In the last months of 2022, the Albanian Parliament approved series of changes to the existing tax legislation covering the Laws on Tax Procedures, Value Added Tax and Excise Duties.

In addition to the annual changes of the main tax laws, a new law was approved introducing a windfall tax known as Solidarity Contribution on extraordinary profits of energy producers which operate in the liberalized market.

In the following outline we have summarized the most important changes of the Albanian tax legislation effective in 2023.

Law on Tax Procedures

The existing Law No. 9920 dated 19.05.2008 has passed additional changes which cover the extension of the definitions, additional anti avoidance rules and measures, increase of the penalties and other changes to the functions of the tax administration.

Definitions

Taxpayer – The definition of the taxpayer is extended by bringing a detailed and exhaustive definition of the taxable person. Based on the amendments approved, a taxpayer is considered any person subject to the taxes applicable in the territory of Albania (i.e. value added tax, income tax, excise duty, local and national taxes, social security and health insurance or other taxes imposed with a special law), as well as any agent of withholding tax as specified in the legislation.

Related parties – By definition a related party is any person that is related to another person in a relationship which influences directly or indirectly to the taxable base through management, control or ownership. Two persons are related if one or both act according to the instruction, requests, suggestions or will of the other person or a third person.

Based on the changes the following persons are related parties for tax purposes:

i. husband, wife, their ancestors and descendants, between them or between each other; 

ii. an economic entity in which each person owns directly or indirectly at least 50% of voting or management rights, dividend distribution rights or capital rights;

iii. any two or more economic entities in which another person owns or carries at least 50% of voting or management rights, dividend distribution rights or capital rights in both economic entities.

Person – The new definition of the person for tax purposes encompasses, besides the legal forms provided in the Albanian Commercial Companies Law, also other legal structures which are not incorporated in the territory of Albania.

Registration of individuals

For the purposes of the declaration for personal income tax the tax administration keeps a separate register of the individuals as per the data of the National Civil Registry. The identification of the individuals will be based on the individual’s personal number, and the information will be exchanged through the governmental platform. The individuals having the obligation to submit the annual tax return will be notified by the tax administration and if the individual would not comply the regional tax office may assess the tax obligations of the individual.

Cash limits in stores

The taxpayers receiving the payment in cash for sales performed should transfer to their bank account any amount of cash (banknotes and coins) exceeding a specific maximum daily cash limit. The cash transfer should occur in the following working day after the day the cash limit is exceeded. The daily opening cash balance for each electronic device of invoicing should be declared with the tax authorities through electronic communication. As a standard the maximum cash limit depends on the previous year turnover of the taxpayer, while if the activity has started during the year the cash limits are estimated based on the forecast of the taxpayer. The allowable daily cash limits are estimated based on the overall turnover of the activity and based on such turnover the taxpayer is obliged to set an individual limit for each place of activity/till device. The approved allowable cash limits are set to be as follows:

  • Previous year turnover <ALL 2 million → cash limit up to ALL 150,000 
  • Previous year turnover from ALL 2 million to ALL 10 million → cash limit up to ALL 500,000 
  • Previous year turnover >ALL 10 million → cash limit up to ALL 500,000 or 5% of the annual turnover of the previous year, whichever value is the highest. 
  • Exchange offices → may set the cash limit to ALL 5 million or 5% of the annual turnover of the previous year, whichever value is the highest.

Request for provision of information

The tax administration may request any information which is deemed necessary for compliance with the tax legislation from the following persons including but not limited to:

  • Entities for dividends paid, for financial or business transactions made, payments to subcontractors, debtors or creditors; 
  • Banks and financial institutions for opening/closing balances, statement of accounts of the taxpayers, interest payments, assets held on behalf of another person; 
  • Investment funds or intermediary companies, private pension funds;
  • Real estate agents, public notaries for immovable/movable property transactions, service contracts; 
  • Non-resident entities and non-resident taxpayers for the payment made to non-residents; 
  • State authorities or state officials; 
  • Donators, international organizations, resident or non-resident non-for-profit organizations in relation to the payments made for the supply of goods or services; 
  • Electronic marketplaces, interfaces and digital platforms related to the suppliers and their transactions; 
  • Public databases and registers including the ultimate beneficiary owners register, cadaster and National Business Center.

Tax assessments

According to the approved changes, besides the Regional Tax Directorates, tax assessments may be issued also by the authorized structures within the General Tax Directorate for the registered taxpayers including entities, sole entrepreneurs, self-employed persons, individuals, or other persons having the obligation to declare and/or pay taxes in Albania. For local taxes, the tax assessment is issued by the structures managing the local taxes and tariffs within the Municipalities.

