Depreciation
For the determination of taxable profit, depreciation for business fixed assets is calculated and deducted from:
a) the owner of the business assets, except as otherwise provided in point “b” of this article;
b) the person who bears the risk of loss or damage to the assets, in cases of leased assets, usufruct, or any other form provided for by legal provisions.
Financial assets and embodied fixed assets that are not subject to consumption and depreciation, such as land, plots of land, works of art, antiques, jewelry, precious metals, and stones, are not depreciated.
Costs related to the purchase, construction, or improvement of fixed assets that are not subject to depreciation are deductible in the tax year in which the fixed assets are alienated, provided that the income from the alienation is included in the taxable profit.
4. Depreciation in the year of purchase or putting the asset into use and in the year of retirement is calculated proportionally to the period of use during that year.
5. Amortization of the costs of purchase or construction, as well as the costs of improvement, renovation, and reconstruction of buildings, facilities, and constructions that serve for a period of more than 15 years, is calculated individually for each asset at the amortization rate of 5% of these costs for the tax year.
6. Amortization of intangible asset costs is calculated individually using the straight-line method for each asset at a rate of 15% of these costs per tax year.
7. Amortization for the following asset categories is calculated individually using the straight-line method with the following percentages:
a) computers, information systems, computer software products (Software) and data storage devices with 25%;
b) all other business activity assets with 20%.
8. In each category described in point 7, the depreciation percentage, specified in this article, is applied to the depreciation base of the respective category.
9. When an asset, as mentioned in points 5, 6, and 7, is taken out of service during a tax year, the remaining book value for tax purposes is deductible in that year, while any potential income from the decommissioning is included in taxable income.
10. The depreciation base is equal to the cost of acquisition or creation of the asset, plus the cost of reconstruction of assets of the respective category during the tax year.
11. Baza e amortizimit për autoveturat 1+4 të personelit nuk mund të jetë më e lartë se 50% e kostove të blerjes dhe rikonstruksionit, përfshirë TVSH-në. Kostoja e plotë e autoveturës 1+4, e cila amortizohet 50%, nuk mund të jetë më e lartë se 10 000 000 lekë.
12. In the case where the depreciation base is a negative amount, this amount is added to the taxable profit, and the depreciation base will be considered equal to zero.
13. In cases where the depreciation base does not exceed 10,000 lekë, the entire depreciation base will be considered a deductible expense.
14. In cases of revaluation of business assets, depreciation will not be allowed for the revalued amount.
Inventory valuation
The taxpayer must consistently use the same accounting method for inventory valuation, including work-in-progress inventory. The accounting method cannot be changed more than once every five tax years.
2. The revaluation and revaluation of inventory, after initial recognition, according to the provisions of the law on accounting and financial statements, are not recognized for the purpose of calculating taxable profit. This rule also applies to financial assets and intangible assets.
3. My inventory depreciates at a rate of 50% in the year of its purchase and at a rate of 50% in the following year.
Bad debt write-offs
1. A deduction is allowed on a portion of the nominal value of any receipt from an unrelated party, which was accounted for as income, that remains unpaid and for which the taxpayer believes the debt will not be fully or partially settled, and the taxpayer has taken the necessary steps for collecting the bad debt, as determined in the instructions of the minister responsible for finance, as follows:
a) up to 20% of bad debt, when at the end of the tax year the bad debt is uncollectible for more than 6 months;
b) up to 40%% of bad debt, when at the end of the tax year the bad debt is uncollectible for more than 12 months;
c) up to 60% of bad debt, when at the end of the tax year the bad debt is uncollectible for more than 24 months;
ç) deri në 85% të borxhit të keq, kur në fund të vitit tatimor borxhi i keq është i papagueshëm për më shumë se 36 muaj.
2. Total write-off of bad debt is allowed if the following conditions are met simultaneously:
a) bad debt, previously recognized in income, is removed from the taxpayer's books, and
The Tax Administration has taken all possible legal steps to collect the bad debt.
3. When a bad debt write-off has been previously applied to a claim that has been agreed upon or not, the amount recovered must be added to taxable profit in the year of recovery, unless it can be transferred in a business reorganization process.
4. This provision does not apply to financial institutions (including insurance companies).
Carrying losses
If the taxable profit results in a loss in a tax year, such a loss can be offset against taxable profits in the next five tax years, according to the “first-in, first-out” principle.
2. The provisions of point 1 of this article do not apply to losses incurred in the tax year and previous years if a change in ownership exceeding 50% of shares, quotas, or voting rights occurs, provided that this is accompanied by a change in activity. The minister responsible for finance will determine the implementation of this article by instruction.
Source: General Directorate of Taxes.