Albania: Changes to tax depreciation and inventory valuation methods
New income tax law—Law no. 29/2023
New income tax law—Law no. 29/2023
The new income tax law—Law no. 29/2023 (dated 30 March 2023 and effective 1 January 2024)—introduced changes to the tax depreciation and inventory valuation methods effective 1 January 2024.
Depreciation
Under the new law, the person entitled to deduct depreciation expense is either the (a) the owner of the assets, or (b) the person who bears the risk of loss or damage to assets (e.g., in the case of leased assets or usufruct).
Financial assets and tangible fixed assets, which are not subject to consumption and obsolescence (such as land, works of art, antiques, jewelry, metals, and precious stones) are not depreciated.
Non-current assets must be depreciated using the straight-line method (and not the residual method), and non-current assets of each category are depreciated individually.
The new law also introduces a limitation on depreciation expenses for vehicles having a capacity up to five passengers (i.e., 50% of the purchase price and any repairing costs (including VAT), not to exceed ALL 10 million).
Inventory valuation
The new law stipulates that taxpayers must consistently use the same accounting method for inventory valuation and work in progress as specified by the accounting legislation. However, the inventory valuation method chosen by the taxpayer must be applied for at least five consecutive years.
In addition, under the new law expenses for consumable items are recognized at 50% in the year of acquisition and 50% in the subsequent year.
Read an October 2023 report prepared by the KPMG member firm in Albania
For more information on the new income tax law, read TaxNewsFlash:
- Changes to expenses considered non-deductible for corporate income tax purposes
- Changes to corporate income tax
- Changes to taxation of individuals’ business income
- Special provisions and rules on taxation of investment income realized by individuals
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.