Corporate Income Taxation
- As from 1 January 2014, the corporate income tax rate for taxpayers with an annual turnover exceeding ALL 8m (approx. EUR 57k) increases from 10% to 15%.
- No tax deductibility ceiling shall apply to second-tier banks’ bad debt provisions created in compliance with the IFRS. So far, their deductibility was limited to the amount of provisions determined in accordance to the Bank of Albania regulations
- Small businesses i.e. taxpayers with annual turnover ranging between ALL 2m to ALL 8m (approx. EUR 14,290 to EUR 57,150) are relieved from the 10% personal income tax on their profits and are subject to the simplified income tax at a rate of 7.5% on their profits. They should make advance payments on quarterly basis and by 10 February file the annual tax return and pay the tax due for the year less the advance payments made. The simplified income tax for small businesses shall be administered by the General Tax Directorate and no longer by the local government. Previously, small taxpayers were in addition to the personal income tax, subject to the local tax on small businesses at the rate of 1.5% on their annual turnover payable on quarterly installments. Such tax was creditable against the personal income tax liability.
- Small scale business activities with an annual turnover below ALL 2m are taxed at a fixed amount of ALL 25k (approx. EUR 179) payable within the first half of the fiscal year. Until now, they were subject to a fixed tax obligation which varied according to the type of business activity and their location.
Value Added Tax (VAT)
- Starting from 1 April 2014 the supply and importation of medicines and health care services becomes VAT exempt. The VAT treatment of medicines purchased prior to and resulting on stock on 1 April 2014, will be defined in an instruction of the Minister of Finance to be issued before this date.
- Local and cross-border supplies of services and importation of goods carried out by operators in the hydrocarbons sector and directly relating with the exploration phase will continue being VAT exempt. However, supplies made during the development phase now become subject to VAT. The services and goods eligible for VAT exemption during the exploration phase and the related procedure will be regulated in a joint decree of the Minister of Finance and the Minister of Energy to be issued in the coming months.
- The timeframe for verifying and authorizing VAT refund claims is extended to 60 days, from 30 days which had been the case before, except for refunds to foreign donators having in place a financial aid agreement ratified by the Albanian Parliament or a grant agreement approved by the Council of Ministers, which requests should be processed within 30 days. Moreover, in order to prevent abuses from the tax authorities’ side, the payment of VAT amounts approved for refund by the tax authorities shall be processed by the treasury department on a first come first paid basis.
Personal Income Taxation
- Taxation of employment income changes from a flat tax rate regime of 10% to a progressive tax scale. Employment income ranging between ALL 30k and ALL 130k (approx. EUR 215 and 930k) is taxed at 13% and any excess income is taxed at 23%. The initial ALL 30k of the employment income becomes income tax exempt. Previously employees earning more than ALL 30k (approx. EUR 215) per month were taxed at the rate of 10% on their entire salary amount.
- As from 1 January 2014, the exemption from personal income tax for expatriate personnel of operators in the hydrocarbons’ sector during all petroleum operations phases is no longer applicable. Thus, as from 1 January 2014 such expatriate personnel becomes subject to taxation in accordance with the personal income tax scale.
- Transfer of ownership titles over agricultural land by a registered farmer to another farmer or an entity engaged in agricultural activity, is exempt from personal income tax.
- As of 1 January 2014, the base for the calculation of health insurance contribution is the gross salary. The ceiling amount of ALL 95,130 (approx. EUR 680) at which the health insurance contribution calculation was capped so far is removed. The health insurance section contribution rate continues being the same i.e. 1.7% borne by the employer and 1.7% borne by the employee.
- A new base for purpose of calculating of the health contributions of selfemployed individuals is introduced. Such base is calculated on twice of the minimum national salary amount. The minimum national salary currently equals 19,026 ALL (approx. EUR 136). The same rule will be applied for purpose of calculation of the voluntary health insurance contributions for those individuals who voluntarily adhere to the health insurance scheme i.e. unemployed individuals.
Real Estate Tax
- Annual Real Estate Tax on properties used for other than 40 and ALL 400 (approx. EUR 0.3 to EUR 3) per square meter.
- Individuals owning more than one residential properties will be subject to a tax equal to a range of ALL 5 to ALL 30 (approx. EUR 0,04 to EUR 0,2) per square meter on the first property, and to two times higher rate for any additional property.
- Starting from 1 April 2014, taxpayers operating in the hydrocarbons’ sector, including both contractors and subcontractors become subject to excise duties on the importation of petroleum by-products. The excise duties exemption previously granted to such taxpayers during the exploration and development phases will no longer apply.
- Excise duties for alcoholic beverages and tobacco products are increased. The new law introduces a new scheme on the excise of beer resulting in an increase of the excise duty.
- The excise tax for crude oil will be calculated at 25 ALL/kg. Penalties will apply in cases of surpluses or shortages of registered crude oil importers equaling to ALL 25 per kg.
- Energy drinks become subject to excise tax at the amount of ALL 50 per liter.
- The unroasted coffee is exempted from the excises duty, which previously used to be at the rate of 30 ALL/Kg. The roasted coffee excise rate decreases to 60 ALL/Kg from the previous rate of 140 ALL/Kg.
- The circulation tax on oil and gasoline increases from ALL 7 per liter to ALL 17 per liter.
- The new law provides for the same taxation rates on packaging materials regardless of the products packaged and introduces exhaustive lists of tax exempt packaged materials.