Registration of sole entrepreneurs

Sole entrepreneurs must be registered with a unique number of registration for tax purposes and cannot have more than one registration number. Any additional economic activity performed by the same person in a different location from the principal address registered in the Commercial Register must be registered as a secondary address under the main tax registration number. If a new registration is requested by the same person already registered as a taxpayer, such a procedure could not be completed before deregistration of the existing tax registration number.

Deregistration of taxpayers

Amendments to the Law on Tax Procedures specify the date of deregistration depending on the legal form of registration of the taxpayers and define the roles of the National Business Center, the courts or the Tax Administration in the process. An enhanced communication with the competent authorities is foreseen in order to shorten the period of deregistration and evidence the outstanding tax liabilities before the finalization of the process.

Anti-avoidance rules

The Albanian Tax Administration has the powers to initiate an alternative tax assessment if there are indications about actions of tax avoidance and abuse of the tax law. The tax authorities may re-classify the transactions whenever they evidence that:

• The actions undertaken by the taxpayer distort the principles of the tax legislation
• Actions/transactions are not at arm’s length
• Actions/transactions have no economic substance
• The form of the action/transaction does not reflect its substance
• Elements of the actions/transactions lead to the avoidance or reduction of the tax base.

For all the above cases, the burden of proof is mainly on the tax administration. The procedures and criteria to apply the above provisions will be specified in an Instruction of the Minister of Finance.

Chronology of settlement of the tax liabilities

Any tax credit in the account of the taxpayer will firstly offset tax liabilities of the same type of tax. This rule is not applicable for the mandatory social security and health insurance contributions.

Furthermore, payment of taxes will initially settle the earliest outstanding tax liabilities unless these liabilities are appealed or outstanding based on an instalment agreement between the taxpayer and the Tax Administration.

Administrative Tax Appeal 

For the purposes of formal acceptance of an administrative tax appeal, taxpayers must pay only the tax liabilities assessed or issue a bank guarantee equal to the value of tax liabilities in favor of the tax authorities. Previously, for appealing purposes apart from the tax liabilities, the taxpayers were obligated to provide evidence on payment or bank guarantee of also interest for late payment.

Transactions with taxpayers included in the passive register

Any transactions performed by or with taxpayers, sole entrepreneurs or legal entities registered in the passive register of the Tax Administration are considered an administrative violation. Taxpayers are transferred in the passive status register of the Tax Administration if they do not perform any commercial activity or do not submit tax returns in the last 12 consecutive months, as well as when they declare the suspension of their activity with the National Business Center. Transactions performed by or with taxpayers included in the passive register will be penalized as follows:

• If the taxpayer registered in the passive register of the Tax Administration is in the seller’s position, the taxpayer is subject to the penalty at 100% of the tax liabilities due according to Article 116 Tax Evasion
• If the taxpayer registered in the passive register of the Tax Administration is in the buyer’s position, the taxpayer will not be entitled to deduct the input VAT charged and the expense is considered non-deductible for corporate income tax (CIT) purposes.

The amended law also specifies implications for the active taxpayers entering into transactions with taxpayers included in the passive register of the Tax Administration, where the penalty may vary from ALL 10,000 (if there is no tax effect) up to 100% of the tax liabilities according to Article 116 Tax Evasion.

Incorrect completion of tax returns

If the tax credit position of the taxpayer is reduced after a tax audit procedure, this will be classified as an incorrect declaration. In such circumstances, the taxpayer will be subject to a penalty of 20% of the reassessed difference.

Non-issuance of tax invoices

A penalty of 100% on the outstanding tax liabilities is applied if the taxpayer has failed to issue a tax invoice or tax voucher. If the taxpayer accepts the assessment made by the tax authorities and pays the tax liability due, the penalty will be reduced by 30%.

Entry into force

Law no. 97/2018 dated 3 December 2018 on Additions and Amendments to Law No. 9920 on Tax Procedures in the Republic of Albania is published in the Official Gazette No. 187 dated 21 December 2018 and becomes effective from 1 January 2019.