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Fiscal Package 2014 – Taxes in Albania

Taxes Albania 2014

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.

 

New National Monthly Salary, New Minimum and Maximum Salary for Social Insurance Contribution Calculation

New minimum national monthly salary in Albania starting from July 2013

On 03 July 2013 The Albanian Council of Ministers decided to approve decision no. 573, “On the Amendment of the National Minimum Monthly Salary”.

Starting from 1 July 2013, the minimum national monthly salary will be 22,000 ALL.

New Minimum and Maximum Salary for Social Insurance Contribution Calculation starting from August 2013

On 17 July 2013 The Albanian Council of Ministers decided to approve decision no. 581 “On the Amendment of the Minimum and Maximum Monthly Salary for the calculation of Social Security and Health Insurance Contributions”.

Starting from starting from 1 August 2013, the minimum monthly salary for the purpose of calculating the social and health insurance contributions shall be not less than 19,026 ALL, while the maximum monthly salary shall be 95,130 ALL.

Fiscal Representative in Albania – Procedures

Starting from 24 January 2013, the fiscal representative in Albania is registered at the Regional Tax Directorate. The previous legislation that required the fiscal representative to be registered with the National Registration Center is revoked.

On 3 June 2013, the Minister of Finance approved Instruction No. 17, clarifying the procedures and obligations for the fiscal representative in Albania as follows:

The fiscal representative remains personally liable for all tax obligations of his principal with the Albanian state even after deregistration.

Registration of fiscal representative in Albania:

The fiscal representative must personally submit a registration application to the Regional Tax Directorate within 5 days from his appointment and before the legal obligation to act as fiscal representative arises. The following list of documents must be submitted along with the application form:

  • Resolution or Power of Attorney appointing the Fiscal Representative in Albania, signed by competent body of the foreign entity.
  • A notarized copy of the contract for the fiscal representation entered between the foreign entity and the Fiscal Representative.
  • Document certifying the registration of the foreign entity in its residence country, issued within the last three months.

The Regional Tax Directorate shall complete the registration procedure within two working days after the submission of the application and all requested documents.

Deregistration of fiscal representative in Albania:

The Fiscal Representative, having complied with the fiscal legislation in force and paid all the tax obligations due to the Tax Administration in Albania, must notify the tax authorities at least 15 days of the termination of the fiscal representation of the foreign entity.

Within 10 days of the filing of the deregistration application, the tax authorities should verify the tax position of the Fiscal Representative and may undertake a tax audit. According to the stipulations of the amended tax procedures, the tax authorities should deregister the Fiscal Representative within 30 working days.

Revaluation of Imovable Property with 1% Tax, Normative Act Enters into Force

revaluation

The Immovable Property Registration Office of Albania (ZRPP) today started accepting immovable property revaluation applications with a reduced revaluation tax rate of 1%.

On 02.05.2013, following the proposal of the Minister of Finance, the Council of Ministers of Albania approved Normative Act no. 2, “On the Revaluation of Immovable Property”. The normative act is effective immediately and shall be in force until October 31, 2013.

The normative act grants individuals who own immovable property the right to revalue their property at market value by paying a reduced rate of 1%, instead of 10%, on the immovable property capital gain.

The capital gain is calculated as the difference between the revaluated property value and the value of the contract registered at the Immovable Property Registration Office.

The immovable property owners can choose to revalue their property at market value or at minimum fiscal prices. In the first case a property appraisal report issued by a licensed Appraiser must be attached to the revaluation application. In the second case the calculation of the revaluated immovable property will be assessed by the Immovable Property Registration office.

Amendmends to Personal Income Tax in Albania

Salaries up to 30,000 ALL exempt from personal income tax.

The Albanian parliament has recently amended the Law no. 8438 “On Income Taxes”.

Monthly salaries which do not exceed 30,000 ALL are exempt from personal income tax while monthly salaries above 30,000 ALL will be taxed 10% of the full amount, as provided in the table below:

Tax on buildings is a deductible expense.

Taxpayers who file the personal income tax return voluntarily can deduct the tax on buildings.

Fiscal Package 2013 – Taxes in Albania

On 20 December 2012, following the proposal of the Minister of Finance, the Albanian Parliament approved the 2013 fiscal package amending VAT, Income Tax, Tax Procedures, Customs and Excise Duties laws. The 2013 fiscal package has been published on 09 January 2013 on Official Gazette no. 177, and, shall enter into force on 24 January 2013.

