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Amendments to the Albanian Tax Legislation

3 January 2014

On 28 December 2013 the Albanian Parliament approved amendments to the current tax legislation. They impact areas such as tax procedures, income tax, value added tax, fiscal system of hydrocarbon operations, excise duty, health insurance contributions, local and national taxes. The main amendments and additions consist of the following:

Amendments to the Law on Tax Procedures

Tax deregistration
The tax authorities, based on a risk analysis, should verify the tax position of the taxpayer within 30 days from any deregistration notification or application for liquidation. The tax authorities may perform the verification at the taxpayer’s premises.

Cash transactions
Taxpayers (natural persons or legal entities) should not make cash transactions exceeding the amount of ALL 150,000. Expenses exceeding this amount will be considered non-deductible for income tax purposes. Previously, the limit for cash transactions was ALL 300,000.

VAT refund and compensations of the tax liabilities
For a refund of VAT or compensation of tax liabilities from the overpaid taxes, the tax authorities should verify the correctness of the VAT refund request or compensation request, inform the taxpayer and make the proper refund within 60 days from the application, if the legal conditions are completed. Previously, the period available for the tax authorities was 30 days.

Draft tax audit report objections
Taxpayers may object against the draft tax audit results 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 calendar days.

Tax administrative appeal
Taxpayers initiating an administrative appeal procedure against an assessment or a decision of the tax administration may provide the Tax Appeal Directorate with a bank guarantee equal to the value of the total tax liabilities assessed by the tax authorities. However, the taxpayers having initiated an administrative appeal procedure still have the option to pay the tax liabilities assessed. The amendment to the Tax Procedures Law does not specify whether interest calculated for late payment of the assessed tax liabilities can be covered by the bank guarantee. In addition, the bank guarantee provided for administrative appeal purposes cannot cover penalties assessed by the tax authorities.

According to the previous provisions, the taxpayers had to pay the total amount of taxes assessed by the tax authorities and related interest calculated for late payment.

Amended tax returns
No penalties will apply if the taxpayer amends the original tax return. Previously, the penalty applied for an amendment of the tax return was 5 percent per each month of delay (or part of it) but not more than 25 percent of the outstanding tax liability.

Tax assessment notification
If the receipt date of the tax assessment notification cannot be proved, the taxpayer is considered to receive the notification 10 days from its delivery by the tax authorities to the postal office.

Amendments to the Law on Income Tax

Amendments to the corporate income tax
The corporate income tax (CIT) rate for legal entities registered for CIT purposes becomes 15 percent (the previous rate was 10 percent).

Personal income tax
Employed individuals shall be taxed according to a progressive taxation scheme for any income derived from employment. Specifically, the personal income deriving from employment (e.g. salaries, wages, bonuses, compensations, awards, etc.) shall be taxed according to the below progressive taxation scheme.

The first category of income, i.e. income up to ALL 30,000 shall be exempt from taxation.

The tax base for employment income which exceeds ALL 30,000 per month shall be calculated by deducting the maximum non-taxable income (i.e. ALL 30,000) from the gross monthly income.

Taxable income PIT rate
From (in ALL) To (in ALL)  
0 30,000 0%
30,001 130,000 13%
130,001 Unlimited 23%

The personal income tax rates for other types of personal income such as income from dividends, income from rent, capital gains, income from bank interest, gains from lottery or games of chance and any other income specified as personal income of individuals will remain taxable at a 10 percent rate.

Special reserves for banks and insurance companies
The amendments of the Law on Income Tax abolish the previous conditions applied to banks for the purposes of determining the taxable income for corporate income tax purposes. There is now no limit for recognizing as deductible expenses of banks the impairment of loans for an amount not higher than that one determined in the regulations of the Bank of Albania for this purpose.

Withholding tax return
Withholding tax shall be declared within deadlines set out in the Law on Income Tax through a specific tax return. The Minister of Finance shall provide through an instruction the template and content of the withholding tax return.

Amendments to the value added tax (VAT) legislation

Hydrocarbon operations
The supply of goods and services (including import of goods and services) made by contractors and subcontractors during the research phase of hydrocarbon operations and certified as such by the National Agency of Natural Resources will remain VAT exempt.

The supply of goods and services (including import of goods and services) made during the development phase shall not benefit from the VAT exemption.

Supply of medicines and medical services
Starting from 1 April 2014, the supply of medicines and medical services offered by private and public health institutions will be considered VAT exempt supplies. According to the previous provisions, the VAT rate applied to the supply of medicines and medical services was 10 percent.

Amendments to the fiscal system of hydrocarbon operations

Foreign personnel employed by hydrocarbon operations contractors and subcontractors will not be exempt from personal income tax.

Salary amount for calculation of health insurance and social security

Health insurance contributions shall be calculated based on the entire gross salary of the employee. This amendment replaces the current maximum cap amount of ALL 95,130 taken into consideration for calculation of mandatory health insurance contributions. The current health contributions rates (i.e. the employer rate of 1.7 percent and the employee rate of 1.7 percent) will remain unchanged.

The maximum cap salary for calculations of mandatory social security contributions and respective applicable rates for the employer and the employee remain unchanged.

Amendments to the excise duty

Exemptions from the excise duty
The import of oil derivatives used during oil exploration and utilization of oil wells will not benefit from excise duty exemption. This amendment enters into force on 1 April 2014.

