Value Added Tax

Scope of application

The VAT is a general tax on consumption of goods and services.
The VAT is applied as a percentage tax on the price of goods and services, and becomes required to be paid after the deduction of the VAT, which directly encumbers on the cost’s elements of the goods and services.

Liable to VAT are:

• all sorts of supply of goods and services, performed by a taxable person, within the territory of the Republic of Albania;
• all sorts of service import within the territory of the Republic of Albania.

In the taxable transactions are included:
• The supply of goods, which means, the transfer of the right to dispose as an owner the tangible property
• The supply of services, which means, any transaction that is not a supply of goods, unless otherwise provided for in this law;
• Imports of goods, which means release for free circulation of goods in the Republic of Albania;
• Self-supply of goods and services, means any supply against payment by a taxable person, the supply of goods produced, constructed, extracted, processed, purchased or supply of services within the scope of his business to be used for the needs of this activity.
• Transfer of activity, is considered the transfer against payment or not, or in the form of a contribution in an enterprise of the totality of assets or a part thereof
• Mixed supply.

Taxable persons
Is considered as a taxable person:

• Every person, despite his organizational type, who independently carries out an economic activity, regardless of the place, scope or outcome of such activity.
  An economic activity is every kind of activity performed by producers, traders and other persons who supply goods and services, including the extractive, agricultural and professional activities.
• Every person residing in Albania, whose activity’s annual turnover exceeds 5,000,000 ALL, amounts defining the minimum threshold of registration for VAT.

Attention: The registration is obligatory:

• Within 15 days from the date of exceeding the minimum threshold, if your annual turnover exceeds the threshold for 12 months in a row during the whole year.
• When the minimum threshold for registration for VAT is exceeded before 12 months, then the taxable person must immediately request the registration within 15 days from the date of threshold exceed.
• When importing circulating services (goods traded or to be traded), despite the performed or expected turnover.

Clarification
From this rule are exempted taxable persons that perform or expect to perform a turnover smaller than the minimum threshold of registration and import goods under the category of Incorporated Sustainable Activities (ISA) used for economic activity purposes, and not for trading purposes. These taxable persons may import goods of investments for the purpose of their economic activity, subject to the small business regime in accordance with the law, with no obligations to the normal VAT regime.

Characteristics of exporters
The taxable persons conducting exports, whose turnover is smaller than the minimum threshold for registration for VAT, are not obliged to normal the VAT regime.

Exemptions from the regular rule
The taxable persons that render economic activity services, in form of professions such as: lawyer, notary, specialized doctor, dentist, specialized dentist, chemist, nurse, vet, architect, engineers, approved accountant and estate appraiser, or conduct economic activity in the fields of hospitality, despite their annual turnover, are taxable persons registered for VAT.

Tax Representative
In case when the responsible person to declare the VAT payment, is a taxable person non residing in Albania as the place where the payment of VAT is carried, then he must assign a tax representative within the Republic of Albania as the person responsible to fulfill VAT payment.

Tax representative is registered at the regional directorate of tax.

You may request the deregistration:

• When the turnover for the last 12 calendar months drop below the minimum threshold for registration. The deregistration enters into force 12 months after the date of submission of the request for entering the regime of the small business.

The turnover necessary for calculating the registration threshold includes:

• The turnover obtained from all taxable supplies of goods and services, no VAT included.
• Exempted supplies and 0% rated taxable supplies.

Is not considered as a taxable person:

• Non - profit organizations for payments gained from quotations, funds, grants, donations obtained for the activity purposes of the non-profit organization;
• The employee related to the employer through an employment contract;
• Central and local govern authorities and other organs of the public law for actions regarding their service as public authorities.

Supplies of goods and services
The Supply of goods
The supply of goods means the transfer of the right to dispose as an owner of the tangible property.

Are considers also as “Supply of goods” the following transactions:

• The transfer against payment of the property’s ownership, by order of/or on behalf of a public authority or by law;
• The delivery of the goods based on a contract, where is provided that the rental of goods for a determined period or the installment sales of goods, where the transfer of the ownership is concluded with the payment of the final installment;
• The transfer of goods based on a contract, according to which is paid the commission for the purchase or sale;
• The supply of the electric power, water, gas, heat or cooling energy and the like.

The Supply of goods against payment
The supply of goods is considered as carried out against payment, entirely or partially, if the direct or indirect supplier gains or has the right to receive payments in cash or in the nature of such supply, from the supplied person or any other person.

Attention: Transferring of the economic activity is not considered as supply of goods or services, but as a passing of the assets from the transferring taxable person to another person, treated as the successor of the transferring person.

The Import of goods
Import of goods, means their release for free circulation within the territory of the Republic of Albania, as defined by the legislation into force.

The Supply of services
Supply of services means every transaction that does not represent supply of goods. Services performed by the employee for his employer for labor purposes, are not considered as a supply of services from the employee.

