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Tax Alert “Recent Amendments to the Law on Local Taxes, Value Added Tax, and Tax Procedures”

In Official Gazette No. 197, dated 12.11.2020, several amendments have been published within the legal framework of taxation, specifically:

The first paragraph of Article 10 of the law “On simplified taxation on profit for small businesses” previously stipulated the obligation to pay simplified profit tax for small businesses, while the latest amendment specifies that every business becomes subject to all obligations outlined in Chapter 3 of the law.

Article 11, concerning the Tax Rate, previously provided for simplified profit tax rates for small businesses with annual turnover ranging from 2-8 million ALL at 7.5%, and for entities with annual turnover from 0-2 million ALL, it was 26,000 ALL per year. Now, it is stipulated that for all small businesses with annual turnover from 0-8 million lekë, the amount is 0 ALL.

Article 16, concerning Declaration, previously stipulated that taxpayers with turnover ranging from 2-8 million lekë were required by February 10 of the following year after the tax period to submit an annual tax declaration detailing their total income, total deductible expenses, taxable profit, tax payable, and any other details required by the Ministry of Finance. Now, this requirement applies to all taxpayers subject to simplified profit tax for small businesses.

Article 17, concerning Tax Administration, previously stipulated that the General Directorate of Taxes, through the Regional Tax Directorates, was responsible for assessing, collecting, auditing, treasury management, and transferring revenue from simplified profit tax for small businesses to the local government budget account. Following the amendments, the above-mentioned institutions are now only responsible for assessing and auditing taxpayers subject to simplified profit tax for small businesses.

This change will come into effect on January 1, 2021.

In Article 49 of the law, “On Reduced Rates”, point 9 has been added which expresses the reduced rate of value added tax, applicable to the supply of construction works services for state investments of sports clubs or sports federations, as defined in the legislation governing the field of sports, set at 6%.

This law enters into force on January 21, 2021.

Amendment to directive no. 24, dated 02.09.2008, “ON TAX PROCEDURES IN THE REPUBLIC OF ALBANIA”.

Regarding the date for non-voluntary payment of tax obligations, the first day of work following the date specified in the notification from the tax administration shall be considered. If the taxpayer has not made the required tax payment by that date, the head of the local tax office shall issue an order to freeze bank accounts as a measure to ensure forced collection of the tax obligation.

In the order, the full identity of the taxpayer is included, the accounts affected by the issuance of this order, the reason for its issuance, the type of tax obligation being enforced, the date by which the taxpayer was supposed to have paid the tax obligation themselves, and the amount that banks are required to freeze.

In the event that the taxpayer’s obligation is fully executed, the tax administration immediately sends an unblocking order to the address of the banks where the taxpayer is a client. In case the taxpayer’s obligation is partially executed, the tax administration sends a new blocking order to the banks, where the taxpayer has a bank account for the amount of the unpaid tax obligation resulting from the partial execution. In the event that the taxpayer has no balance in the bank accounts in any of the banks, the accounts will continue to be blocked based on the blocking order issued by the tax administration.

If, following the application of all coercive measures against the entity for the forced collection of tax obligations, the tax liabilities of the legal person are not fully settled, the tax administration transfers the remaining tax obligation of the entity to the partner, shareholder, and administrator.

The blocking order is valid for a period of 12 months, after which accounts and deposits are automatically unblocked by the bank without the need for additional notification.

This directive enters into force upon publication in the Official Gazette.