25 August 2016

Tax Alert 2016

Boga & Associates


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Boga & Associates, established in 1994, has emerged as one of the premier law firms in Albania, earning a reputation for providing the highest quality of legal, tax and accounting services to its clients. Boga & Associates also operates in Kosovo (Pristina) offering full range of services. Apart of the wide consolidated legal practice, the firm offers also a significant expertise in tax and accounting services with a keen sensitivity to the rapid changes in the Albanian and Kosovo business environment.
To keep you up-to-date with the latest economic and financial developments, this bulletin prepared by our Tax Team provides information that may affect the operation of your business in Albania.
Albania Tax
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To keep you up-to-date with the latest economic and financial developments, this bulletin prepared by our Tax Team provides information that may affect the operation of your business in Albania.

2016 Fiscal Package

Several amendments of the tax legislation ("2016 Fiscal Package"), approved by the Parliament by mid of December 2015, have been now published in the Official Gazette. Below we present a summary of the most important amendments introduced by the 2016 Fiscal Package.

Amendments to Law no. 9975, dated 28.07.2008 "On National Taxes"

The new law no. 141/2015 "On Some Amendments and Additions to Law no. 9975, dated 28.07.2008 "On National Taxes" introduces a new national tax and also changes the rates and method of calculation for some existing taxes.

Tax on Luxury Vehicles

The new tax on luxury vehicles consists of an initial registration tax of such vehicles and an annual registration tax. According to the definition given in the law, luxury vehicles are passenger vehicles having no more than 4+1 seats and meeting one of the following conditions: (i) engine displacement equals or exceeds 3,000 cm3 and (ii) value /price equals or exceeds 7 million Leke. The initial registration of a luxury vehicle is subject to a tax of 70,000 Leke and in any subsequent year a tax of 21,000 Leke shall apply.

New Royalty Tax Rates

The new law has changed the method for application of the royalty tax for certain minerals. The tax payable for non-metallic minerals (Group III and IV) is now calculated as a fixed amount rather than as a percentage over the sale value of the mineral.

For the other minerals the tax will continue to be calculated based on the value of the mineral sold.

Insurance Premium Tax Increased to 10%

The tax rate on the insurance premium is increased from 3% of the premium to 10%. Other conditions on its application remain unchanged.

Amendments to Law no. 9632, dated 30.06.2006 "On Local Taxes"

The new law no. 142/2015 provides for the following amendments to the law no. 9632/2006 "On Local Taxes":

Tax on Construction Land

The law includes the construction land in the scope of property tax. Until now the tax was paid on buildings and agriculture land, only. Starting from 01.01.2016, land within the city's border, which is classified as construction land, subject to property tax at the level of 0.14 Leke/m² up to 0.56 Leke/m² for individuals, and 12 Leke/m² up to 20 Leke/m² for businesses, depending on municipality where the land is located.

Change of Tax Rates for Small Business

The new law changes the small business tax.

Starting from the year 2016, a small business having a turnover less than 5 million Leke is exempted from the tax (previously a fixed amount of 25,000 Leke was payable from businesses who had an annual turnover up to 2 million Leke, and a 7.5 % tax on profit was payable for those having a turnover between 2 million Leke and 5 million Leke).

In addition, the tax rate for taxpayers having the turnover between 5 million Leke and 8 million Leke is reduced to 5% (previously 7.5%).

The User to be Liable for Payment of the Building Tax

The new law extends the liability to pay the property tax on building to the user of the building in addition to the owner. Liability for the payment of such tax is as well extended for properties not duly registered with the immovable property register.

Changes in the Calculation of Tax on Hotels

The new law changes the way the tax on hotels is levied. Instead of a certain percentage on the price of accommodation, now the tax is set to a fixed amount based on the hotel classification and municipality where the hotel is located. For a 4 to 5 stars hotel in Tirana, the tax amounts to 350 Leke/per night.

Changes in the Tax on Impact in Infrastructure from New Constructions

The tax for the impact on infrastructure of new constructions, consisting of residence or business units, is increased at the rate of 4% - 8% of the sale price of such units.

The tax on the other constructions (such as touristic, industrial and public constructions) will continue to be calculated on the value of the investment at the rate of 1% to 3% (except for Tirana where the tax is 2% to 4%).

The local municipality determines the actual rate.

Exceptionally, for infrastructure projects such as construction of national roads, ports, airports, tunnels, dams, construction of infrastructure in energy, the tax is 0.1 % of the investment value (which includes the value of equipment and machineries for such project), but not less than the cost of rehabilitation of the damaged infrastructure.

Changes in Billboard Tax

According to the old law, tax on billboards used for business identification purposes was set at 120 Leke despite the surface of the board. The new law sets a zero tax for a billboard used for identification purposes less than 2 m2 and increases the tax for boards exceeding the said surface. The tax varies from 13.500 Leke/m2 to 45.000 Leke/m2 depending on the municipality where the business is registered.

Additionally, the new law differentiates between the non-electronic and electronic billboard, imposing on the latter a double tax amount per meter square. Furthermore, the new law removed the upper ceiling of the surface on which the tax is applied (previously, for billboards exceeding 18m2, a fixed tax of 810.000 Leke was applied for businesses registered in Tirana).

Amendments to Law no. 61/2014, dated 30.06.2006 "On Excise Tax"

The Parliament has decided to stop the increase of the excise tax on cigarettes and tobacco. The new amendment confirms the same level of the excise tax for the year 2016 as it was in 2015 (by abolishing the anticipated increase starting from 01.01.2016).

Another amendment of the law regards to the introduction of an exemption threshold for the tobacco produced in the country to be used for personal consumption. Tobacco produced and manufactured by individuals for their own consumption should not exceed 25 kg/year.

A novelty of the amendment is the possibility that the importers have to put the excise strip stamps within the country provided that the process will be carried on fiscal warehouse.

Changes on Social and Health Contributions

Changes and amendments on the collection of the social and health contributions (introduced by law no. 143/2015, law no. 144/2015 and law 145/2015) consist in:

  • exemption of self-employed retired persons from obligation for payment of social and health contributions; unpaid familiars might get an exemption from such obligation, upon certain conditions to be determined by a forthcoming decision of the Council of Ministers;
  • for certain categories of self employed professionals, the basis of calculation will be determined by the Council of Ministers based on the profession, number of employees, location of business, and level of income of similar employees.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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