Draft law “On some additions and amendments to law no. 9920 dated 19.5.2008 “On tax procedures in the Republic of Albania”, as amended”.

P R O J E C T L A W

No. _____, Date ____.____.2022

“For

Certain additions and amendments to Law No. 9920, dated May 19, 2008, ‘On Tax Procedures in the Republic of Albania,’ as amended.”

In support of Articles 78, 83, paragraph 1, and 155 of the Constitution, on the proposal of the Council of Ministers, the Assembly of the Republic of Albania,

SET:

Article 1

In Article 5 “Definitions,” the following changes and additions are made:

In Article 5, paragraphs (g), (h) and (j) are amended as follows:

g) “taxpayer” means any person who is:

1. subject to taxes under the applicable tax legislation, as listed in paragraph 2, letters “a” through “dh” of Article 4 of this law;
2. subject to the local taxes, duties, and fees listed in paragraph 3 of Article 4 of this law;
3. subject to the payment of social security and health insurance contributions, in accordance with the applicable legislation in force on social security and health insurance contributions;
4. Withholding agent in cases provided for by this law or other tax laws.

“ h) “Related person” means any person who is related to another person in a relationship that directly or indirectly affects the determination of the tax base, whether through management, control, or ownership. In general, two persons are related if one or both persons can act in accordance with the instructions, demands, suggestions, or will of the other person or of a third person.

The following persons will be treated as related persons:

1. The husband and the wife, the predecessor and the successor, between them or among themselves.
2. An economic unit in which each person directly or indirectly owns at least 50 percent of the voting or management rights, dividend distribution rights, or capital rights.
3. Any two or more economic units in which another person owns or holds at least 50 percent of the voting or management rights, dividend distribution rights, or capital rights in both economic units.

When subdivisions (ii) or (iii) above apply, ownership attributed to a person by a related person may not be attributed to another related person. Two persons shall not be considered related solely because one of them is considered an employee or customer of the other, or both are considered employees or customers of a third party, unless such a relationship affects the determination of the tax base, directly or indirectly.”

(j) “Ambulant” means a taxpayer who trades goods or services to the public but does not have a fixed place of business, instead operating from a single mobile trading unit, or is permitted to trade in public spaces authorized by the local authorities that administer the territory, and who, for the purposes of paying taxes and contributions, are registered as ambulant taxpayers with the Tax Administration.”

“(k) “person” means any natural person and entity;

(l) “natural person” means any individual, self-employed individual, or trader.  It includes employees, the self-employed, sole proprietors, as well as any other natural person who has income from any source, income received from inheritances or gifts, or gambling winnings;

(m) “entity” means: (i) any corporation or any structure of corporate or non-corporate organizations (regardless of form) for-profit or non-profit, (ii) for-profit and non-profit organizations, (iii) any form of foreign “trust” or similar structure, (iv) any form of partnership or any personal-type entity, (v) any form of joint venture, (vi) any form of capital or asset management company, (vii) any form of civil code or commercial corporation law entity, (viii) passive or ‘sleeping” partnerships;  

(n) “self-employed individual” means any natural person engaged in the provision of any type of service, or engaged in other professional activities, other than commercial activities;

(o) “trading individual” means any natural person engaged in commercial activities.”

Neni 2

Article 8 “Resident and Non-Resident Taxpayer” is amended to read as follows:

 “Resident and nonresident persons are to be understood as defined in the income tax law.”

Article 3

Article 15 “Local government tax offices” is amended as follows:;

“Local government tax offices operate and enforce the law on the local tax system and administer local taxes, tax obligations, and local public payments.”

 Article 4  

In Article 16 “Structure of the Central Tax Administration,” paragraph 3 is amended as follows:

“3. The central tax administration is organized into directorates and other units according to the following functions:

a) basic and operational functions, which include:

i) taxpayer service, registration, and education;

 ii) risk management, taxpayer control; accounting and statistics;

iii) collection of unpaid tax liabilities/enforcement of coercive measures;

iv) tax investigation; on-site verification;

v) internal anti-corruption investigation, internal audit.

b) support functions, which include: finance and budget, tax refund, technical and legal services, support services, human resources, external relations and project management, business processes.”

Article 5

Article 39, “Register of Individuals,” is amended as follows:

1. The tax administration maintains a separate register of individuals based on civil status data who have attained full legal capacity to act for the purpose of declaring their realized individual income.

2. As a tax identification number for individual taxpayers, the personal identification number issued by the civil registry in accordance with the relevant legislation is used.

