The current tax alert highlights the most important changes to the Albanian Legislation on Income Tax, Value Added Tax and Local Taxes approved during 2020 and which will be implemented starting from 1 January 2021.
Corporate Income Tax (CIT)
Taxable persons for CIT purposes
Starting from 1 January the definition of the taxable persons for CIT purposes will be slightly changed. Thus, a taxable person for CIT purposes would be regarded any legal entity or partnership realizing an annual income above ALL 8 million in Albania. Previously, the CIT registration condition was linked with the registration for value added tax purposes.
Other categories of taxable persons subject to CIT purposes remain the same. In this respect, simple partnerships, non-residents which activity creates a permanent establishment in Albania, other non-Albanian tax residents which are not subject to personal income tax and other persons irrespective of the legal status or registration form (unless such persons are subject to the simplified profit tax on small business) will continue to be regarded as taxable persons for CIT purposes.
Amendments to the CIT rate
Effective from 1 January 2021, taxpayers with annual taxable income up to ALL 14 million (approximately EUR 113 thousand) will be subject to the CIT at 0%. Previously, for this category the CIT was applied at 5% rate.
The CIT rate applied to taxpayers realizing an annual income above ALL 14 million remains 15% on the taxable profit. Moreover, the CIT rate will not change for other categories of taxpayers which are subject to CIT at 5% rate (i.e. software developers/produces, automotive industry, certified agritourism and agriculture cooperatives).
Value added tax (VAT)
VAT registration threshold
Starting from 1 January 2021, the VAT registration will be required if the annual taxable turnover exceeds ALL 10 million (approximately EUR 80 thousand). In any case, taxpayers may register voluntarily for VAT purposes if their annual turnover is above ALL 5 million (approximately EUR 40 thousand).
The new VAT registration threshold will be uniformly applied to all categories of taxpayers. Up to end of 2020, any entrepreneur carrying out a regulated profession was required to register for VAT purposes irrespective the annual turnover or nature of activity. This rule will be superseded in 2021 and the above VAT threshold will be applied for registration of entrepreneurs providing certain services categorized as regulated profession (e.g. public notaries, lawyers, dentists, nurses, doctors, pharmacists, engineers, architects, accountants, auditors, etc.).
In 2021, the new VAT registration threshold will apply also to agriculture producers which previously were obliged to register only if the annual taxable turnover exceeded ALL 5 million.
Unification of the VAT reporting deadlines
Starting from 1 January 2021, all VAT registered taxpayers will be obliged to submit on a monthly basis the VAT purchase/sales books and the related VAT return. The VAT purchase/sales books will have to be submitted no later than 10th date of the following month, while the monthly VAT return will be due no later than 14th date of the following month. Previously, certain categories of taxpayers were filing quarterly VAT purchase/sales books and VAT returns.
Registered taxpayers performing a business activity and having an annual turnover in the interval of ALL 0 – ALL 8 million, will be subject to the simplified tax on small business. Starting from 1 January 2021, the simplified tax on small business for this category will be at 0% rate. Once the turnover is exceeded, the taxpayer is obliged to be registered for CIT purposes and act in accordance with the provisions of the Income Tax Law.
Previously, the taxpayers having an annual turnover from ALL 0 – ALL 5 million were subject to tax at 0% rate, while taxpayers having annual turnover of ALL 5 million – ALL 8 million were subject to tax at 5% rate.
Entry into Force
Decision no. 576 dated 22 July 2020 on amendments to the Decision no. 953 on “Implementing provisions of the VAT Law” is published in the Official Gazette 139 dated 29 July 2020. The provisions of this Decision become effective from 1 January 2021.
Law no. 106/2020 dated 29 July 2020 on amendments to the Law no.8438 on “Income Tax” dated 28.12.1998 is published in the Official Gazette 154 dated 26 August 2020.
Law no. 122/2020 dated 15 October 2020 on amendments to the Law no. 9632 dated 30 October 2006 on “Local Taxes” is published in the Official Gazette 197 dated 12 November 2020.
© 2021 KPMG Albania Shpk, an Albanian limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.