Tax changes entering into force in 2018
This issue of KPMG’s Tax News presents a summary of tax-related amendments in a number of laws which are effective as of 1 January 2018.
Tax incentives for companies in tourism
Recently, the Albanian Parliament has approved changes in the Law on Tourism providing for the categories of investors which may be entitled to benefit from the tax incentives introduced in the main tax laws. Thus, in order to qualify as a four-star and five-star hotel holder of a special status, the investment value should be respectively at least EUR 8 million and EUR 15 million. Four-star and five-star hotels could be managed by a hotelier group which operates independently or through a franchise contract or any other similar contract. In order to obtain the special status, investors in four-star and five-star hotels should fulfill certain conditions as stipulated in the specific Law on Tourism.
Starting from 1 January 2018, all services offered by the above mentioned four-star and five-star hotels and holding a special status as well as being holders of a trade registered mark or brand of hotel as defined in the Law on Tourism are subject to a reduced VAT rate of 6%. Currently, any company offering services in tourism, regardless of the hotel rating, is allowed to apply the reduced rate of 6% only for accommodation services.
In addition, four-star and five-star hotels are exempt from corporate income tax (CIT) for a period of 10 years provided they have met the criteria for obtaining the special status no later than December 2024. A decision of the Council of Ministers will determine the terms, conditions and procedures for implementing this provision.
Four-star and five-star hotels holding the special status are exempt from tax on real estate and infrastructure tax.
Tax incentives for IT companies
Starting from 1 January 2018, the CIT rate for entities operating in the Information Technology (IT) sector and dealing with software development is reduced from 15% to 5%. This incentive is expected to attract new and/or international software development companies to register in Albania. In addition, reduced customs duty rates will apply on the import of equipment and devices used in the course of IT business activity. Activities to be considered as related to the software development will be determined separately in a decision of the Council of Ministers.
Amendments to the Law on Local Taxes
Starting from 1 April 2018, the tax on buildings is calculated as a percentage of the tax base, which is the value of the building calculated as per the methodology and procedures to be determined in a decision of the Council of Ministers. This new method is very different from the previous one based on which the tax was levied on the surface of the property and varied depending on the district where the building was located.
The new tax on buildings will be calculated as follows:
- 0.05% of the tax base for buildings used for living purposes
- 0.2% of the tax base for buildings used for business purposes
- 30% of the approved construction area for buildings not constructed within the approved term of construction.
The tax on buildings will be calculated on an annual basis and paid in monthly installments or a longer interval depending on the classification of the taxpayers subject to this tax.
A new authority is established - The General Directorate of Real Estate Tax - which will be responsible for administering the Albanian cadaster (the real estate register). The Council of Ministers will determine the organization and functions of the General Directorate of Real Estate Tax in Albania.
Amendments to the Law on National Taxes
An amended definition of a luxury car is introduced in 2018 by changing one of the elements taken into account for classification of a luxury car. Thus, a luxury car is considered a vehicle which has 6 +1 seats instead of 4+1 seats. The other conditions such as engine displacement of 3000 cm3 and the purchase price equal or exceeding ALL 5 million remain unchanged. In the same way, the registration tax of ALL 70,000 for luxury cars and their annual tax of ALL 21,000 remain unchanged.
Amendments to the Law on Excise Duties
Starting from 1 January 2018, the excise duty for cigarettes that contain tobacco changes from ALL 5,750/1000 cigarettes to ALL 5,850/1000 cigarettes. In addition, the excise duty of ALL 10/ml for liquid nicotine of electronic cigarettes is introduced.
The import and the production of cigarette paper in the form of a booklets or tube shall be allowed upon receiving the approval from the General Customs Directorate. A specific instruction regarding the procedures to be followed for the import and production of such paper is expected to be released soon by the General Customs Directorate.
In addition, based on the changes in the Excise Duty Law, energizing drinks are excluded from the list of products subject to excise duty and consequently there is no excise duty on such drinks.
Amendments to the Law on Implementing Customs Duty
The amendments introduce a reduction of customs duties for 70 products from the harmonized nomenclature of goods used in different industries, such as computer monitors, projectors, reception apparatus for television, spacecraft (including satellites) and suborbital and spacecraft launch vehicles devices, air combat simulators and parts thereof, etc. The new levels of the customs duty vary from 0% to 6% of the customs value of the imported product.
Entry into force
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