3. The Civil Registry Directorate immediately notifies the tax administration of any change or update to individuals' data.

4. Individuals who have the legal obligation to file an annual individual income tax return and fail to do so are notified by the tax administration in order to facilitate self-compliance.

5. If the individual fails to fulfill the obligation under point 4, the regional directorate with jurisdiction has the right to carry out an assessment of the relevant tax liabilities and to register the individual.

Article 6 

In Article 57 “Documentation and record-keeping for tax purposes,” paragraph 1 is amended as follows:

1. The taxpayer shall maintain accounting records in accordance with the provisions in force of the legislation on accounting and financial statements, as well as with the regulations issued for its implementation.“

Article 7

After Article 59, Articles 59/1 and 59/2 are added as follows:

“Article 59/1
The obligation to deposit the money (banknotes and coins) into the bank account.

1. The taxpayer who issues an invoice is required to deposit the funds (bills and coins) collected during the day for the supply of goods or services, which exceed the maximum cash limit, into his own bank account or into his account opened with other non-bank financial institutions that are authorized to accept deposits in accordance with the relevant law, the cash (banknotes and coins) collected during the day for the supply of goods or services that exceeds the maximum cash-in-hand limit set by Article 59(2) of this law, on the next business day after the limit has been exceeded.

2. The taxpayer who issues an invoice, whose bank accounts have been blocked A business that fails to pay its obligations may not pay in cash or hold cash in its till; it must deposit those funds into the bank account for its regular business operations immediately or on the next business day.

Article 59(2)
Cash limits

1. The taxpayer who issues an invoice, except in the cases specified in point 2 of Article 59/1 of this law, may hold cash (bills and coins) in his cash register at the start of each business day up to the maximum cash register limit. The cash amount is the initial sum of money (bills and coins) that the taxpayer may have in his cash register at the start of the workday or shift of each operator. The taxpayer issuing the invoice independently determines the maximum cash amount by issuing an internal act, in accordance with needs and security requirements, but this cannot exceed the maximum set in paragraph 2 of this article.

2. The criterion for determining the maximum amount of the taxpayer's cash, which Issuing an invoice is determined by the size of the taxpayer issuing the invoice, in accordance with tax legislation. Based on this criterion, the taxpayer issuing the invoice may set the maximum amount of cash on hand in the cash register as follows:

a) taxpayers with annual turnover, during the past year, of up to 2 million lekë, up to 55,000 lekë;

b) taxpayers with annual turnover in the past year of over 2 million and up to 10 million lekë, up to 250,000 lekë;

c) taxpayers with annual turnover in the previous year exceeding 10 million lekë, up to 500,000 lekë or 2 percent of the previous year's annual turnover, whichever is higher.

In cases where a taxpayer commences operations during the calendar year, the cash limit is the amount corresponding to items “a,” “b,” and “c” of this point, based on the projected turnover through the end of the year.

3. The maximum cash limit is set for the taxpayer issuing the invoice as a whole, and within this limit the taxpayer issuing the invoice may determine the maximum amount of cash in the cash register for each organizational unit or business location.

4. The maximum cash amount in the cash register, as set forth in paragraph 2 of this article, does not apply to banks and other nonbank financial institutions.

5. The taxpayer issuing an invoice who carries out currency exchange transactions, notwithstanding the provisions of paragraphs 2 and 3 of this article, may set the maximum cash limit at 1,700,000 lekë.

6. The taxpayer who issues an invoice is required, at the beginning of each business day and before issuing the first invoice, via an electronic connection (via the internet) established with the central tax administration, which it uses to implement the fiscalization procedure, to submit information on the initial cash amount in the cash register for each electronic invoicing device. The taxpayer must also submit, in the same manner, any change to the cash register balance during the business day.”

Article 8

Article 61 “Obligation of Third Parties to Provide Information,” paragraph 3 is amended as follows:

“3. The minister responsible for finance shall determine by directive:

a) the manner, time, and form in which third parties are required to submit information to the tax administration, as well as the content of that information;

b) the specified information required to be submitted electronically by third parties on a periodic basis, in accordance with a standardized format and using appropriate technology;

c) the specific categories of persons required to automatically provide information regarding their financial transactions with taxpayers and/or the data they hold about taxpayers, as well as the terms and conditions for providing this information.”

