Introduction
Tax declarations are essential for any business, not only to stay compliant with the law but also to build a stable relationship with the tax administration. In this guide, we will detail 10 of the most common mistakes businesses make in this process and provide practical tips for avoiding them, referring to the current legal framework and real-life cases.
Shuffle here to familiarize yourself with the legal framework in the field of taxation and with the latest news.
1. Late income declaration
Late filing is one of the most common mistakes. Businesses often delay submitting VAT, profit tax, or personal income tax declarations due to a lack of organization or awareness of deadlines. The law Tax Procedures penalties are foreseen for any delay, starting from a fixed fine of 10,000 lekë to higher fines, depending on the amount unpaid.
For example, a small business that is late in paying VAT for September not only faces a substantial fine but also pays interest on the unpaid amount.
To avoid this situation, it is advised to use a financial calendar and delegate the responsibility of submitting declarations to an accountant or advisor.
2. Incorrect tax calculations
A common mistake relates to the incorrect calculation of taxes, such as personal income tax or profit tax.
For example, a company may miscalculate TAP by not applying the progressive tax rate (13% for income up to 200,000 lek and 23% for the amount above that threshold). These errors can lead to overpayments or unpaid liabilities that trigger audits and fines.
The solution is to use certified tax calculation programs and to seek a review of the calculations by a professional before submitting the declarations.
3. Refundable VAT report
Many businesses fail to take advantage of the opportunity to claim VAT refunds for deductible expenses, such as the purchase of equipment or capital expenditure.
For example, a company purchasing manufacturing machinery valued at 2,000,000 ALL could be reimbursed up to 400,000 ALL in VAT, but this opportunity is lost due to non-application within the deadline.
To avoid this error, document all expenses with corresponding invoices and submit reimbursement applications using the e-filing electronic platform.
4. Use of irregular invoices
The use of invoices that do not contain the elements required by law, such as the NIPT, date, description of services or goods, is another common problem. These invoices are declared invalid during tax audits and result in fines ranging from 50,000 leks for small transactions to more severe sanctions for larger cases.
For example, a small shop that uses incomplete manual receipts faces a fine during a tax inspection. To avoid this, use the platform e-invoice which ensures automatic invoice generation in compliance with the law.
5. Error in deductible expense registration
Recording non-deductible expenses as deductible, or overlooking deductible expenses, is another problem that directly affects profit tax.
For example, a company that forgets to include office rent expenses in its tax returns ends up paying higher taxes than it should.
To avoid this, it is important to clearly understand the categories of deductible expenses defined by law and to maintain complete documentation for each expense.
6. Declaration of income earned abroad
A common mistake is not declaring income from international sources. For example, an IT company that provides services to clients in Germany and receives payments in euros often fails to declare this income.
The Law on Tax Procedures requires that all income earned, regardless of its source, be declared and taxed. Failure to declare results in penalties and negatively impacts a business's tax history.
To avoid this, declare all international income and provide supporting documentation to justify payments.
7. Declaration of informal employees
The informal employment of workers is a widespread problem that leads to considerable fines and legal penalties. A shop that hires seasonal workers without regular contracts can be fined up to 100,000 lek for each informal employee. Furthermore, the lack of declaration harms the social and health rights of employees.
To avoid this, ensure all employees are registered and included in payroll.
8. Including personal income in business accounts
Mixing personal and business income creates confusion and increases the likelihood of tax errors. For example, an entrepreneur who uses their business account for personal expenses may attract the attention of the tax administration during an audit.
To avoid this, maintain separate accounts for business and personal use and follow clear financial management.
9. Disregard for changes in tax legislation
Tax legislation changes frequently, and businesses that do not keep up with these changes face penalties for non-compliance with new rules.
For example, a company that does not update its practices after a new tax regulation for VAT on imported goods comes into effect faces penalties.
To avoid this, maintain continuous contact with a tax advisor and follow publications from the General Directorate of Taxation.
10. Lack of a financial or tax advisor
Many businesses make wrong decisions due to a lack of knowledge or expertise. For example, a business that tries to manage every aspect of its statements internally ends up making mistakes that could have been avoided with a good advisor.
Hiring an expert not only ensures correctness in statements but also optimizes tax obligations, helping businesses save money and avoid penalties.
Conclusion
Accurate management of tax declarations is a complex process that requires attention and thorough knowledge. To ensure your business is compliant with the law and to avoid common mistakes, contact AlProfit Consult. Our experts offer professional support for every aspect of tax returns.