Tax News Albania: Remodeling of the Albanian Tax Procedures
Remodeling of the Albanian Tax Procedures
The Albanian Parliament has approved Law No. 112/2016 on certain additions and amendments to Law No. 9920 dated 19 May 2008 on Tax Procedures in the Republic of Albania. The changes affect a number of articles covering tax administration and collection, tax audit procedures, tax penalties and other tax procedures. For simplicity and ease of understanding, this publication is divided in sections mirroring the Albanian Tax Procedures Law.
Advance Tax Ruling
An advance tax ruling must be published on the webpage of the tax authorities within five calendar days from the ruling’s effective date. The publication of advance tax rulings must follow strictly the confidentiality rules regarding the taxpayers’ data. Any advance tax ruling is binding for the taxpayer having submitted the request and must be applied uniformly by the tax authorities in similar situations.
The tax authorities must publish, twice a year, on their webpage commentaries on the advance tax rulings issued grouping them based on the issues analyzed.
Restructuring of the Tax Appeal Directorate
Starting from 1 January 2017, the Tax Appeal Directorate will be under the structure of the Ministry of Finance. A new function is established within the Tax Appeal Directorate under the name of Commission of Tax Appeals Review. It will consist of seven members and will take decisions only on disputes above a certain threshold which will be defined through a Decision of the Council of Ministers. The reviewing procedures, decision-making powers, functions and composition of the Commission of Tax Appeals Review shall be approved by the Council of Ministers.
An important amendment is that if the Tax Appeal Directorate or the Commission decide in favor of the taxpayer, then the tax authority must accept this decision and has no right of appeal before higher instances. Previously, the decisions of the Tax Appeal Directorate were appealable before all court instances. The new practice is expected to speed up the execution of the decisions in favor of the taxpayer and avoid unnecessary court procedures.
Restructuring of the Taxpayers’ Advocate
Starting from 1 January 2017, the Taxpayers’ Advocate will be under the structure of the Ministry of Finance (previously, the Taxpayers’ Advocate was part of the General Tax Directorate). The competences of the Taxpayers’ Advocate are extended and their recommendations may have an impact on the amendments of the existing laws, decisions of the Tax Appeal Directorate or the Commission of Tax Appeals Review as well as for the advance tax rulings issued by the General Tax Director.
For the first time, the new provisions give the taxpayers the right to file an administrative claim with the Regional Tax Directorate or the General Tax Directorate on account of any act or omission of the tax administration which violates the taxpayers’ rights.
Identification of non-registered activities
The tax administration will confiscate the goods or suspend the services provided by persons identified to carry out business activities without being registered with the National Business Center. Non-registered persons will be obliged by the tax administration to register for tax purposes and any enforcement collection measure will be released after settlement of any tax obligations related to this violation.
Deregistration of taxpayers
The amendments aim to accelerate the deregistration period of taxpayers by setting out new and/or more strict deadlines for the competent authorities to perform this procedure. The National Business Center or the Court must inform immediately (previously, this was not clear) the tax authorities about:
- Any request filed by a taxpayer to open liquidation procedures;
- Any deregistration request in case of sole entrepreneurs;
- Any deregistration request of entities being dissolved without going into liquidation procedures.
Within 10 business days from the date on which the request is filed, the tax authority must confirm and inform the National Business Center or the Court in writing whether the taxpayer has any outstanding tax liabilities. The overall period for finalizing the deregistration procedure (i.e. 30 business days) remains unchanged. The overall period remains unchanged even if the tax authority considers it necessary to undertake a tax audit for the purposes of deregistration.
If tax authorities reject the deregistration, they must provide specific reasons. If the tax authorities fail to provide specific reasons within the deadline, then the National Business Center or the Court must deregister immediately the taxpayer from the commercial register.
The tax compliance obligation ceases at the moment when a legal entity files the final report for liquidation or for merger/demerger. For the sole entrepreneurs, the tax compliance obligation ceases at the moment of filing the request for deregistration.
Computerized fiscal invoices
The taxpayer may request the tax authorities to issue electronically prepared fiscal invoices instead of the preprinted fiscal invoices distributed by the tax administration. The General Tax Director may allow the use of the electronically prepared fiscal invoices, regardless of the number of the sales fiscal invoices prepared by the taxpayer, provided that the software used by the taxpayer fulfills certain requirements. The implementation procedure of this provision shall be detailed in an instruction of the Minister of Finance.
Amendments provide for a broader definition of transactions which will not be treated as cash payments and consequently not being subject to the penalty of 10% for each transaction. From the entry into force of this law, e-banking transactions which are made through financial institutions licensed by the Bank of Albania or payments made with a credit card will not be considered cash payments and, as result, would not be disputable by the tax authorities.
Amendment of tax returns
Any tax return may be amended within 36 months from the initial submission deadline (previously, the period was 12 months) provided that it is not audited by the tax authorities. However, a tax return which has been subject to a tax audit may be amended anytime if the taxpayer has to declare a higher tax liability compared to the one resulting from the tax audit.
Tax assessment notification document
The new tax assessments to be prepared after the entry into force of this law, apart from the tax liability, penalty and interest, must include information on any reduction of the tax loss or credit tax balance of the taxpayer, as the case may be.
In addition, the right of the tax administration to perform a tax assessment is prescribed at 5 years after the submission deadline of the initial tax return or the amended tax return. Previously, this period was calculated from the moment the amended tax returns were submitted.