Miscellaneous supplies

• Supply of services, included in the supply of goods, is part of the supply of goods.
• Supply of goods, included in the supply of services, is part of the supply of services.
• Supply of services, included in the import of goods, is part of the supply of goods.

Place of supply of goods and services
The place of supply of goods

• When goods are not delivered or transported, then the place of the supply of goods is Albania, if the goods are located in Albania in the moment when the supply is being delivered.
• When goods are delivered or transported from the supplier, the buyer or a third party, the place of supply is Albania if, the goods are located in Albania in the moment when the delivery or the transport process commences for the buyer
• When goods are delivered or transported from the supplier, the buyer or a third party, are installed or assembled, tested or not, from or in behalf of the supplier, then the location of the supply is Albania if the goods are installed or assembled in Albania.

The Place of importation of goods
The place of importation of goods is in Albania, if goods originated from other territories are launched for free circulation within the Albanian customs territory.

Attention: The goods that from the moment of entrance into the Albanian territory, are not launched for free circulation and are subject to specific customs regimes, their place of import is in Albania when they are launched by the above cited regimes and situations within the Albanian customs territory.

The Place of supply of services

The General rule
The place of supply of services is in Albania if the service receiver is a taxable person that behaves as such, and has located in Albania:

• The headquarters of his economic activity or a sustainable location;
• His habitation or a usual residence, in absence of the economic activity headquarters or a sustainable location.

The place of supply of services is in Albania, if the service receiver is an untaxable person, while the supplier of service, as a taxable person has located in Albania:

• The headquarters of his economic activity or a sustainable location that delivers the services;
• His habitation or a usual residence, in absence of the economic activity headquarters or a sustainable location.

Specific rules
In other cases, according to the status of the service beneficent as taxable or non – taxable, also according to the type of the service rendered, the place of supply of the service is exempted from the general rule.

The emergent of tax, the claimability
The general rule
For internal supplies, the emerging of a tax happens and becomes claimable when:

• the supply of goods or
• the supply of services is conduced.

For the import of goods, the emerging of tax happens and the VAT becomes claimable when the import of goods has already been conducted.

The Specific rules

• For any payment made before the supply of goods or before the supply of service, the VAT on payment emerges and becomes claimable in the moment that the amount of the payment has been collected.
• In cases when the tax bill has been issued prior to the supply, the VAT becomes claimable in the moment of issue.
• In cases of partial or consecutive payments for the supply of goods or services, such supplies of goods or services are considered as concluded by the end of each period that the payment refers to.
• Supply of goods and services conduced consecutively within a period of time, including construction operations, are considered performed at the same month of the issuing of the bill.
• For goods that, from the moment of entrance into the Albanian territory are not released for free circulation and are subject to specific customs regimes, the emerging of the tax occurs and the VAT becomes claimable when these goods are released by the above cited regimes or situations.

The Taxable value
The taxable value includes everything that represents the corresponding value received or to be received by the supplier of goods and services from the buyer, client or third party, in return for such supply, including subsidies immediately linked to the price of supplies, no VAT comprised.

The taxable value of goods imported is composed of the value assigned at import by the customs authorities, in accordance with customs legislation into force within the Republic of Albania.

The elements included in the taxable value

• The tariffs, taxes, liabilities and other similar payments, excluding VAT;
• The secondary expenses, such as commission, expenses, packaging expenses, transportation and security expenses;
• The packaging value when irreversible.

The elements excluded from the taxable value

• The price discounts on cases of discount for early payments of supply;
• The price discounts and reductions for the buyers or clients;
• The amounts that a taxable person has received from his client, in the form of refund for expenses made by and on behalf of the person.

The Tax Rate
The Standard Tax Rate
The standard rate of the added value tax for good and service supplies, applied as a percentage of the taxable value, is of 20 per cent.

The 0% VAT rate
The 0% VAT rate applies for:

• Export of goods
• Supply of goods for non – profit organizations
• The supply of services in the form of work engaged for imported goods to be developed in Albania and that are later on exported abroad.
• The supply of services directly linked to import or export of goods.
• Some type of operations linked to the international transport of goods and passengers;
• The supply of goods and services for international organizations and for their members;
• The supply of goods and services performed within diplomatic and consular relations;
• The supply of goods and services for the armed forces of other nations joining NATO;
• The supply with gold to the Bank of Albania.

Goods inside the passenger personal baggage
The goods meant to be transported inside the passenger personal baggage are considered as exports and are liable to 0% tax rate, when:

• The passenger does not reside within the Republic of Albania;
• The goods are being transferred abroad, within three months from the month when the supply has been made;
• The total value of the supply expressed in ALL or counter value of supply in ALL, VAT included, is not less than 120 000 (one hundred and twenty thousand) ALL.

