Just before the year ended 2012, the Albanian Parliament has approved several amendments and changes in taxlegislation, which the most important ones are summarized in this news letter.

Additions and amendments to Law no. 8438, dated 28.12.1998 ‘On Income Tax’

Income excluded from the calculation of income tax:

  • Benefits to the compensation received by final decisions of the courts, as well as certain compensation for court costs;
  • Income earned from state institutions for achievements in science, sports and culture.

Deductible expenses:

  • Scholarships to be awarded to students from educational institutions, public and private, are recognized as an expense deductible to the extent determined by the Council of Ministers, provided that the public and private educational institutions at the beginning of the school year, submit the Ministry of Education and Science the number and amount of scholarships.

Losses carried forward: exclusion limit for their carriage becomes > 50% (was > 25%).

Amendments to Law no. 9920, dated 19.5.2008 ‘On Tax Procedures’

Failure to declare employees would have the following penalties:

  • a fine of LEK 500 thousand for large business taxpayers;
  • a fine of LEK 250 thousand for other taxpayers.

Additions and amendments to Law no. 7928, dated 27.4.1995 ‘On VAT’

Supplies exempt from VAT:

  1. Supply and import of iron and cement used in construction of hydropower;
  2. Import of machinery and equipment for investments worth > 50 million;
  3. Import of machinery and equipment for investments in processing and agribusiness sector;
  4. Import of manufacturing machinery by small business entities for investments in production activity.

Criteria and determination of the kind and quantity of iron and cement, the list of machinery and equipment that are directly related to the investment, the categories of economic operators involved in active processing and agribusiness sector, exemption procedure as well as the relevant criteria will be stipulated by Government decision.

For machinery and equipment, which are imported under the scheme of deferring the payment of VAT and the validity of the authorization by the customs administration/Minister of Finance:

1. Has not expired on 24/01/2013, the amount VAT is exempted. In cases where the deferred VAT has been paid, the amount paid is not refunded;

  1. Has expired on 24/01/2013, and
  • Has a VAT refund, then the customs duties would be compensated with deferred VAT, provided they do not claim the amount of VAT refund from the tax authorities;

• has no VAT refund, then the customs duties is extinguished