MAZARS IN ALBANIA

Mazars Shpk
Rr. Emin Duraku, Pall.
“Binjaket”, Nr.5,
Tirana, Albania

Phone:
+355 (0) 42 278 015

www.mazars.al

Teit GJINI

Managing Partner

Phone:
+355 (0) 29 30 37 456

Mail:
teit.gjini@mazars.al

ALBANIA

Corporate taxes and other direct taxes

Resident companies are subject to corporate income tax on their worldwide income, while non-resident companies are taxed only on their income derived from sources in Albania. Resident companies and sole traders having an annual turnover above ALL 8,000,000 (EUR 57,000) are subject to corporate income tax. Capital gains, dividends, interests, and royalties are included in the income of companies and are taxed as part of corporate income tax. Income tax is assessed on a current-year basis at the rate of 15%. The assessment of CIT is based on the FS prepared in accordance with the National Accounting Standards or IFRS, subject to certain adjustments for tax purposes as specified in the Albanian Tax Laws and other supplementary legal acts. Fiscal losses may be carried forward up to three consecutive years. The law does not provide for consolidated tax returns. Each company forming part of a group must file a separate tax return.

The gross amount of interest, royalties, dividends, and shares of partnerships’ profits paid to non-resident companies is subject to a withholding tax of 15%, unless a Double Tax Treaty (DTT) provides for a lower rate. Albania has established agreements with 41 countries for avoiding double taxation. 38 of them are ratified and currently in force.

Transfer pricing in Albania
Arm’s length principle since 1998
Documentation liability since 2014
APA since 2014
Penalty
Lack of documentation ~ Documentation submited on delay -EUR 70 / for each month of delay
Tax shortage 0.06% on daily bases (not more than 365 days) on tax underpayment + late payment interest
Related parties 50%
<
direct or indirect control or common managing director
Safe harbours Rational value added service with 5-15% mark up

Level of attention paid by Tax Authority:

5/10

VAT and other indirect taxes

The new law of VAT entered in force in January 1, 2015 has been harmonized with the “acquis communautaire” in almost all respects. Any person (entity or individual) that makes supplies in the course of the person’s independent economic activity is required to pay VAT. For domestic supplies and for services subject to the reverse-charge mechanism, the obligation to register for VAT purposes and charge VAT is triggered when annual turnover exceeds ALL 5 million (approximately EUR 36,000). Persons involved in import or export activities and taxpayers supplying professional services must register for VAT regardless of the amount of turnover.

Customs duty in the Republic of Albania is applied by the custom authorities on the import of goods. The liability to pay the duty is always on the importer of goods, but it is added to the cost of goods and in this way it is finally passed on to the consumers. The customs duty rates range between 0% and 15%, depending on the type of goods and the country of the origin.

Local taxes consist of different categories of taxes and vary from 300 to 800 EUR per year.

VAT Options in Albania
Distance selling N/A
Call-off stock N/A
VAT group registration N/A
Import VAT deferment N/A
Local reverse charge for all services from non resident entities that are subject to VAT in their country
Option for taxation
- letting of real estate
- supply of used real estate N/A
VAT registration threshold* EUR 36,500/year

* Persons involved in import or export activities and taxpayers who supply professional services must register for VAT regardless of the amount of turnover.

Personal income tax/ Social security system

Mandatory social security and health insurance contributions are due on employment income. The social security contribution is calculated on a monthly gross salary, from a minimum amount of ALL 22,000 (approximately EUR 160) to a maximum amount of ALL 97,030 (approximately EUR 700). Social contribution payable by the employer is 15%; while the rate payable by the employee is 9.5%. The health insurance contribution rate is 1.7% for both the employer and the employee.

Employed persons are subject to income tax on remuneration and all benefits received from employment. Entities are required to withhold personal income tax from the gross salaries of their employees. In Albania a progressive rate is applicable since 2014; no tax is applicable up to a monthly salary of ALL 30,000; above that 13% applies between ALL 30,000 and 130,000. Above that level ALL 13,000 plus 23% of the amount above ALL 130,000 is payable.

Wage-related taxes
in Albania
Minimum wage Average wage in private sector
Exchange rate ALL / EUR 137 in EUR in ALL in EUR in ALL
  161 22,000 400 54,800
TOTAL WAGE COST 187 116,70% 467 116,70%
Social Contribution tax 24 15,00% 60 15,00%
Health Insurance Contribution 3 1.70% 7 1.70%
GROSS SALARY 160,58 100.00% 400 100.00%
Personal income tax* - 0.00% 24 13.00%
Employees’ Social contributions 15 9.50% 38 9.50%
Employees’ Health contributions 3 1.70% 7 1.70%
NET SALARY 143 88.80% 332 82.92%

*Salary 0 -30,000 ALL PIT rate 0%.
Salary 30,001 -130,000 ALL PIT rate 13% of the amount over 30,000 ALL.
Salary over 130,001 ALL PIT 13,000 ALL + 23% of the amount over 130,000 ALL.

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