New VAT Law for 2015 – Albania

6. February 2015 | Reading Time: 7 Min

Taxable person

The new law provides a clearer definition of a “taxable person” for VAT purposes, by introducing the notions of ‘economic activity’ carried out independently, regardless of the place of conduct, the purpose and the result.

Taxable amount

The new regulation brings a more extended definition of the ‘taxable amount’ by introducing new notions, such as the ‘open market value’, and new elements to consider, such as ‘incidental expenses’, ‘returnable packaging material’, ‘price reductions and discounts’, ‘rebates’, ‘reference value for customs purposes’, the official ‘exchange rate’, etc.

Under the new law, the taxable amount is the consideration agreed between the parties. For certain supplies of goods and services, such as transactions between related parties, self-supply of services and barter transactions, the taxable amount will be the open market value.

The taxable value for the self-supply of services will be the market value, if the VAT on such service would not have been fully recoverable had the supply been made by another taxable person.

In the case of barter transactions or where the consideration for a supply is partially in cash and partially in kind, the taxable amount for that supply will be the market value of the goods or services received in exchange at the date the tax is due plus any amount paid in cash.

Place of supply of service

As a general rule, services  supplied to taxable persons, will be taxable in the place where the service recipient is established. Hence, services provided to an entity established and registered for VAT outside Albania will be subject to VAT in the jurisdiction of the service recipient and there will be no obligation to charge Albanian VAT, nor will there be a limitation on the right to deduct input VAT.

If the service is supplied to a non-taxable person, the place of supply will be considered to be the place where the service provider is established.

 In general:

Place of the supplier

 – taxable person

Place of recipient

– taxable person

Place of recipient – nontaxable person

Place of supply/

tax of service


Not in Albania


Not taxable in Albania

Not in Albania



Taxable in Albania



Not in Albania

Taxable in Albania

Not in Albania



Not taxable in Albania


However, certain exceptions are introduced to the general rules. Specifically, regardless of whether the recipient of the service is a taxable or non-taxable person, the place of supply will be in Albania in the following cases:

  • Services related to immovable property located in Albania
  • The supply of restaurant and catering services physically carried out in Albania
  • The supply of cultural, artistic, sporting scientific and similar services when such events take place in Albania

The new VAT law introduces exceptions to the general rule as regards the place of supply of services supplied to non-taxable persons. Specifically, the place of supply will be the place where the non-taxable person is established or where he has his permanent address or usually resides in the following cases:

  • Digital services, such as website supply, radio and television broadcasting services, telecommunications, supply of software, music, films, distance teaching and similar electronically supplied services
  • The transfer or assignment of copyrights, provision of advertising services
  • Banking, financial and insurance transactions
  • The provision of access to a natural gas system or other utility distribution systems

As a consequence, a foreign service supplier providing any of the above services to a non-taxable person in Albania should register for VAT purposes in Albania by appointing a fiscal representative in the country to account for and pay the VAT liability.

Fiscal representative

According to the new law, the obligation to appoint a fiscal representative in Albania will be triggered where a foreign person who is not established in Albania supplies services or goods which are subject to Albanian VAT to a non-taxable person.

In the case where a foreign person who is not established in Albania supplies services or goods to an Albanian taxable person, the latter will always be liable to account for the VAT through the reverse charge mechanism. Thus, pursuant to the new rules, a foreign service provider rendering services related to an immovable property located in Albania will have to appoint a fiscal representative only when his services are provided to a non-taxable person.

Place of supply of goods

The new law changes the rules on the place of supply for goods supplied on board ships, aircrafts or trains and the supply of natural gas, electricity and water through a distribution system.

Where goods are supplied on board ships, aircraft or trains during a passenger transport operation, the place of supply is deemed to be in Albania if the point of departure of the passenger transport is in Albania. Therefore, when the supply of goods is made by a taxable person who is not established in Albania, the latter must account for and pay the VAT due through appointment of a fiscal representative in Albania.

