Declaration

Personal income tax is calculated on the income of individuals who are legally obligated to declare it.

Compulsory declaration.

Resident individuals, Those who earn taxable income in the territory of the Republic of Albania and outside it submit the annual income tax return to the central tax administration.

Resident individuals are required to complete and submit the Annual Individual Income Declaration if they earn annual gross income from all sources (within and outside the Republic of Albania) totaling more than 2,000,000 (two million) lek.

If resident individuals earn annual gross income from all sources, both within and outside Albania, of less than 2 million lek, they are not required to complete and file the Annual Individual Income Tax Return.

This exemption does not apply to individuals who are employed by more than one employer, regardless of whether their total annual gross income is below 2,000,000 (two million) lek.

These individuals declare on their annual income statement, as a single amount, all income earned from employment, They calculate the total tax liability on wages, deduct, where applicable, the tax withheld by the employer, and determine the amount of tax liability they must pay to the state budget.

Non-resident individuals, Those who earn taxable income sourced in the Republic of Albania file their annual income tax return with the central tax administration.

Non-residents must complete and submit the Individual Annual Income Declaration if they earn total annual gross income from sources in the Republic of Albania exceeding 2,000,000 (two million) ALL.

Non-resident individuals who earn annual gross income sourced within the territory of the Republic of Albania in an amount less than 2,000,000 (two million) ALL are not obligated to complete and submit the Annual Individual Income Tax Return. This exemption does not apply to individuals employed by more than one employer, regardless of whether their total annual gross income is below 2,000,000 (two million) ALL. These individuals declare in their annual income tax return, as a single sum, all income earned from employment, calculate the total tax liability on wages, deduct, where applicable, the tax withheld by the employer, and determine the amount of tax liability to be paid to the state budget.

Exemption from declaration

All individuals whose total gross annual income from all sources is less than 2,000,000 (two million) ALL are exempt from the obligation to complete and submit the Individual Annual Income Declaration.

Optional declaration

The annual income declaration may also be filed by any individual who, although not legally required to do so, wishes to benefit from it. from the deductible expenses scheme provided for in this law, when that individual meets the conditions for benefiting from the expense deduction.
In this case, the sum of gross annual income, from all sources, must not exceed 1,050,000 (one million and fifty thousand) lekë per year (indexed annually).

Declaration Form

Filling out the declaration

The annual income statement is completed by the individual who has the obligation to declare.

• An individual who is obliged to complete and submit the individual annual personal income tax return has the right to appoint their legal representative by proxy to complete or submit their declaration.
• The representative of the declaring individual is a person chosen by them to represent them in tax matters. The individual's representative assumes the rights and obligations of the individual, and the tax administration is obliged to cooperate and operate with them.
• The appointment of a representative does not relieve the declarant individual of tax liability.

He remains legally responsible for fulfilling his tax obligations.

• The fact that an individual's representative may make an error in declaring and paying tax obligations does not relieve the individual of responsibility for the error.

To identify as a declarant, the individual's tax code serves as:

• the personal identification number on his ID card.
• For the non-resident individual, the personal identification number on the non-resident individual's identity card.

The statement contains data on:

• gross income,
• deductible expenses incurred,
• taxes paid, during the tax period (calendar year)

Model and content of the Declaration

The individual annual income declaration form model is approved by instruction from the Minister of Finance. Below you will find the approved model of the declaration (Form D1 and D2):

Declaration Model (Form/D1):

Declaration Model (Form/D2):

• In the first part of the statement, the tax period associated with the calendar year in which the individual earned the income, as well as his identifying information, is noted.
• In the second part, the data that enable the calculation of the tax are presented, specifically:

Gross income

• Gross income from wages or bonuses from employment relationships for individuals, to be completed for the total of salaries and bonuses that the declarant receives from all employment relationships during the tax period.
• Gross dividend income from participation in trading companies or from business activities., It will be completed for the amount of dividends the declarant receives from all of his participations in trading companies or business activities.
• Gross rental income, It will be completed for the total gross income the individual earns from renting one or more properties.

Clarification:
In the case of a rental agreement between two individuals, the income recipient is required to declare and pay to the relevant tax authority a tax amount equal to 15% of the income received, no later than the 20th day of the month following the month in which the payment was made. For this purpose, the following form is used:

• Capital gains from the sale of real estate (land, buildings) owned by the declarant., will be completed for the realized capital gain.

