In April 2013, the Albanian Parliament approved two laws, No. 106/2013 and 107/2013, that provided changes to the laws on personal income tax and local taxes. Both laws entered into force on April 30 2013.
One of the changes that had a major impact, affecting a large number of employees, is the removal of the personal income tax for the monthly salary and all employment incomes below ALL 30,000 ($279).
The employment incomes include salaries and all kinds of rewards from actual employment relations. Previously, only those employment incomes up to ALL 10,000 were exempt from taxation. Now the 10% rate is applicable only for wages, salaries and rewards, above ALL 30,000.
According to INSTAT, the Albanian national institute of statistics, the average monthly salary in Albania is approximately ALL 35,000.
This measure will have a considerable impact on a large number of employees in Albania, by increasing their personal incomes by 10%, but without affecting the employers' costs. The law on personal income exercises its influence on all personal incomes acquired by resident or non-resident individuals in the Republic of Albania. Non-resident individuals are only subject to this law for those incomes that they acquire in Albania.
Non-deductible expenses
Another change made by law 107/2013 concerns non-deductible expenses for calculating taxable income.
Under the previous version of the law, expenses made for technical services, consultancy and management services, for which the invoice was issued by third parties, but were not liquidated within the fiscal year, were considered to be non-deductible expenses.
After the changes, this category of expenses is considered as non-deductible, only in cases where the taxpayer does not pay the withholding tax within the fiscal year. This change gives the taxpayer the opportunity to make the payment for these services even after the appropriate tax period, and they are still considered as deductible expenses. The only condition on the taxpayer is to pay the withholding tax which is at a rate of 10%, in accordance with the invoice issued.
The changes made to the law on personal income also affect the deductible expenses for the calculation of the income tax of individuals with incomes up to ALL 1,050,000.
One of the deductible expenses added to this list, not previously foreseen by the law, is the building tax. This measure aims to serve as an incentive for promoting voluntary declaration of incomes annually for resident individuals.
The building tax is a tax paid according to the law on local taxes, and it is calculated based on the construction surface according to the ownership documents. The changes include this tax as a deductible expense performed by the individuals who declare their income voluntarily.
Another law that underwent changes was the law on local taxes. According to law no. 10354 on local taxes, the communal or municipal councils have the right to issue new temporary taxes based on the general interest of the community in the territory under their jurisdiction. The latest changes provide that the mobile company's antenna, or any other transmission antennas, will not be subject to temporary local taxes.
Law no. 106/2013 provided that any state owned properties transferred under the administration of public state companies would be exempted from tax on buildings. In addition, the tax for the occupation of the public space is not applicable for those spaces that are not property or under the administration of the local administration.
The main conclusion regarding these last changes in the tax laws is that they tend to relieve the overall position of the taxpayers.
Dorina Ndreka (dorina.asllani@eurofast.eu)
Eurofast Global, Tirana Office
Tel: +355 42 248 548
Website: www.eurofast.eu