Article 9

Article 62 “Persons required to provide information” is amended as follows:

“1. The tax administration requests any information necessary for the implementation of the applicable tax legislation from any person, including, but not limited to, the following:

a. any entity, including information about:

i. dividends paid to shareholders or partners;

ii. the persons with whom the legal entity has carried out financial or business transactions;

iii. payments made to subcontractors;

iv. debtors and creditors;

b. banks and financial institutions, including information on:

i. bank account details and the opening and closing balances of these accounts within a tax year;

ii. interest payments;

iii. other assets that they hold in the name of a person;

iv. any other financial transaction necessary for tax control purposes and for determining the tax liability;

c. brokerage firms or investment fund managers, including securities transactions or asset/portfolio management accounts;

d. pension funds, in relation to private pension plans;

e. real estate agents, in connection with their clients' transactions;

f. Notaries for notarizing transactions for the sale and purchase of real or personal property, or service contracts;

g. resident and non-resident entities, for payments made to non-resident persons;

h. state institutions and employees of the state administration;

i. any person in financial or business transactions with a taxpayer;

j. donors, international organizations, nonprofit organizations, domestic or foreign, in relation to payments made to taxpayers for the supply of goods and services;

k. electronic marketplaces, electronic interfaces, and digital platforms in relation to suppliers, users, and their transactions;

l. public and private data databases and registries, including the cadastre, the beneficial ownership register, the electronic register of bank accounts, and the National Registration Center, with respect to taxpayer data held therein.

Article 10

In Article 70 “The right to issue the tax assessment notice,” paragraphs 1 and 3 are amended as follows:

“1) Regional Tax Directorates, or other authorized structures within the General Directorate of Taxes, which may perform the same functions as them, are authorized to issue a tax assessment notice for taxpayers registered with the central tax administration, including entities, sole proprietors, self-employed individuals, individuals who are required to file individual income tax returns in cases where they have been subject to audit by the responsible authorities in accordance with the procedures set forth in Chapter X of this law, as well as any other person who is required to declare and/or pay taxes or duties under the legislation of the Republic of Albania.

3) The tax and fee management structures of local self-government units issue assessment notices for categories of obligations and taxpayers in accordance with the legislation on local taxes and fees.”

Article 11

Article 71/2 “Use of alternative valuation methods in cases of actions to avoid tax and abuse of the principles of tax law” is amended as follows:

“1. In calculating income and taxable profit, the Tax Administration may disregard any agreement or series of agreements between taxpayers whose primary purpose, or one of the primary purposes, is to secure tax benefits. Such agreements, for tax purposes, are treated by reference to their economic substance.

2. For the purposes of paragraph 1, “agreement” or ”series of agreements" means any transaction, act, operation, arrangement, grant, understanding, promise, undertaking, or event. An agreement may consist of more than one act or part of an act.

3. To determine whether a transaction or a series of transactions lacks economic substance, the Tax Administration examines whether one or more of the following situations exists:

a) the legal characterization of the individual steps that make up an agreement does not correspond to the legal substance of the agreement as a whole;

b) the agreement or series of agreements is implemented in a manner that is not consistent with regular business conduct;

c) the agreement or series of agreements includes elements that have the effect of compensating or offsetting one another;

d) related transactions are of a recurring nature;

e) the agreement or series of agreements results in a significant tax benefit, but this is not reflected in the taxpayer's business risks or cash flow;

f) The projected pre-tax margin is significant compared to the amount of projected taxable income.

4. For the purposes of paragraph 1, the objective of an agreement or series of agreements consists of avoiding tax when, regardless of any subjective intention of the taxpayer, that objective conflicts with the object, rationale, and purpose of the tax provisions that would otherwise apply.

5. For the purposes of paragraph 1, a particular objective shall be considered critical when any other objective attributed to, or that could be attributed to, the agreement or series of agreements appears insignificant, taking into account all the circumstances of the case.

6. To determine whether an agreement or a series of agreements has resulted in a tax benefit within the meaning of paragraph 1, the Tax Administration compares the amount of tax that a taxpayer is required to pay, taking into account the agreement, with the amount that the same taxpayer would be required to pay under the same circumstances in the absence of such an arrangement.

7. For the purposes of this article, the burden of proof rests with the tax administration.”

Article 12

In Article 80 “Tax Control,” paragraph 5 is amended to read as follows:

“5. For audits conducted by the central tax administration, the authority to initiate the tax audit rests with the Regional Tax Directorate or other units within the General Directorate of Taxes with equivalent functions. For audits conducted by the control structures within the General Directorate, the authority to initiate the tax audit rests with the head of the institution or his delegate. For audits carried out by the local tax administration, the local government tax unit has the authority to initiate the tax audit.”