The sale value of the immovable property is determined in the notarized sales contract, which is signed by the parties (seller and buyer).

Capital gain is equal to the difference between the selling price and the purchase price of the real estate.

• Gross income from bank interest will be completed with the total income from bank interest that the individual has earned during the tax period.
• The net capital gain generated from investments in securities or real estate will be offset against the total gains realized from investments in securities, the sale of shares, and real estate, excluding land and buildings.

The term “realized capital gain” refers to the difference between the selling price and the purchase price of an asset.

In the case of selling shares, the taxable value is the difference between the revenue from selling the shares and the nominal or purchase value of the shares.

• Gross winnings from lotteries or other gambling games will be completed for the total gross winnings from lotteries or other gambling games.
• Gross income from intellectual property, licenses, exclusive rights, and other assets consisting solely of rights and having no physical form, shall be completed for the total gross income from all, as described above.
• Capital gains from donations will be supplemented by the amount of capital gains realized from the donation. In cases of transfer of ownership through donation, the transaction is considered taxable and for the purpose of calculating the tax liability, the procedure will be as in the case of transfer of ownership, land and building, through a sales contract.
• Gross income earned outside the territory of the Republic of Albania shall be completed for the total gross income earned outside the territory of the Republic of Albania.
• Other gross income not mentioned above, will be added to the total other gross income, which is not included in the income mentioned above.

Deductible expenses

• The amount of bank interest on a loan taken for education for oneself, children, or dependents will be covered by the bank for the amount of bank interest on the loan taken for education, within the territory of the Republic of Albania.
• Expenses for personal medical treatment, or for children and dependants, not covered by mandatory health insurance, will be reimbursed based on invoices issued by healthcare institutions within the territory of the Republic of Albania, for the justification of medical expenses, in accordance with the provisions of subordinate legislation.

Tax calculated to be paid

The taxable income sum is calculated for the difference between:

• gross income, with
• Total deductible expenses.

The sum of the tax is calculated, which results from the multiplication of:

• taxable income, with
• tax bracket 15%.

Paid taxes during the tax period

Special statement categories are filled out with: paid leaves during the calendar year, calculated on gross income.

• the calculated and paid tax, on gross income earned outside the territory of the Republic of Albania.

• foreign tax credit, is the amount in Albanian lek of foreign tax paid by individuals, for income sourced from outside the territory of the Republic of Albania, up to the amount that this income would be taxed at the tax rate of 15%.

Tax overpaid from the previous year and not refunded., is credited for the amount of tax overpaid from the previous year that remains unrefunded as of the date of filing.

Request for reimbursement, is completed for the amount that is to be reimbursed.

Overpaid tax (for refund), The difference is made up if the tax paid during the tax period is greater than the tax calculated on the return. .

Mandatory tax to be paid, is completed for the difference between:

• the amount of tax calculated according to the return, minus
• the amount of tax paid,
• minus the tax overpaid from the previous year and not yet refunded.

Declaration method

Submission for:

• Form D1 – Annual Individual Income Statement;
• Form D2 – Annual Individual Income Statement for Foreign Individuals,

It is completed electronically and is available on the official website of the General Directorate of Taxes.

Declaration Deadline

Resident and non-resident individuals subject to filing must submit their annual income tax return to the central tax administration no later than April 30 of the year following the tax period for which the return is filed.

Tax payment

Tax Rates

• The difference between the total gross income, less deductible expenses, and income from employment constitutes the individual's taxable income, which is taxed at a flat rate of 15%%.
• On this basis, with a tax rate of 151 TP3T, the total calculated tax for all types of taxable income, excluding the tax calculated on employment income, is determined.
• Income from employment relationships is taxed according to the table below:
  Every employer who pays a stipulated wage or remuneration is obliged to calculate and withhold personal income tax (employment income) at source.
• The tax amount, as calculated, is added to the tax calculated on the salary and the taxes paid during the tax period, documented by the withholding agent of these taxes, are subtracted.

Tax payment deadline

If the annual tax return shows that the taxpayer must:

• to pay tax, based on the “Total due” line of the individual annual income statement,
• The individual submits the “Individual Income Tax Payment Order” form to the bank.

Caution:
Tax payment must be made no later than April 30th.

Correction of the statement

The declarant, if he discovers material errors made by himself while completing the declaration, may correct the declaration by filing a new one and placing an “X” in the appropriate box (amended declaration), within three months from the date of filing the original declaration.

