Tax system in Albania

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The tax system of Albania is based on a 10% flat tax. The tax was implemented in 2008.[1][2][3] The Albanian Taxation Office is the revenue service of Albania.

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The most widespread division mentioned in various publications is according to tax base. Tax revenues in Albania are grouped into three main categories: (a) indirect taxes (VAT, excise, gambling and other indirect taxes), direct taxes (income tax, personal income taxes, taxes on capital); (b) local taxes, and (c) social and health security contributions. National Taxes, administered by the CTA and Customs Administration include: - Indirect taxes a. Value added tax; b. Excise; c. Taxes on gambling, casinos and hippodromes; - Direct taxes a. Income tax; b. National taxes; c. Other taxes, which are defined as such by special law, and d. Customs taxes. - Social and health security contributions, as defined in the social insurances law

Local taxes and tariffs administered by LTA include: a. Local tax on small business; b. Tax on immovable property, which includes tax on buildings and agricultural land; c. Tax on hotel accommodation; d. Tax on impact of new constructions upon infrastructure; e. Tax on transfer of ownership right on real estate; f. Annual tax for vehicle registration; g. Tax for occupation of public space; h. Board tax; i. Temporary taxes j. Registration tariff for various activities; k. Cleaning and waste disposal tariff; l. Vehicle parking tariff; m. Tariff for services

Local Tax Administration is composed of a network of tax administrations, as part of local government organization. Organization of LTA includes: General Directorate of Taxes and Tariffs in Municipality of Tirana, Local Tax Departments for main Municipalities and Tax Revenue Sections in small municipalities and communes. LTA is a very important component in the structure of Municipalities and Communes, as the institution which ensures mutual cooperation between the local business community administered by respective local tax structures and local leaders on a variety of necessary services for citizens. In this administration, the local business community operating in the administrative unit can pay local tax liabilities. This administration is the structure responsible for collecting local taxes and tariffs specified in the laws and decisions of City Council. This administration also pursues relations with Tax Agents responsible for local taxes and tariffs. You can find more information about the organization of local government in www.moi.gov.al or for each major municipality you can search the internet by typing the words Municipality (name of municipality) e.g. Municipality of Tirana.

One of the important initiatives undertaken in the last three years by the government is the reform of business registration procedures through establishment of National Registration Center (NRC). This means that now, after three years of NRC activity, we have managed to reduce registration time for new businesses to one day and to combine into one single procedure all registration steps for new businesses, including registration for tax purposes. This institution also conducts commercial registry services for corporations, except nonprofit organizations, which are obliged to register as such in the Tirana District Court, despite the administrative unit where they are located.

Starting from the moment of application for registration and afterwards, every citizen should be acquainted with legislation requirements included in tax legislation. The main laws to be acquainted with at the time of application are: - Law "On traders and commercial companies"; - Law "On tax procedures in the Republic of Albania"; - Law "On VAT" - Law "On income tax"; - Law "On national taxes"; - Law "On gambling, casinos and hippodromes - Law "On local taxes"; - Law “On local tax system"; - Law "On social and health insurances contributions ".

Knowledge of basic requirements of these laws is the beginning of taxpayers’ acquaintance with their rights and obligations to the tax administration which they must observe in the course of their commercial activity.

Tax liability arises when persons raise incomes, become a property owner or make payments, which are subject to tax, according to tax legislation. Tax liability also arises when persons derive incomes illegally, make payments or become owners of something illegally. When persons become owners of an item in an illegal way, this obligation is calculated for the entire period in which the person has enjoyed the fruits of such property. Tax liability includes tax, interest on arrears, and fines. Tax liabilities are calculated and paid in national currency, unless otherwise provided by law. Depending on the type of tax they have registered for, taxpayers are required to make tax declaration and payment, which they are obliged to self-calculate and pay in due time.

Data on accounting and financial information are stored by taxpayers for at least 5 years, starting from the end of the tax year, which the documents belong to. Records, books and financial information are documents containing chronologic and systematic information on taxpayers’ trading operations, which are kept to determine the amount of taxes for these taxpayers.

Taxpayers conducting flow of goods and services, for which payment is not made through banks, are obliged to introduce and use the fiscal system through the use of fiscal devices in order to record cash payments and issue tax receipts. Taxpayers, private individuals or legal entities and traders cannot perform purchase or sales transactions in cash among them if the value of transaction is higher than 300.000 ALL.

The minimum registration threshold for VAT is determined by the Council of Ministers (the threshold). For 2010 this threshold is 8 million.

Registered taxable persons are obliged to request deregistration no later than 15 days from the last day they made taxable supplies as part of their economic activity. Taxable persons, who want to deregister, are subject to procedures stipulated in the law "On tax procedures in the Republic of Albania".

Each individual, who is a partner in a commercial company, is responsible for the company's tax liabilities to the tax administration, according to provisions in the company charter. According to commercial registry, over 95 percent of companies are limited liability companies. The remainder is joint stock companies, partnerships and less than 0.5 percent is limited partnerships.

At the moment a company is created and starts its economic activity, it is responsible for: • Calculation of VAT and timely declaration and payment; • Payment of advance tax installments for profit tax to pay every month; • Calculation, timely declaration and payment of tax on incomes from employment for employers and employees; • Calculation, timely declaration and payment of social and health insurances contributions; • Monthly payment of advance income tax installments in time; • Withholding and payment of withheld tax, under obligation from the Law "On Income tax"; • Calculation, timely declaration and payment of taxes according to specific activity "for gambling, casinos and hippodromes"; • Calculation, timely declaration and payment of excise under specific law "On Excises"; • Calculation, timely declaration and payment of national taxes and local taxes.

In order to calculate taxes, taxpayers who are subject to VAT or profit tax keep registers, accounting records, books and financial information and issue tax receipt or tax coupon, in accordance with relevant laws and regulations pursuant to them.

Taxpayers keep their accounts in accordance with provisions of the law "On accounting and financial statements" and act pursuant to that law in accordance with IFRS principles. In order to register economic transactions related to taxes, taxpayers can also use books, records or documents specified in specific tax laws and respective regulation provisions. Taxpayers are required to use basic documentation, including tax invoice, in accordance with tax legislation and relevant legal provisions.

In order to calculate their tax liabilities taxpayers, who are subject to the law "On local tax on small business", keep records, books and other documents, and issue simple tax receipts or tax vouchers, in accordance with provisions in the law "On local tax system" and provisions in the Law "On income tax". In order to calculate their tax liabilities taxpayers keep records, books and other documents, and issue simple tax receipts, tax certificates and tax vouchers, in accordance with the law of the field and regulations issued pursuant to that law. Also, taxpayers keep tax records as required by tax procedures law, specific tax laws and provisions and regulations adopted pursuant to them.

Tax legislation has excluded public and private non-profit organizations from income tax and VAT (if NGOs meet criteria for public status). Meanwhile, managers and employees in such organizations are subject to tax like all other employees. Public institutions are exempted from calculation, declaration and payment of profit tax, based on their public status.

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