On distinguishing the economic activities for taxpayers that apply the reduced VAT tax rate of 6%

Following previous communications, the General Directorate of Taxes would like to bring to your attention that pursuant to paragraph 2 of the Article 11/1 of the Decision of the Council of Ministers No. 953, dated 29/12/2014 “On implementing provisions of the Law No. 92/2014 “On Value Added Tax”, as amended, it is stipulated that:

“For purposes of operating in the area of accommodation structures and to apply the reduced rate of VAT, the taxable persons, that apart from the activity in the area of accommodation structures perform other activities as well, shall be registered to the National Business Centre as separate taxable persons, whether re-organizing or not their economic activity, as defined in the Law No. 9901, dated 14/04/2008 “On entrepreneurs and companies”, as amended, within 3 months upon entry into force of this decision”.

Given this, the Tax Administration, pursuant to its mission and based on the principles of tax administration defined in the Law No. 9920, dated 19/05/2008 “On tax procedures in the Republic of Albania”, as amended, for the purposes of effectively implementing the legislation, reiterates the following issues to be taken into consideration:

In the context of the modalities and conditions for the registration of taxable persons that operate in the area of accommodation structures, pursuant to paragraph 1 of the Article 11/1 of the DCM No. 652, dated 10/11/2007 “On some amendments and addenda to the decision No. 953, dated 29/12/2014, of the Council of Ministers “On the implementing provisions of the Law No. 92/2014 “On Value Added Tax in the Republic of Albania”, as amended, which determines that the accommodation structures that operate in line with the legislation in the area of tourism, shall refer to the latter to first of all clarify what is an accommodation structure.

Therefore, Article 4(33) of the law on tourism clarifies the concept of the accommodation structure, which means: “The structure that makes available to the tourists, national or international, individuals or in groups, for an undetermined period of time, but not more than 1 year, the services of accommodation (bed, meals, drinks and other services), in compliance with the standards determined according to its classification and categorization.

Thus, it is important that the service units belonging to the type of: restaurants, bars, conference rooms, fitness room, pools, entertainment parks or sunbeds in case of resorts, etc., shall be at the availability of the accommodation structures and inside the accommodation structures or the complex as a whole, by invoicing the VAT in line with the tax rate that applies to them and implementing the conditions defined, and the provisions in the Law No.9920, dated 19/05/2008 “On tax procedures in the Republic of Albania” and the respective instruction related to the registration process.

With regards to the legal definition defined in paragraph 2 of the Article 11/1 of the Decision of the Council of Ministers No. 953, dated 29/12/2014 “On implementing provisions of the Law No. 92/2014, On Value Added Tax”, as amended, that for purposes of operating in the area of accommodation structures, in order to apply the reduced tax rate of VAT, the taxable persons that apart from the activity in the area of accommodation structures, carry out other activities as well, shall be registered at the National Business Centre as taxable persons per se, whether re-organizing or not their economic activity, as defined in the Law No. 9901, dated 14/04/2008 “On entrepreneurs and companies”.

We would like to remind you that: If the taxable person exercises other activities apart from that of accommodation structures, he shall be registered as a taxable person per se.

Other activities mean when the entity, apart from the activity in the area of accommodation, exercises other activities like construction, trade, energy, etc. In such case this taxpayer should separate the economic activity in the area of accommodation and hotels with the other activity exercised beyond the accommodation activity or that falls out of the entirety of activities that serve to the accommodation structure pursuant to the concept of tourism area, as explained above.

This is for the sake of clearly identifying the activity that is exercised in the areas of accommodation structures and that benefits from the 6% tax rate of VAT, with the other activity that is exercised at a standard VAT rate.

Referring to the legal provisions of the Law No. 9901 “On entrepreneurs and companies”, as amended, all entities that exercise an economic activity shall be registered in the trade register in one of the forms provided for by the law and according to the manner provided for in the Law No. 9723, dated 03/05/2007 “On the National Business Centre”, as amended.

Pursuant to the Law No. 9901, dated 14/04/2008 “On entrepreneurs and companies”, as amended, the entities shall be registered as:

-           Entrepreneurs that are natural persons in the sense of the Civil Code and that exercise an independent economic activity

-           In the form of a commercial company (collective, limited, with limited liabilities and joint stock company)

Upon registration at the National Business Centre, according to one of the above forms, the entities shall be equipped with an identification number, generated electronically, which serves as a tax identification number for them in relation to the local and national taxes.