Sanctions in case of administrative violations
The amendments to the Excise Duty Law provide for unification of penalties applied to unauthorized producers of tobacco products, alcohol and alcoholic beverages. They also introduce additional penalties in cases of violations of provisions such as differences in inventory, illegal production of tobacco products, non-payment of excise duty for tobacco and coffee products, improper documentation of crude oil during transport, etc.

Amendments of excise duty on excise products
The table below shows the excise duty applicable to certain excise products as of 1 January 2014.

Product New excise duty Previous excise duty
Unroasted, caffeinated or decaffeinated coffee ALL 0/kg ALL 30/kg
Roasted, caffeinated or decaffeinated coffee ALL 60/kg ALL 140/kg
Energy drinks ALL 50/liter ALL 0/liter
Beer (when up to 200,000 hectoliters per year produced) ALL 360/hectoliter ALL 1,000/hectoliters (when up to 70,000 hectoliters)
ALL 1,200/hectoliters (when 70,000-200,000 hectoliters)
Beer (when more than 200,000 hectoliters per year produced) ALL 710/hectoliter ALL 1,500/hectoliters (when 200,001-300,000 hectoliters)
ALL 1,200/hectoliters (when more than 300,000 hectoliters)
Sparkling wine, champagne and fermented or sparkling beverages ALL 5,200/hectoliter ALL 2,000/hectoliter
Alcoholic beverages with an alcohol content between 15% and 20% ALL 5,200/hectoliter ALL 2,000/hectoliter
Spirit beverages produced (when up to 20,000 hectoliters per year produced) ALL 65,000/hectoliter ALL 50,000/hectoliter
Spirit beverages produced (when more than 20,000 hectoliters per year produced) ALL 84,500/hectoliter ALL 65,000/hectoliter
Cigarettes* ALL 4,500/1000 cigarettes from
1 January 2014
ALL 3,500 /1000 cigarettes
Other processed tobacco and its substitutes** ALL 3,000/kg from
1 January 2014
ALL 1,500/kg
Petroleum jelly ALL 40/kg ALL 0/kg

* The excise duty will increase by ALL 500/1000 cigarettes for each year until 2017.
** The excise duty will increase by ALL 700/kg for each year until 2017.

Amendments to national taxes

Circulation tax
The circulation tax for vehicles will be ALL17/liter of oil or gas purchased. Previously, the circulation tax applicable was ALL 7/liter.

Plastic and glass packaging tax
The amendment introduces the definition of “packaging materials” and specifies the national tax applicable on them.

Plastic and glass packaging tax will be applied to all types of packaging materials. Previously, this tax was applied only to single-use plastic or glass materials. Based on the approved amendments, the plastic and glass packaging tax will be applied when the plastic and glass material represents at least 51 percent and 80 percent respectively of the overall mass product packaged. In addition, there is a list of imports which will be exempt from the payment of plastic and glass packaging tax.

Royalty tax return
Royalty shall be declared within deadlines provided by the Law on National Taxes through a specific tax return. The Minister of Finance shall provide through a specific instruction the template and content of the royalty tax return.

Amendments to the local taxes

Tax on small business
Taxpayers with an annual turnover between ALL 2 million and
ALL 8 million will be subject to a simplified income tax on small business. The simplified income tax on small business will be levied at a 7.5 percent rate.

Taxpayers with an annual turnover of less than ALL 2 million will be subject to a fixed tax amounting to ALL 25,000 per year.

Tax on buildings
Starting from 1 January 2014, the local tax on buildings will vary from ALL 5 to ALL 400 per square meter (previously the range was ALL 5 – ALL 200 per square meter). The tax depends on the region where the real estate is located and is calculated on an annual basis. The tax on residential buildings used for business purposes varies from ALL 40 to ALL 400 per square meter, while the tax on buildings owned by individuals varies from ALL 5 to ALL 30 per square meter. In addition, the tax on buildings will be doubled for any second or subsequent real estate property (apartment or house) owned by individuals. The tax on agricultural land will remain the same.

Entry into force

  • Law no. 177/2013 on amendments to Income Tax Law
  • Law no. 178/2013 on amendments and additions to National Taxes Law
  • Law no. 179/2013 on amendments and additions to Tax Procedures Law
  • Law no. 180/2013 on amendments and additions to Excise Duty Law
  • Law no. 181/2013 on amendments and additions to Local Taxes Law
  • Law no. 182/2013 on amendments and additions to Value Added Tax Law
  • Law no. 183/2013 on amendment to Fiscal System on Hydrocarbon Operations and
  • Law no. 184/2013 on amendments and additions to Health Insurance Contributions are published in the Official Gazette no. 203 dated 30 December 2013.

The Laws have entered into force after their publication in the Official Gazette and are binding from 1 January 2014, unless otherwise specified in any specific law.

 

For Information

Arkadiusz Mierzejewski
Partner, Tax
Tel: +355 (4) 2274 524
Fax: +355 (4) 2235 534
arekmierzejewski@kpmg.com

Alba Paparisto
Senior Manager, Tax
Tel: +355 (4) 2274 524
Fax: +355 (4) 2235 534
apaparisto@kpmg.com

In this issue

Amendments to the Law on Tax Procedures

Amendments to the Law on Income Tax

Amendments to the value added tax (VAT) legislation

Amendments to the fiscal system of hydrocarbon operations

Salary amount for calculation of health insurance and social security

Amendments to the excise duty

Amendments to national taxes

Amendments to the local taxes

Entry into force

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