 0
actionBottomLeft: 0
actionLeft: 0

Screens
=======
Multi-Head: no
Active screen follows mouse:  yes
Number of Screens: 2

Screen 0:
---------
Name: DP-1
Geometry: 1920,0,1920x1080
Scale: 1
Refresh Rate: 60

Screen 1:
---------
Name: DP-5
Geometry: 0,0,1920x1080
Scale: 1
Refresh Rate: 60


Compositing
===========
Compositing is active
Compositing Type: OpenGL
OpenGL vendor string: NVIDIA Corporation
OpenGL renderer string: GeForce GTX 970/PCIe/SSE2
OpenGL version string: 3.1.0 NVIDIA 415.27
OpenGL platform interface: GLX
OpenGL shading language version string: 1.40 NVIDIA via Cg compiler
Driver: NVIDIA
Driver version: 415.27
GPU class: Unknown
OpenGL version: 3.1
GLSL version: 1.40
X server version: 1.20.3
Linux kernel version: 4.20.7
Direct rendering: Requires strict binding: no
GLSL shaders:  yes
Texture NPOT support:  yes
Virtual Machine:  no
OpenGL 2 Shaders are used
Painting blocks for vertical retrace:  no

Loaded Effects:
---------------
zoom
kwin4_effect_maximize
kwin4_effect_fade
kwin4_effect_windowaperture
kwin4_effect_dialogparent
kwin4_effect_logout
kwin4_effect_translucency
kwin4_effect_frozenapp
kwin4_effect_morphingpopups
kwin4_effect_login
slidingpopups
slide
screenshot
scale
minimizeanimation
glide
flipswitch
desktopgrid
cube
coverswitch
colorpicker
presentwindows
highlightwindow
blur
contrast
startupfeedback
screenedge
kscreen

Currently Active Effects:
-------------------------
blur
contrast

Effect Settings:
----------------
zoom:
zoomFactor: 1.2
mousePointer: 0
mouseTracking: 0
enableFocusTracking: false
followFocus: true
focusDelay: 350
moveFactor: 20
targetZoom: 1

kwin4_effect_maximize:

kwin4_effect_fade:

kwin4_effect_windowaperture:

kwin4_effect_dialogparent:

kwin4_effect_logout:

kwin4_effect_translucency:

kwin4_effect_frozenapp:

kwin4_effect_morphingpopups:

kwin4_effect_login:

slidingpopups:
slideInDuration: 150
slideOutDuration: 250

slide:
duration: 500
horizontalGap: 45
verticalGap: 20
slideDocks: false
slideBackground: true

screenshot:

scale:
duration: 160
inScale: 0.96
inOpacity: 0.4
outScale: 0.96
outOpacity: 0

minimizeanimation:

glide:
duration: 160
inRotationEdge: 0
inRotationAngle: 3
inDistance: 30
inOpacity: 0.4
outRotationEdge: 2
outRotationAngle: 3
outDistance: 30
outOpacity: 0

flipswitch:
tabBox: false
tabBoxAlternative: false
duration: 200
angle: 30
xPosition: 0.33000001311302185
yPosition: 1
windowTitle: true

desktopgrid:
zoomDuration: 300
border: 10
desktopNameAlignment: 0
layoutMode: 0
customLayoutRows: 2
usePresentWindows: true

cube:
cubeOpacity: 0.800000011920929
opacityDesktopOnly: false
displayDesktopName: true
reflection: true
rotationDuration: 500
backgroundColor: #000000
capColor: #eff0f1
paintCaps: true
closeOnMouseRelease: false
zPosition: 100
useForTabBox: false
invertKeys: false
invertMouse: false
capDeformationFactor: 0
useZOrdering: true
texturedCaps: true

coverswitch:
animationDuration: 200
animateSwitch: true
animateStart: true
animateStop: true
reflection: true
windowTitle: true
zPosition: 900
primaryTabBox: false
secondaryTabBox: false

colorpicker:

presentwindows:
layoutMode: 0
showCaptions: true
showIcons: true
doNotCloseWindows: false
ignoreMinimized: false
accuracy: 20
fillGaps: true
fadeDuration: 150
showPanel: false
leftButtonWindow: 1
rightButtonWindow: 2
middleButtonWindow: 0
leftButtonDesktop: 2
middleButtonDesktop: 0
rightButtonDesktop: 0

highlightwindow:

blur:

contrast:

startupfeedback:
type: 1

screenedge:

kscreen:

Okay, so the problem lies in the fact that Breeze decoration theme has just too big shadows. KWin does its best too handle them, but as you can see it's not enough (and we probably have to drop that special code because it's not working well).

I think if you try smaller shadow size, then that gap will go away.

In general, Breeze decoration theme has to update the shadow if the decorated client becomes too small. This would require some refactoring because currently all decorations share the same shadow.