Albania changes the Value Added Tax Legislation

Albania/March 2014

Value Added Tax is the most important tax in Albania. According to the fiscal indicators regarding the consolidated budget, VAT is expected to amount to 8.5% of the GDP for the 2014 fiscal year.

VAT is levied on all supplies of goods and services in Albania, and for all imports. The VAT rate in Albania was 20% for the majority of supply of services and goods, and until now a reduced rate of 10% was levied on the supply of medications and medical services.

The Law on Valued Added Tax provides some specific goods and services that are exempted from the VAT. Some of these exempted supplies include: financial services; supply and rental of land; granting, negotiating, administration and securing of money credits; bank transactions, money transfers, loans, cheques, with the exception of debt collection services; transactions dealing with money, bills, and other legal means of payment; transactions regarding shares, capital, bonds, securities, etc; administration of investment funds; non profit organisations; supply of casinos, hippodromes, gambling, etc; postal services and exports.

With the Law no.182/2013, dated 28.12.2013, the Parliament adopted several changes regarding the VAT, which entered into force from the 1st of January 2014.

In accordance with these changes, medicinal drugs and health services supplied by public or private medical institutions are no longer subject to 10% VAT, but are instead considered as exempted supply. The changes are not to be strictly applicable with the beginning of the new 2014 financial year, but will rather be effective as of the 1st of April 2014, in order to give the Ministry of Finance the possibility to arrange the administration of the already existing supplies.

VAT refunding has been one of the less applicable legal rights regarding this tax, which was until now legally granted but practically denied to the taxpayers. In order to help both taxpayers and the law enforcement, the new Law defines a simplified procedure and accelerated deadlines regarding refunding, with the scope of making it more applicable in practice. Starting from the 1st of January 2014, the Fiscal Regional Directory is to control and approve as refundable the taxpayer’s credit balance within 60 days from the taxpayer’s application. The payment of the VAT refundable credit balance is performed by the treasury system, in accordance with the rules and procedures defined in the Guideline of the Ministry of Finances, which remains to be published.

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