Taxes in Albania are grouped into three main categories: indirect taxes (VAT, excise, gambling and other indirect taxes), direct taxes (income tax, personal income taxes, taxes on capital); local taxes, and social and health security contributions. These three categories are under authority like below: mm.hr
National Taxes, administered by the Central Tax Administration and Customs Administration include:
Indirect taxes include: Value added tax; Excise; Taxes on gambling, casinos and hippodromes;
Direct taxes include: Income tax; National taxes; Other taxes, which are defined as such by special law, and Customs taxes.
Social and health security contributions, as defined in the social insurances law
Local taxes and tariffs administered by Local Tax Administration include: Local tax on small business; Tax on immovable property, which includes tax on buildings and agricultural land; Tax on hotel accommodation; Tax on impact of new constructions upon infrastructure; Tax on transfer of ownership right on real estate; Annual tax for vehicle registration; Tax for occupation of public space; Board tax; Temporary taxes; Registration tariff for various activities; Cleaning and waste disposal tariff; Vehicle parking tariff; Tariff for services.
How is going on the Taxation of commercial companies?
Each individual, who is a partner in a commercial company, is responsible for the company’s tax liabilities to the tax administration, according to provisions in the company charter. According to commercial registry, over 95 percent of companies are limited liability companies. The remainder is joint stock companies, partnerships and less than 0.5 percent is limited partnerships. At the moment a company is created and starts its economic activity, it is responsible for:
– Calculation of VAT and timely declaration and payment;
– Payment of advance tax installments for profit tax to pay every month;
– Calculation, timely declaration and payment of tax on incomes from employment for employers and employees;
– Calculation, timely declaration and payment of social and health insurances contributions;
– Monthly payment of advance income tax installments in time;
– Withholding and payment of withheld tax, under obligation from the Law On Income tax;
– Calculation, timely declaration and payment of taxes according to specific activity for gambling, casinos and hippodromes;
– Calculation, timely declaration and payment of excise under specific law;
– Calculation, timely declaration and payment of national taxes and local taxes.
In order to calculate taxes, taxpayers who are subject to VAT or profit tax keep registers, accounting records, books and financial information and issue tax receipt or tax coupon, in accordance with relevant laws and regulations pursuant to them. Taxpayers keep their accounts in accordance with provisions of the law “On accounting and financial statements” and act pursuant to that law in accordance with IFRS principles. In order to register economic transactions related to taxes, taxpayers can also use books, records or documents specified in specific tax laws and respective regulation provisions. Taxpayers are required to use basic documentation, including tax invoice, in accordance with tax legislation and relevant legal provisions.
What Tax exemption are applied?
Albania’s tax regime is considered by far one of the most important incentives for foreign investment as it is the lowest in Europe; however, the tax system as such does not discriminate against or in favor of foreign investors.
Likewise, legislation relating to the public procurement process makes little distinction between foreign and domestic companies, as many activities in Albania require licensing within the territory. The procedures for obtaining a license are, however, the same for national and foreign companies. The government to date has not screened foreign investments and provided little in the way of tax, financial or other special incentives.
The Value Added Tax
The majority of goods and services are subject to VAT at a standard rate of 20 per cent, although certain exemptions apply (such as for financial services, postal services, non-profit organization supplies, packaging and materials used in drug production, supplies of electronic and written media for advertising, supplies of services at casinos and hippodromes (race tracks), sales of newspapers, magazines and advertisement services in them, as well as certain hydrocarbon operations).
According to the instruction of the Minister of Finance (No. 17, 2008), the most significant incentives for investors in Albania are as follows:
– VAT credit at the rate of 100 per cent for importers of machinery and equipment which will serve entirely their taxable economic activity;
– exemption of VAT for export of international services;