The main amendments consist of the following:

Amendments to the Law On Income Tax:

The following amendments have been made to the Law on Income Tax:

  • Indemnities and compensations of court costs ordered by final court decision, and income earned from Government Institutions regarding achievements in science, sports and culture will not be subject to personal income tax.
  • For Self-employed persons with an annual turnover of less than 2.000.000 ALL, only 10% of the turnover is considered gross income for the purpose of the declaration of the Personal Income Tax Return.
  • Scholarships awarded to students from public of private educational institutions will be considered deductible expenses up to an amount specified by the Council of Ministers on the condition that the above institutions, in the beginning of the academic year, submit to the Ministry of Education and Science the number and amount of scholarships for the academic year.
  • If the ownership or voting rights of a legal entity change more than 50% (in value or number) during a fiscal period, than the entity will not have the right to carry forward the fiscal losses in the upcoming fiscal periods.
  • Individuals, who have filed the Annual Personal Income Return after September 30th, 2012 and within December 31st, 2012, will not be subject to late filing penalties.

Amendments to the Law on Tax Procedures:

The following amendments have been made to the Law on Tax Procedures:

  • The fiscal representatives of non-resident taxpayers will now register and deregister at the respective Regional Tax Directorate, instead of the National Registration Center.
  • The penalty for failing to declare new employees within the legal deadlines is increased to 500,000 ALL from 100,0000 ALL for taxpayers registered for VAT and corporate tax  Income Tax, and to 250,000 ALL from 50,000 ALL for other taxpayers

Amendments to the Law On VAT

The following amendments have been made to the Law On VAT:

  • The supply and import of iron and cement to entities building hydropower stations will be exempted from VAT. The exemption procedure, criteria and the definition of type and quantity will be determined with a Decision of the Council of Ministers of Albania.
  • The import of machinery and equipment in order to implement investment contracts with a value of at least 50,000,000 ALL will be a supply exempted from VAT.
  • The import of machinery and equipment in order to implement investment contracts in active processing and agribusiness will be a supply exempted from VAT regardless of the investment value.
  • Production machinery imported by small business taxpayers for use in their production processes will be a supply exempted from VAT.

Amendments to the Excise Law

The following amendments have been made to the Excise Law:

The excise rate applied to the production of roasted, caffeinated and decaffeinated coffee is 60 ALL/kg, instead of 140 ALL/kg.

Amendments to the Law On Customs Tariffs

The following amendments have been made to the Law On Customs Tariffs:

The customs tariff applied on the import of unroasted caffeinated coffee and unroasted decaffeinated coffee is reduced from 10 % to 0 %.

New minimum national monthly salary in Albania starting from July 2012

The Council of Ministers has recently decided to approve decision no. 411, “On some amendments and additions to Decision no. 1114, dated 30.06.2008” and decision 445, “On the determination of the national minimum monthly salary”.

Starting from starting from July 2012, the minimum monthly salary for the purpose of calculating the social and health insurance contributions shall be not less than 18,295 ALL, the maximum monthly salary shall be 91,475 ALL.

In addition, the self-employed registered as physical persons or partnerships, with or without employees, shall pay the for themselves the fixed monthly amount of 5,488 ALL for social and health insurance contributions.

Starting from July 2012, the minimum national monthly salary will be 21,000 ALL.

The Council of Ministers revokes reference national salaries for social contributions and personal income tax

On 20.06.2012, following the proposal of the Minister of Finance, the Council of Ministers decided to approve decision no. 293, revoking decision no. 285, dated 04.05.2007, “On the determination of the monthly reference salary for the purposes of calculating social security and health insurance contributions and personal income tax according to nomenclature of economic activity for private sector employees and directors”.

Following the publication in the Official Gazette Albanian companies can report and pay social insurance contributions and personal income tax based the actual salaries instead of the previous reference salary lists.

Personal income tax returns for fiscal year 2011 are due by September 30, 2012

The Albanian Parliament has made the following amendments to Law no. 8438 “On Income Taxes”, in force from 11th April 2012.

Albanian resident individuals who generate global annual income of at least 2 million ALL and non-Albanian resident individuals who generate annual income of at least 2 million ALL in Albania are required to prepare and file the personal income tax return.

In addition, Albanian resident individuals who generate annual income up to 1,050,000 ALL and wish to benefit from the deductable expenses have the option to submit their personal income tax return. Deductible expenses are considered the following:

  • Voluntary contributions to pension fund schemes, as well as life and health insurance premiums
  • Interest on bank loans utilized for the education of dependent family members
  • Health care expenses for medical treatment which is not covered by the health insurance

Resident individuals who have generated income from another country which has signed an Double Tax Avoidance Agreement with Albania can credit the tax paid in the foreign country up to the amount provided in the Agreement.

The personal income tax return should be filed not later than 30th April of the subsequent year. Exceptionally, for fiscal year 2011 the deadline for the filing and payment of the personal income tax is 30 September 2012.

Tax Amnesty deadline extended to 31 March 2012

The Albanian Council of Ministers approved a normative act on 28.12.2011, extending by three months the deadline of the Tax Amnesty Law.

The taxpayers now can benefit from tax amnesty law until 31 March 2012 instead of the original deadline of 31 December 2011.