During the last two months of 2021, several changes to the Albanian tax legislation were approved amending certain provisions of the laws on tax procedures, revaluation of the immovable property, personal income tax on employment income, reduced VAT rate, national taxes and excise tax. The following issue presents a summary of the most important changes which become effective at the beginning of 2022 with the exception of the changes relating to the taxation of the employment income which will enter into force in July 2022.
Postponement of electronic invoicing for certain category of taxpayers
On 24 December 2021, the Albanian Government decided to postpone for a 6-month period the application of the penalties for certain categories of taxpayers which have not implemented yet the electronic invoicing procedure. The electronic invoicing has started to apply in Albania at the beginning of 2021, obliging all taxpayers having transactions with the government, private entities and individual customers to follow electronic invoicing procedure as per specific provisions of the Law on Invoice and Turnover Monitoring Systems. Penalties for non-compliance with the said invoicing law were initially suspended for all taxpayers up to 31 December 2021. Based on the new rules, the suspension of the penalties would be applied only for a limited category of taxpayers as follows:
- Taxpayers registered for simplified tax on small business (not registered for VAT purposes) and supplying goods or services to individual customers from which the payment is received in cash;
- Taxpayers operating in utilities market consisting of water supply to end customers and sales of electric power by licensed operators;
- Banks and other financial institutions with regard to reporting of the electronic invoices issued between registered taxpayers.
The suspension of the penalties for the above categories of taxpayers was approved with the Normative Act no. 36 dated 24 December 2021 and will be applicable until 30 June 2022.
Revaluation of the immovable property
Through the Normative Act No. 35 dated 24 December 2021, the deadline for revaluation of the immovable properties by individuals and entities is again postponed to 30 April 2022. Individuals and entities electing to reevaluate real estate properties should filed the application with the State Agency of Cadaster not later than 30 April 2022 and pay the tax for registration of such revaluation before 31 July 2022.
For individuals the tax due is 3% of the taxable base comprising of the difference of the revaluated value with the acquisition value, while for entities the tax due is 5% of the resulting difference of the revaluated value with the accounting net book value.
Personal Income Tax on Salaries
Starting from 1 July 2022, the progressive taxation scheme of employment income in Albania will change by introducing new level of the non-taxable salary and adding more taxable layers in the taxation scheme as presented below. The new taxation scheme of employment income was approved with Law no. 133/2021 dated 25 November 2021.
Value Added Tax
The list of the supplies to which a VAT reduced rate applies is extended by adding the sale of agricultural inputs which will be taxed at 10%, instead of the VAT exemption applicable before. Moreover, the farmer’s compensation rate has changed from 6% to 0%.
In addition to the above amendments of the VAT Law, imported machinery and equipment used for investment contracts of ALL 500 million or more will be VAT exempt. Previously, the investment contracts value benefiting the VAT exemption on import of machinery and equipment was ALL 50 million.
The amendments to the VAT Law were approved with the Law No. 111/2021 dated 25 November 2021.
The Law on National Taxes in Albania is amended by adding five new categories of products which will be regulated by this law. As per the amendment, the following categories of supplies or imports will be subject to national taxes upon importation or domestic production or use:
- Tax on importation or production of powdered milk at ALL 100/kg;
- Tax on importation or production of homogenized drinks at ALL 16/L;
- Tax on importation or production of whey and milk cream at ALL 150/L;
- Tax on fuel used for sailing vehicles used for leisure and touristic purposes used outside the territory of Albania at ALL 40/L.
The amendments to the Law on National Taxes were approved with the Law no. 112/2021 dated 25 November 2021.
The Excise Law has also passed several changes which impact the increase of the excise tax on all products and subproducts subject to this tax. A detailed list of the excisable products and respective excise tax applied from the beginning of 2022 is published in the following link.
Apart from the above, the changes of the Excise Law introduce a new method of indexing the excise tax every 2 years based on the inflation rate of the two proceeding years as per the publication of the Albanian Institute of Statistics. Such indexing of the excise tax will be applied uniformly for each of the excise products, except for the tobacco and its subproducts for which categories the excise tax is defined based on a specific calendar.
Other changes to the excise law introduce increased penalties for certain excisable products, an increase the timeline available for the Albanian Customs Authorities to review an appeal from 30 days to 60 days as well as an extended deadline for appealing to the court a decision of the customs authorities from 30 days to 45 days. The detailed amendments to the Law on Excise Tax were approved with the Law no. 114/2021 dated 25 November 2021.