Within this period, the individual has the right to amend the declaration up to two times without penalty.

Caution
If within this three-month period it changes for the third time, penalties are applied.

If during the audit it is found that the taxpayer has undeclared income on the return or has submitted false or inaccurate documents, the penalties prescribed by the Tax Procedure Law shall apply.

Refund of overpaid tax

If, from the completion of the Annual Individual Income Declaration, a negative difference results, meaning that from the calculation according to the declaration, the taxpayer has a tax surplus as a result of the calculation of deductible expenses, the regional tax directorate must, upon his request, refund the amount of taxes overpaid.

The taxpayer's request for a refund of overpaid amounts must be submitted to the tax authority within 30 days from the date of filing the Annual Individual Income Tax Return and must be accompanied by copies of all supporting documentation for income and deductible expenses.

Individual taxpayers shall submit the refund request, along with supporting documentation, in person to the tax authority, and shall be issued with a protocol number for their submission.

• The individual must accurately provide the number of his bank account into which the refund of overpaid tax will be made. The responsibility for the accuracy of the bank account number rests with the individual taxpayer.

Once the regional tax directorate verifies the accuracy of the data and the verification or inspection reveals that the information provided in the declaration is correct, the regional tax directorate proceeds:

• for reimbursement of the amount of overpaid taxes, into the taxpayer's bank account.
• Upon written request of the taxpayer, the overpaid amount can also be calculated as a payment made for the following tax year.

The crediting of amounts earned from the deductible expenses scheme is carried out by September 30 of the year following the tax period for which the declaration was prepared.

Appeal

Where can we appeal against tax administration actions that we consider unfair?

Appeals are filed only with the Tax Appeals Directorate, which, as of January 1, 2017, has been part of the Ministry of Finance's structure.

What are the rules for filing an appeal:

1. You must have a document (sent by the tax administration) that affects the taxpayer's interests (see below for what this document might be).
2. To file a complaint within one month of becoming aware of the administrative act sent to you by the tax administration.
3. By the end of this month you must pay or provide a bank guarantee for the obligations set forth in the assessment notice, together with any interest due up to the payment date. Fines are neither prepayable nor secured by a guarantee.

Warning! Without these documents, the Appeals Directorate will reject the appeal.

What can be appealed?

• For any “Notice of Assessment of Tax Liabilities” that the tax administration has sent you and you consider unfair.
• Any act that affects the taxpayer's request for a tax refund.
• Any act that affects the taxpayer's request for tax relief.
• Errors made by the administration in calculating the late‐payment interest rate can be appealed.
• The imposition of or errors in calculating the amounts and various types of fines.
• An appeal can also be filed against an omission (failure to act) by the tax administration that affects the taxpayer's tax liability.

Warning! Administrative measures related to the forced collection of tax liabilities cannot be appealed. These include:

• such as an order to freeze bank accounts;
• Notice and demand for payment;
• Notification to third parties and administrative acts related to the confiscation of goods.

What documents need to be sent to the Appeals Directorate for the appeal?

1. A written request in which he describes his claims. This request must include the taxpayer's name and address; the taxpayer's registration tax code; and it must be signed at the end.
2. An administrative act issued by the tax administration.
3. Confirmation of payment of the obligation and late fees (payment order submitted to the bank). In the event of non-payment, a bank guarantee covering the obligations and late fees.
4. Supporting information for the appeal, such as audit reports, minutes (records), acts of findings, etc.
5. Any other document that the appellant deems important for the fair resolution of the matter.

How is the appeal submitted?

The appeal can be delivered in person or sent via registered mail. The submission date is considered the date of protocoling for in-person deliveries, or the postmark date for those sent by mail.

Warning! The taxpayer must provide proof of the date they received the administrative act being appealed. Proof may include the envelope copy, postal registration records, etc.

Key issues to keep in mind during the appeal process:

1. During the review process, the Appeals Directorate may request additional documents, and the taxpayer is obliged to respond to the request.
2. The burden of proof to verify the contrary of the tax administration’s assessment lies with the taxpayer.
3. If the taxpayer has missed the appeal deadline, they must argue and prove with the necessary documentation that the delay was not their fault.
4. After reinstatement within the time limit, the appeal must be filed after 15 days, not after one month, as was previously the case before this deadline was missed.
5. If the taxpayer wishes to be heard orally, they may request a hearing in their written appeal.

Source: General Directorate of Taxes.