Agreement for payment in instalments
Based on the new changes, any taxpayer experiencing insolvency which impedes the settlement of future tax liabilities has the possibility to enter into an agreement with the tax administration for payment of the tax liabilities in instalments. If the taxpayer and the tax authorities reach an agreement, it becomes binding only if it is signed by the competent tax authority and the taxpayer pays immediately at least 20% of the tax liabilities for which the agreement is concluded. During the period of the agreement, the taxpayer must pay interest on the principal starting from the month following the one when the agreement becomes effective until its termination date. No penalties for late payment are applied during the period of the agreement.
Tax audit notification
The tax audit notification must be delivered no later than 30 calendar days before the date of the start of tax audit procedure, or 10 calendar days in case of fiscal visits. If the taxpayer is subject to a re-audit, the decision of the General Tax Director must be sent to the taxpayer together with the tax audit notification. Any notification for a tax audit must provide information about the duration of the audit.
The amendments introduce the possibility for the taxpayer to report, before the start of the tax audit, any non-declared transactions for which no tax was paid. In this case, the taxpayer must pay the tax liabilities and the related interest for late payment. A penalty amounting to 50% of the tax liabilities is applied for tax liabilities reported by the taxpayer before the start of the tax audit procedure. However, such a penalty is not to exceed the standard penalty applicable for this administrative violation. If this is the case, the lowest penalty is applied.
If the taxpayer does not make any declaration before the start of tax audit procedure, any breach identified during the tax audit is subject to administrative sanctions as generally provided by law.
Late declaration of tax returns
For every tax return submitted after the deadline, a reduced penalty amounting to ALL 5,000 (approximately EUR 35) shall be applied to all taxpayers, except for those registered for CIT purposes in Albania that will be liable to the previous penalty amounting to ALL 10,000 (approximately EUR 70).
Late payment of income tax advance payments
A reduced penalty of 10% compared to the previous 15% shall be applied in case of late payment of the advance payments of the CIT or income tax on small business.
Penalties related to withholding tax
Penalties for agents liable to withhold tax and collect fees or tariffs are refined and specified based on the respective breach. Previously, only the penalty of 50% was applied in case of non-collection and payment of the withholding tax. The new provisions lay down the following penalties for agents of withholding tax:
- Penalty of 0.06% per day of the tax/fee/tariff if it has been withheld, calculated and declared but not transferred to the state budget.
- Penalty of 50% of the tax/fee/tariff if it has not been withheld or collected.
- Penalty of 100% of the tax/fee/tariff if it has been withheld but not declared or transferred to the state budget.
Non-reporting of hiring of employees and failure to report real salaries
Taxpayers/employers registered for CIT and VAT purposes will be subject to a penalty of ALL 200,000 (approximately EUR 1,450) in case of failure to report the hiring of an employee. Previously, the penalty was uniformly applied for all taxpayers at the amount of ALL 500,000 for each failure to declare the hiring of an employee.
A new penalty is introduced for the cases when, during a tax audit, it is concluded that an employer has failed to report the real salaries paid to the employed individuals as per the employment contract. In such a case, the employer will be subject to a penalty of 100% of the tax liability along with the payment of the whole amount of tax liabilities and social contributions due.
Failure to keep tax documentation
Taxpayers trading with goods unaccompanied by tax documents will be subject to the following measures and penalties:
- Taxpayers subject to income tax on small business will be immediately registered for VAT purposes and they will be obliged to issue a fiscal invoice for the goods non-supported with documentation. Apart from the tax liability, a penalty equal to 100% of the non-declared tax liability and interest for late payment will be assessed.
- Taxpayers registered for VAT purposes are obliged to issue a fiscal invoice for documenting the goods. For the goods non-supported with fiscal invoices, the tax authorities shall make a tax assessment based on the market value of those goods. Apart from the tax liability, a penalty equal to 100% of the non-declared tax liability and interest for late payment will be assessed.
Previously, the tax authorities confiscated any goods not supported with documentation and revaluated the tax position of the taxpayer for a six-month period. The confiscation of the goods was replaced if the taxpayer paid immediately a penalty equal to the market value of confiscated goods. Compared to the former one, the new procedure aims to regulate the payment of penalties in accordance with the respective provisions related to the breach which has occurred.
Non-issuance of fiscal coupons and non-usage of cash registers
New penalties and administrative measures shall apply if taxpayers do not issue fiscal coupons or do not make use of the cash registers/sales monitoring systems. The first penalty applicable is ALL 50,000 and may escalate with the suspension of activity if the breach is recurrent or even with the classification of the breach as tax evasion; in such a case, a penalty of 100% is applied. For the breaches classified as tax evasion, the tax authorities have the right to file a criminal charge against the taxpayer.
Failure to issue tax invoices and document transactions
Taxpayers who fail to issue a VAT fiscal invoice will be subject to a penalty of 100% of the undeclared VAT in addition to the outstanding tax and interest for late payment.
The recurrent failure to issue fiscal invoices for more than two times is treated as tax evasion and gives the tax authorities the right to file a criminal charge against the taxpayer.
Failure to display retail prices
Taxpayers who fail to visibly display retail prices of goods and services will be subject to a penalty of ALL 100,000 (approximately EUR 720) for CIT registered taxpayers and ALL 50,000 (approximately EUR 360) for other taxpayers. Previously, the penalty was uniformly applied for all taxpayers and amounted to ALL 500,000 (approximately EUR 3,600). The Minister of Finance will determine the situations when the obligation to display retail prices is not necessary through a specific instruction.
Entry into force
Law No. 112/2016 dated 3 November 2016 is published in the Official Gazette No. 129 dated 15 November 2016. This Law becomes effective 15 days after the publication in the Official Gazette, except for the articles related to the Tax Appeal Directorate and the Taxpayers’ Advocate which will become effective starting from 1 January 2017.
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