Exemptions, supplies
There are cases when certain supplies of goods and services, because of their purpose for the general interest or special specifications of the law, although included as liable to VAT, are exempted from such obligation.
For more, please refer to the Law no. 92/2014 “ On the value added tax” articles 51 – 56.

Right to VAT deduction
The principle of VAT deduction
The taxable person has the right to deduct from the estimated VAT for taxable transactions, the amounts of VAT to the extent that the supply of goods and services received are used from the taxable person in function for these taxable transactions

Concretely:

• Already paid or to be paid VAT in the Republic of Albania for supplies of goods and services that are delivered or will be delivered to the person by another taxable person;
• The paid VAT for goods imported to Albania.

Note: The law on VAT sets out in detail, specific cases of VAT deduction applications.

The conditions under which is applied the right to deduct. The right to deduct emerges and is applied when:

• Serves to the taxable activity;
• VAT deduction becomes claimable;
• Is formally sustained by a legal explanatory document (Tax bill, customs declaration of import).

The application of the partial VAT deduction
When goods and service supplies are used by a taxable person, to effect taxable transactions that lead to VAT deduction and to effect transactions that do not lead to such right, then only the portion of VAT linked to the first category of transactions is deductible.

The Refund
Conditions of VAT refund
A taxable person requests a VAT surplus refund if:

• The taxable person bears VAT surplus for more than 3 months consecutively;
• The VAT required for refund exceeds 400 000 ALL.

When to submit the refund request?
The exporters have the right to make a request for the refund when their surplus exceeds 400 000 ALL, so no need for the first condition.
Within 30 days from the day of the submission of the request of the exporting taxable person, the tax administration initiates the return procedure.
Within 60 days from the submission of the request of the non-exporting taxable person, the tax administration initiates the return procedure.

Where to submit the request for refund
The taxable persons submit the request for VAT refund near the Directorate of VAT Refund at the General Directorate of Taxes. The request is presented according to the approved form “Request for VAT refund”, which you can be found below.

The refundable Surplus tax payment is effectuated within five days through the state treasury system, in accordance with the rules designated by the Minister of Finance.

The person responsible for VAT payment

• The person responsible for the payment of VAT is the taxable person who makes a taxable goods or service supply, except when differently stated.
• The VAT can be paid by the taxable person or non- taxable legal person identified for VAT who received the supplies, when these supplies are provided by a taxable person non residing in the Republic of Albania.
• Every person who issues a VAT invoice shall pay VAT.
• When the issued invoice does not match with the goods supply or with the provided service, or simply shows an amount that effectively shall not be paid by the buyer, then the person who pays VAT is the person who issued the invoice.
• For imported goods and services, the VAT is paid by the person or persons responsible for the payment of import custom duties, as defined by the Customs Code of the Republic of Albania.
• The person who pays VAT is the person who releases goods for free circulation from the specific customs regimes.

Attention: The taxable person who received the supply of service or goods and is aware of, or cannot deny the fact that the VAT required to be paid or part of it on this supply or every previous supply of goods and services has not been paid because of fraud, is liable severally and jointly liable with the supplier to pay the VAT.

Taxable person’s liabilities
The taxable person shall be identified. He shall be provided with a unique identification number (NUIS) at the National Business Center. The number is printed on the certificate issued for this purpose.
The taxable person needs to insure that the invoice has been issued, for:

• Every supply of goods or service provided for another taxable or non - taxable person;
• Every payment made before the supply of goods or before the conclusion of the supply of the service
• The invoice is issued periodically for certain supply of goods or services, that are supplied on a regular or continuous basis and effectuated between the taxable person and his client within the same month when such supplies have been done;
• Regarding the construction section, taxable invoices shall be issued on a monthly basis;
• Also, buyers or clients of supplies of goods or services provided to them by a taxable person may issue invoices.

The Minister of Finance approves the VAT tax invoice, in the form and content.

The taxable person, for services whose value is less than 40 000 ALL, may also issue a simplified invoice even if the buyer does not require the VAT tax voucher.

The taxable person is obliged to maintain the register of purchases and sales, where are registered all purchases and sales carried out during the taxable period (one month). The register of purchases and sales is electronically delivered not later than the 10th of the month subsequent to the declared taxation period.

Every taxable person shall submit the VAT declaration that contains all the information necessary to calculate the claimable VAT, value of VAT that may be reduced, taxable values of actions related to claimable and the deduction of VAT calculation, as well as the value of supplies exempted from VAT.

The Minister of Finance approves the declaration model.

The VAT declaration shall be submitted no later than 14 days after the declared taxation period has ended.

Specific regimes
The specific regimes of VAT application in Albania:

• Regime for travel agencies
• Specific regime applied to sales of used items, artwork, objects of collection and antiquary;
• Marge of profit regime;
• Regime for sales by auction;
• Specific regime: compensation scheme for agricultural producers;
• Specific regime on gold designated for investment.

The following documentation will show in detail all types of regimes.