Albania

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TAXES - ACCOUNTING

 

 

Corporate tax

Tax rate for resident companies

All those companies which are VAT registered and are not subject to the small business tax, are subject to corporate profit tax. Resident companies are subject to tax on their worldwide income while as non-resident companies are subject to tax on their Albanian-source income only. The net taxable income (profit) is the difference between total revenues (in-kind revenues included) and deductible expenses.

The standard rate of corporate tax is 20%. A company can carry forward losses for 3 years. However this does not apply when there are changes of more than 25% in ownership titles.
The annual depreciation rate on all those assets like buildings, machinery & equipment which serve for more than 20 years is 5% while as it is 25% in case of computers, IT (information technology) hardware & software products, and data back-up devices. Incase of intangible assets like patents, trade marks and expenses for starting the business the depreciation rate is 15% per annum.
Tax legislation in Albania is managed through the General Tax Department. Due to rapid development of the economy, tax legislation is subject to frequent amendments and changes. More detailed information on tax legislation in Albania, can be found
in the web page of the General Tax Department of Albania.

   
Tax rate on long-term capital gains Capital gains are included in the ordinary income of companies and are subject to profit tax at the regular rate of 20%.
   
System governing groups of companies and dividends paid by subsidiaries to their parent companies Dividends paid are subject to a withholding tax at a rate of 10% for payments to residents as well as to non-residents. Remittances of branch profits are not subject to any withholding tax.
Companies must include dividends received from Albanian and foreign companies in taxable income.
   
Tax rate on branches 20




Income tax

Fiscal year The fiscal year in Albania is the calendar year. The annual tax returns need to be filled by 31st March of the year following the fiscal year.
   
Income tax rate The resident individuals in Albania are taxed on their worldwide income while as the non-resident individuals are taxed on their Albanian sourced income.
Salaries and other payments* are subjected to income tax rates as given below:
1.Taxable monthly income (0-14,000 Lek) : Tax (0 + 1% of the amount over 0 Lek)
2. Taxable monthly income (14,000 - 40,000 Lek) : Tax (140 Lek + 5 % of the amount over 14,000 Lek)
3. Taxable monthly income (40,000 - 90,000 Lek) : Tax (1,440 Lek + 10 % of the amount over 40,000 Lek)
4. Taxable monthly income (90,000 - 200,000 Lek) : Tax (6,440 Lek + 15 % of the amount over 90,000 Lek)
5. Taxable monthly income (200,000 - above ) : Tax ( 22,940 Lek + 20 % of the amount over 200,000 Lek)

Other payments* or rewards (except salary), if made at the place of working, are counted in the above mentioned taxable income scheme. However payments made to the individual from a source outside the the working place, such as management or participation in boards, councils commissions etc., they are taxed at a reduced rate of 10% only.

Income derived from transfer of ownership by an individual on real-estate is taxed as below:
1. Sale Price (0 - 2,000,000 Lek) : Tax ( 0.5%)
2. Sale Price (2,000,000 - 4,000,000 Lek) : Tax (1%)
3. Sale Price (4,000,000 - 6,000,000 Lek) : Tax (2%)
4. Sale Price (above 6,000,000 Lek) : Tax (3%)
The real-estate value is determined based on the evaluation performed by the Office of the Immovable Property Registration.

WITHHOLDING TAX:
All resident individuals, central and local government authorities, non-profit organizations and any other entity, are obliged to withhold tax at the rate of 10% from the following gross payments sourced from the Republic of Albania:
a) dividends;
b) profit shares;
c) interests;
d) payments on copyright and royalties;
e) payments on technical, management, financial and insurance services;
f) payments for management and participation in directing councils;
g) payments for performance of actors, musicians, or sportsmen, including such payments made to persons that employ artists or sportsmen or act as intermediate in arranging shows or performances.
Non-residents are obliged to withhold tax for all the above listed payments if these payments are made through a permanent establishment in the Republic of Albania or by their appointed representatives.
   



VAT rates

Standard rates VAT (Value Added Tax) is applicable on sale of goods and services as well as on the import of goods at a standard rate of 20%.
In case of imported goods VAT is assessed on the CIF plus the amount paid as duties.
All persons (individuals or legal entities) whose turnover exceeds or it is expected to exceed 8.000.000 Lek in a calendar year must register as VAT payer with tax authorities. All natural or legal persons who perform export- import activities are obliged to register for VAT purposes, regardless the total amount of their annual turnover.
   
Reduced rates The following services are exempted from VAT:
1. Supply of financial services
2. Supply of medical equipment, medicines, and materials used for their packing and production
3. Supply of services for processing of goods meant for re-export.



Other important taxes


Name of tax
Rate
Tax on sale of agricultural land  
0.5% of the sale price  
Immovable Property Tax  
Residential Buildings: Ranges between 5-30 Lek/sq. meter/year depending on the municipal zone.
Commercial & Other Buildings: Ranges between 20-200 Lek/sq.m/year depending on the muncipal zone.  
Excise Taxes  
For various imported luxury products such as soft drinks, alcoholic beverages, coffee, mineral water, perfumes, deoderants, automotive fuel and oil by-products, cigarettes and tobacco, excise taxes are also applied. Excise taxes are determined by the type and quantity of the product and are levied in addition to the customs duties; the excise tax ranges from 20-65%.  


 

Accounting

Introduction
Albania has put in place several important elements of the institutional and statutory framework on financial accounting since the time the country started transition to a market economy. The Albanian government is fully determined to undertake the necessary further steps and to give proper support to improve the financial accounting system in the country.


General accounting principles
The new Law on Accounting and Financial Statements became effective on 1 January 2006. The new law requires the use of International Financial Reporting Standards for the preparation of the legal and consolidated financial statements of public interest entities and National Accounting Standards for the preparation of all other financial statements.
For the preparation of the financial statements the following main accounting rules, which are in accordance with the international accounting practice, are applied:
1. Assumption of the going concern basis;
2. Consistency between accounting periods;
3. Use of accrual accounting and matching concepts;
4. Comparative information should be disclosed in respect to the previous period for all numerical information in the financial statements;
5. Each material item should be presented separately in the financial statements;
6. Assets and liabilities, as well as items of income and expense, should not be offset;
7. All transactions and accounts should be valued and presented fairly, prudently and transparently;
8. Fixed assets are valued at acquisition or production cost net of depreciation or amortization;
9. Raw material supplies, goods for resale, finished products and work in progress, are valued at purchasing or production cost.

Obligations and publications
Accounting to the Accounting Law, the financial records need to be maintained in Albanian and are shown in Albanian currency Lek. The financial statements include the balance sheet, the income statement and an annex which describes the general accounting recommendations.

Certification and auditing
The Company Law makes it mandatory that the financial statements of a company must be audited by at leat one auditor if two of the following three criteria exceeded:
1) Balance sheet assets of 6 million Lek
2) Annual sales of 12 million Lek
3) An average of 10 employees.

Professionals and representative organizations
National Accounting Council (NAC),
Albanian Institute of Approved Chartered Auditors (IEKA),
Albanian League of Accountants (LPKM),
Accountants and Financiers Association of Albania (SHKFSH).

Comments
A law to enforce the audited company to make public its financial statements does not exist in the country. Only limited liability companies and joint stock companies have to publish their unaudited financial statements, along with the certification by a certified accountant, 30 days after shareholders' approval.



Useful links
General Directorate of Customs in Albania
Albanian Agency for Business and Investments

Last modified in mai-07
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