Taxes in Albania 2014. A short guide about the main changes introduced to the Albanian tax system with the 2014 fiscal package
On 28 December 2013, following the proposal of the Council of Ministers, the Albanian Parliament approved the 2014 fiscal package amending the main taxes in Albania inlcuding VAT, Income Tax, Tax Procedures, Customs and Excise Duties, National Taxes, Fiscal System in the Hydrocarbon Sector, and Mandatory Health Contributions laws.The 2014 fiscal package has been published on Official Gazette no. 203, dated December 30, 2013. The main amendments consist of the following:
Amendments to Income Tax
The following amendments have been made to the Law on Income Tax, effective starting from January 1st, 2014:
Corporate Income Tax
The Corporate Income Tax Rate in Albania increases from 10% to 15%. This increase impacts all businesses registered for corporate income tax (generally a taxpayer is required to register for Corporate Income Tax if its turnover exceeds 8m ALL in a fiscal year).
The amendments abolish the limitations applied to banks and insurance companies regarding the deductibility of provisions. Provisions created by insurance companies in accordance with the law on insurance and by banks according to IFRS and certified by external auditors are deductible for corporate income tax purposes in Albania.
Personal Income Tax
Personal income tax on employment Income has changed from a flat tax rate of 10% to a progressive scheme with three scales according to the table below:
| No | Taxable Income | Tax | |
|---|---|---|---|
| From (in ALL) | To (in ALL) | ||
| 1 | 0 | 30000 | 0% |
| 2 | 30000 | 130000 | 13% of the amount over 30000 ALL |
| 3 | 130001 | unlimited | 23% of the amount over 130000 ALL |
The personal income tax rate for other types of personal income remains unchanged taxable at a 10% flat rate.
The sale of agricultural land by a registered farmer to another farmer or to a taxpayer that performs agricultural activity is exempt from personal income tax.
Withholding tax
Withholding tax on dividend should be paid to the tax administration not later than the 20th of the month following the month in which the payment of dividend was made.
Amendments to Local Taxes
The following amendments have been made to the Law on Local Taxes, effective starting from January 1st, 2014:
The simplified tax on small businesses
Taxpayers with an annual turnover of up to 8m ALL are subject to the simplified tax on small business. The simplified tax on small business will be administered by the general tax directorate instead of the local government.
Taxpayers with an annual turnover between 2 million ALL and 8 million ALL will are subject to simplified tax on small business at the rate of 7.5% of their net profit. The tax should be paid on advance each quarter.
Taxpayers with an annual turnover of up to 2 million ALL will pay a fixed annual tax amounting of 25,000 ALL, payable each year within the first six months.
Tax on buildings
The annual tax on buildings depends on the region where the real estate is located and will vary from 5 ALL to 400 ALL per square meter. The tax on buildings will be doubled for any second or subsequent residential real estate property owned by individuals.
Amendments to VAT
The following amendments have been made to the Law on Value Added Tax:
Medicines and medical services
Starting from April 1st, 2014, the supply of medicines and health services provided by private and public health institutions will be considered VAT exempt supplies instead of the previous provisions which applied 10% VAT for such services.
Hydrocarbon operations
The VAT exemption for the supply of goods and services in the hydrocarbon operations shall apply only to the research phase.
The Ministers of Finance and Energy will issue a joint instruction regarding the list of allowed goods and services related to the research phase and the exemption procedure.
VAT Refund
The regional tax directorate shall verify and approve the VAT refund request amount within 60 days from the taxpayer’s VAT refund request. Previously, the period available for the tax authorities was 30 days.
From now on the payment of the VAT refund will be handled by the Treasury instead of the regional tax directorate.
Amendments Tax Procedures
The following amendments have been made to the Law on Tax Procedures, effective starting from January 1st, 2014:
Tax deregistration
The relevant tax authority is obliged to verify the tax position of the taxpayer within 30 days from the receipt of notification from the National Registration Center or the Court. When necessary, based on a risk analysis, the tax authorities may perform an audit at the taxpayer’s premises.
Cash transactions
The limit for allowed cash transaction is lowered from 300,000 ALL to 150,000 ALL. Expenses exceeding this amount will be considered non-deductible for income tax purposes. Previously, the limit for cash transactions was ALL 300,000.
Tax assessment notification date
In the case that the exact date of the tax assessment notification cannot be proved, the taxpayer is deemed to have received the notification 10 days from the delivery of the mail to the tax office.
Draft tax audit report objections
The deadline to object the draft tax audit is within 15 calendar days from receiving the draft audit report or 15 calendar days from the date it is considered received. The previous deadline was 5 days.
Tax administrative appeal
Taxpayers filing appeals now have the option to provide a bank guarantee for the contested liability (excluding penalties) instead of paying the tax liability upfront.
Correction of tax returns
No penalties will apply if the taxpayer voluntarily files an amended tax return (interest will still be charged). Previously the penalty was 5% per month up to a ceiling of 25%.
Amendments Mandatory Health Care Insurance in Albania
The following amendments have been made to the Law on Income Tax, effective starting from January 1st, 2014:
The maximum salary for purposes of calculation of the social insurance contributions shall no longer apply to health care insurance contributions. The basis for the calculation of the mandatory health insurance contributions shall change as follows:
For employers and employees, the basis for the calculation shall be the gross salary of the insured person (the rates shall remain the same i.e. 1.7% for the employee and 1.7% for the employer).
For the self-employed and persons paying voluntary health care contributions, the basis shall be double the minimum salary set forth for purposes of calculation of the social contributions (at the rate of 3.4%).
Amendments to National Taxes
The following amendments have been made to the Law on National Taxes, effective starting from January 1st, 2014:
Circulation tax
The circulation tax on diesel and gasoline increases from 7 ALL per liter to 17 ALL per liter.
Plastic and glass packaging tax
The amendment introduces the definition of “packaging materials” and specifies the national tax applicable on them.
The plastic and glass packaging tax shall apply also to multi-use packages. The tax will be applied if the materials represent respectively at least 51% and 80% of the gross mass of the packaged product.
The Regional Tax Directorates will be responsible for the calculation and the collection of national taxes.