The amendments to the place of supply as regards the supply of natural gas, electricity and water supplied through distribution systems make a distinction between those supplies which are made with a view to resale and those purchased for consumption. The place of supply of gas, electricity and water supplied through distribution systems will be where the taxable trader is established or has a permanent place through which the goods are supplied or, in the absence of such a place, the place where he usually resides. Further, the supply of natural gas, electricity and water in the final stage from the distributor to the final consumer will be taxed at the place where the customer consumes such goods. As a consequence, distributors that are not established in Albania where the consumption of the above mentioned goods occurs will have to appoint a VAT representative in order to account for and pay the VAT due.

Supply of intangible assets

According to the new rules, the supply of intangible assets, such as software, licenses, patents and know-how, is treated as a supply of services, thereby, eliminating any ambiguity caused by the prior VAT law on this matter. As a consequence, in the case of a supply of intangible assets by a foreign entity to an Albanian taxable person, the supply will not be treated as an import of goods subject to import VAT, but rather as a cross-border supply of services. The VAT due on such supplies will be self-accounted by the Albanian taxable person through the reverse charge mechanism and no cash flow impact will arise to the extent that the taxable person has the right to fully deduct the input VAT.

Small value gifts

  • Contrary to the past treatment of gifts as taxable supplies, the new law excludes small value gifts from the scope of VAT not bigger than 2,000 ALL 

Transfer of economic activity

The new rules provide detailed guidace for transfering the economic activity consisting not only in the transfer of a totality of assets or part thereof, as provided in the current Law, but including as well, the transfer of the related rights and obligations, accounting and tax books etc. Furthermore, unlike the prior Law, the new one specifies the requirement and procedure for prior notification to the General Tax Directorate by the parties to the transaction.


The new law introduces electronic invoices as equivalent to paper invoices. To ensure the authenticity of the origin and the integrity of the content of the electronic invoice, taxable persons must use an advanced electronic signature or electronic data interchange (EDI).

Also, in contrast to the prior VAT legislation, invoices will no longer be required for insurance, reinsurance services and financial services which are VAT exempt. However, supporting documentation will be defined for these supplies, following consultation between the tax authorities and the respective supervising authorities.

The maximum value of supplies of goods and services for which no fiscal invoice is required is increased from ALL 20,000 to ALL 40,000.

Zero-rated supplies

The new law provides that the following supplies will become zero-rated:

  • Inward processing becomes a zero-rated activity allowing the deduction of the relevant input VAT.
  • The supply of gold to the Bank of Albania will be treated as a zero-rated supply.
  • The supply of goods to be carried in the personal luggage of passengers travelling outside Albania will be considered as zero-rated, to the extent the traveler is not established in Albania, the goods are transported out of the country within three months following the month of supply, and the total value of the supply, including VAT, does exceed 120,000 ALL. In that case, the VAT paid by the traveler upon acquisition of the goods, will be reimbursed by the customs authority at the moment the goods leave Albania.
  • The supply of services by intermediaries, acting in the name and on behalf of another person, where they take part in transactions treated as exports, or in transactions carried out outside Albania, will qualify as a zero-rated supply. Under the prior law, services of intermediaries have been taxable at the standard rate, regardless of the type of transaction.

VAT exempt supplies

Under the new rules, the following supplies become VAT exempt with no right to deduction:

Insurance and reinsurance transactions and services relating thereto supplied by insurance brokers and insurance agents become exempt from VAT. Un the prior law, only life insurance services are VAT exempt.

Under the prior legislation, goods used in the conduct of the business, which upon their acquisition did not give rise to a right of deduction, either because they were wholly used for exempt activities or because the deduction of VAT was disallowed by virtue of another provision, are treated, upon their disposal, as a taxable supply resulting in a double VAT burden. The new VAT law treats such disposals as VAT exempt.


Your Contact Persons