Penalties

Based on the new provisions several penalties have changed compared to the previous provisions as listed below:

 

 

Administrative breach
 

 

New level of the penalty
 

 

Previous level of the penalty
 

  in ALL or % in ALL or %
Non-registration or non-updated information (Art. 112) 10,000 for physical persons
15,000 for legal entities
10,000 for NGO and small business
15,000 for CIT taxpayers
Non-submission of tax return (Art. 113) 5,000 for all taxpayers except individuals
3,000 for individuals
10,000 for CIT taxpayers
5,000 for all other taxpayers
Late payment of income tax installments (Art. 114/1) 10% of the installment + interest for late payment up to 365 days 10% of the installment
Non-proper keeping of tax documentation, books and registers (Art. 118) 10,000 for physical persons/self employed
50,000 for legal entities
10,000 for small business
50,000 for all other taxpayers
Non-declaration of employees &non-declaration of the salary (Art. 119) 200% of outstanding tax/contribution for legal entities
100% of outstanding tax/contribution for other taxpayers
200,000 for CIT and VAT taxpayers
50,000 for all other taxpayers
Goods not supported with tax documents (Art. 121) 25,000 for physical persons/self-employed
50,000 for physical persons/self-employed registered for VAT, but not less than VAT due
750,000 for CIT registered taxpayers, but not less than VAT due
25,000 for small business and other taxpayers
50,000 for small business taxpayers registered for VAT
75,000 for CIT and VAT registered taxpayers
Second occurrence of non-issuance of invoices (Art. 123) 50,000 for physical persons/self-employed
100,000 for physical persons/self-employed registered for VAT
500,000 for CIT registered taxpayers
50,000 for small business and other taxpayers
100,000 for small business taxpayers registered for VAT
150,000 for CIT and VAT registered taxpayers
Breaches for non-fiscalisation (Art. 124) 25,000 for physical persons/self-employed
50,000 for physical persons/self-employed registered for VAT
75,000 for CIT registered taxpayers
25,000 for small business and other taxpayers
50,000 for small business taxpayers registered for VAT
75,000 for CIT and VAT registered taxpayers
Opposing of a tax audit procedure (Art. 127) 100,000 for physical persons/self-employed
1,000,000 for legal entities and individual with high income
100,000 for small business
1,000,000 for other businesses

The amendments to the Law No.9920 dated 18.05.2008 as amended are approved with the Law No. 83/2022 dated 24 November 2022.

Value Added Tax

VAT exempt supplies

The list of the supplies benefiting VAT exemption is extended with supplies and import of fuel wood, in logs, billets, twigs or similar forms as listed in the Chapter 4401 of the Nomenclature of Goods. The exemption will apply until 31 December 2023.

Exemption on import will extend also to the goods destined for realization of projects financed based on a donation or grant agreement entered by the Council of Ministers provided that such agreements stipulate for non-use of the funds for the payment of the taxes in Albania. In addition, the supply of goods and services intended to be used under the same contracts will be treated as supplies similar to exports.

Special regime for Albanian Power Exchange

The amendments of the Law on VAT also include a new VAT regime applicable for the energy producers trading the energy through the Albanian Power Exchange. According to the new regime introduced, the import and domestic supply of electricity which is traded in Albanian Power Exchange is considered as supply taxable by the recipient under the reverse charge mechanism for VAT purposes.

In case of the supply of electricity traded through the Albanian Power Exchange, the VAT becomes payable at the moment when the results of the day-ahead auction markets are announced or within the same day or at the moment when the orders are matched in the case of continuous trading within the same day. Until 31 December 2026, the VAT is payable by the recipient of the electricity whereby the latter applies the reverse-charge mechanism for the supply received. The detailed procedures of application of this regime are expected to be specified in a Decision of the Council of Ministers.

The amendments to the existing VAT Law are approved with the Law No. 82/2022 dated 24 November 2022.

Solidarity Contribution/ Windfall Tax

The Albanian Parliament has approved a temporarily windfall tax, named Solidarity Contribution, aiming to tax the energy producers operating in a liberalized energy market for the additional income created as the result of the increase of the energy prices. Based on the approved Law, the Solidary Contribution is triggered if by 30 September of the respective year, the expected price for the sale of energy in the Hungarian Power Exchange for the following year is higher than 180 EUR/MWh. The Solidarity Contribution is applied at 50% rate on the additional income deriving from the sale of the energy with a price higher than ALL 8.5/KW and by following a specific formula.

The Albanian energy producers are required by 31st of January to calculate and report to the tax authorities the Solidary Contribution based on the data of prior year. The payment of the Solidarity Contribution is executed in two equal installments, respectively on the 31st of March and on the 30th of November. The Solidarity Contribution is considered as a deductible expense for Corporate Income Tax purposes.

The Law 98/2022 dated 22 December 2022 is published in the Official Gazette no.8 dated 18 January 2023. The provisions of the law will remain in force until 31 December 2024.

Excise Law

The Excise Law has also passed several changes which impact the increase of the excise tax on all products and subproducts subject to this tax. A detailed list of the excisable products and respective excise tax applied from the beginning of 2023 is published in the following link.

The detailed amendments to the Law no. 61/2012 on Excise Tax are approved with the Law no. 81/2022 dated 22 November 2022.

For information

Alba Paparisto, ACCA
Managing Director, Tax
Tel: +355 (4) 2274 524

Sonila Selmani
Senior Manager, Tax
Tel: +355 (4) 2274 524