Tax legislation in Albania is managed through the General Tax Department. Due to rapid development of the economy, tax legislation is subject to frequent amendments and changes. More detailed information on tax legislation in Albania, can be found in the web page of the General Tax Department (www.tatime.gov.al).
Tax and tariff regime in the Republic of Albania consists in a package of laws, directives, regulations, tax agreements with other countries which display a complete review of all kinds, levels, calculations, procedures, as well as the methods and forms of tax control for taxes included in the Albanian tax system.
Legal and/or physic persons in the Republic of Albania are subject to the following taxes:
|Tax System||Tax Rate|
|Profit Tax||20 %|
|Personal Income Tax||Progressive taxation with tax rates from 1% to 20 %|
|Value Added Tax||20%|
CORPORATE INCOME TAX
All companies (domestic or Foreign) which are registered in the trade register and pay VAT are subject to the Profit Tax.
A legal person is considered as an Albanian resident if:
- has a permanent establishment (central office) in the Republic of Albania
- has a place of effective management of business in the Republic of Albania
All the residents in the Republic of Albania, central and local government, non-profit organizations and any other entity, recognized by the legislation into force, are constrained to withhold the tax at source at 10% from the gross amount of the following payments, generated by source in the Republic of Albania:
|Share of profit||10%|
|Fee for technical , management and financial services, etc.||10%|
|Fee for rent||10%|
|Payments for author’s and intellectual property right||10%|
The taxable revenues are fixed based on the balance – sheet and its annexes which should be in accordance with the law no.7661, date 19.01.1993 “On accounting” , with the provisions of this law, as well as with sub-legal acts issued by the Ministry of Finance to this end. Profit or net taxable income is the difference between total revenues (in kind revenues included) and deductible expenses. The tax period correspond to the calendar year beginning on January 1st and ending on December 31st.
Tax deductible expenses
As in other countries of the region, tax deductible expenses are those incurred to generate, ensure and maintain the taxable income. Expenses are tax deductible if:
- They are made on behalf of the economic activity from which revenues are generated, or if they relate to the usual management of the taxpayer business activity.
- They are accompanied by justifiable documentation which confirms the destination of such expenses.
- They are reflected in accounting books by reducing net assets.
Corporate income tax is paid in advance each month on the 15th. The amounts to be paid for each month by the taxpayers are calculated as follows:
- In each of months of January, February, March and April of the current taxable period the amount of profit tax for taxable period of two proceeding years divided by 2.
- In each of 8 other months of the current taxable period, the amount of profit tax for proceeding taxable period reduced by payments made from January to April of the current taxable period, divided by 8.
Taxpayers, whose prepayment amount does not exceed 0.000 ALL/month, pay corporate income tax installments quarterly.
The amount to be paid monthly by the taxpayers with less than 2 years of business activity is calculated according to the instructions given in the Instruction of the Minister of Finances no.5, dated 30.0.2006 “On income tax”.
TRANSFER PRICING RULES
Transfer pricing or profit transferring through changes in prices is applicable only in case of commercial companies owned by the same persons and operating in two or more countries where tax legislation is different. Such companies can set selling prices for their inputs or products in such a manner that the majority of the profit can be transferred in the country where the Corporate Income Tax level is lower. The same principle is applicable to services that such legal entities provide to each other.
Price transferring modifications for international transactions are made only by the Commission of Price Transferring in the General Tax Department (www.tatime.gov.al). The Commission exercises its activity in compliance with the Instructions of OECD on transfer pricing rules. Transfer pricing levels may be agreed in advance through a written agreement between the Commission and the taxpayer signed by the General Director of Taxes.
VALUE ADDED TAX
The value Added Tax is payable :
a. for all taxable supplies of goods and services realized against the payment by a taxable person, as part of his economic activity in the territory of the Republic of Albania.
b. for all imports of goods in the territory of the Republic of Albania
The minimum limit of registration is 8.000.000 ALL (per calendar year) or any order amount defined by the Council of Ministers. All legal and physical persons involved in export or import activities ate constrained to register in order to pay the VAT.
Any other entity such as individuals, central and local government, social, politic and international organization, diplomatic missions, etc which carry out import-export activities, regardless of the turnover are also constrained to register. For any entity which carries our import-export activity, the customs operations will proceed after he submits the original or the notarized copy of the Certificate of the Identification Number for the Taxable Person (NIPT).
The total turnover is calculated based on the total price paid by the buyer, inclusive also the tax and condemnation fees (fines).
The Vat declaration and payment form is filled in two copies and the taxable person submits it to the respective bank with which the GDT has an agreement regarding the admission of VAT payments, within 14 days after the expiration of the tax period.
VAT is applied at 20%, unless otherwise settled by law. The following operations are excluded from payment of VAT:
- financial services supply
- gold, bank – notes or currencies supplies to the Bank of Albania
- Postage- stamp supply used for mail service or similar stamps
- Supply provided by a non- profit organization against a reduced payment
This tax is refundable for the following items:
- Propellant oils used by producers of electricity resources, with a power of SMV or more for each energetic resource.
- Propellant used for agricultural purposes for industrial and agroindustrial, for quantities reflected in VAT invoices.
Excise duty is due when excise goods are imported into or produced in the Republic of Albania. However, natural or legal entities are permitted to perform transactions without paying excise tax if excise products are going to be exported or are set under a customs or fiscal suspension system.
Payment of excise duty due on goods requiring banderols shall be made by the purchase of a banderol for an amount equal to the excise duty due on the quantity or value of excise goods contained within the packing unit or package to which the banderol is to be affixed. The purchase of banderols shall be made at the office designated by the tax authority, in accordance with procedures specified in instructions issued by the Minister of Finances. Supply of banderols is made prior to full payment.