Article 13

In Article 83 “Tax Audit Report,” paragraph 3 is amended as follows:

“3. A copy of the audit report is submitted to the Director of the Regional Tax Directorate for approval, and a copy of the report is provided to the taxpayer. For audits conducted by the structures of the General Directorate, the audit report is approved by the head of the institution or his delegate.”

Article 14

In Article 84 “Final Tax Audit Report,” paragraph 3 is amended as follows:

“3. A copy of the final tax audit report and the amount calculated, if any, must be sent by mail to the taxpayer, and a copy must be submitted to the Tax Audit Directorate that conducted the audit.”

Article 15

In Article 89 “Notice and Demand for Payment,” in paragraph 2, the following sentence is added:

 “The transfer of monetary amounts from the taxpayer's account, and the sale or transfer of the company's assets or capital in this case, is carried out only in cooperation with the tax administration.

Article 16

In Article 101 “Obligation to Appear,” paragraph 3 is amended as follows:

“3. The tax administration must issue a written summons authorized by the head of the tax administration's responsible structure for inspections conducted by the tax control structures in the central tax administration, or by the head of the local government tax unit, a request that includes the following information:

1. identification of the central or local tax authority issuing the call for bids;
2. the name and tax identification of the person summoned;
3. the place, date, and time of the hearing;
4. the subject matter of the summons and the position of the person summoned (taxpayer, third party, or expert); and
5. a list of books and specific data, as well as other documentation that the person must submit.”

Article 17

In Article 103, “Procedures for declaring the tax liability as uncollectible,”, Point 5 is removed.

Article 18

In Article 105, “Structure and Functions of Tax Investigation Units,” the following amendment is made:

At point 1, the phrase "… " is removed.  “and implementation.

At point 2, the content changes as follows: 

“2. The primary function of tax investigation structures is:

a) the collection and analysis of tax information;

b) tax investigation;”

At point 6, the phrase ‘and the directors of tax investigation in the regional tax directorships.’

Article 19

After section 105(2), section 105(3) is added. “Structure and Functions of the Directorate for Verification and Field Coordination” with content as follows:

“Article 105/3

“Structure and Functions of the Directorate for Verification and Field Coordination”

1. The Verification and Field Coordination structures are specialized enforcement units within the central tax administration.;
2. The Verification and Field Coordination structures have as their primary function:
   1. the implementation of restrictive measures;

Article 20

Article 112 “Failure to fulfill the registration obligation” is amended as follows:

“In addition to the administrative sanctions provided for in other laws, failure to comply with the registration requirement or the obligation to update data is punishable for each violation by a fine of 10,000 lekë for natural persons and 15,000 lekë for legal persons.”

Article 21

In Article 113 “Failure to declare within the deadline,” after paragraph (b) the following paragraph (c) is added:

“c) 3,000 lekë for individual taxpayers”

Article 22

Article 114/1 is amended as follows:

“Article 114/1

“Non-payment of tax installments on corporate profit and the on Personal income”

“Failure to pay the advance installments of corporate income tax and personal income tax on business and self-employment, in accordance with the law “For income tax, the penalty is a fine equal to 10 percent of the installment amount due plus late‐payment interest calculated for the days delayed, but not exceeding 365 days.”

Article 23

Article 118 “Failure to keep accurate books, records, and documentation” is amended as follows:

“A taxpayer who fails to keep the tax records and documentation required by this law is required to pay a fine of 10,000 lekë, for each violation, in cases where it is a natural person engaged in commercial economic activity or as a self-employed individual, and 50,000 lekë when it is a legal entity.”

Article 24

Article 119 “Failure to declare employees and concealment of wages,” paragraph 3, is amended as follows:

“3. If the verification and control reveal that the taxpayer has concealed and failed to declare the exact salary received from the employer, as a result of the employment relationship, the employer, in addition to the obligation to pay the correct amount of tax liability and contributions for this employee, calculated for the entire period proven that the violation occurred, is fined in the amount:

Article 25

Article 121 “Goods not accompanied by tax documents” is amended as follows:

“1. For taxpayers who store, use, or transport goods without accompanying tax documents, in accordance with the provisions of this law and the applicable legislation on invoices and the monitoring system of circulation, the following penalties shall apply:

a) taxpayers registered with tax liability for personal income tax on business or self-employment who are not registered for VAT, and other taxpayers are fined 25,000 lek;

b) registered taxpayers with tax liability for personal income tax on business or self-employment and for VAT are fined 50,000 lek, but not less than the amount of the missing VAT;

c) taxpayers registered with corporate income tax liability are fined 750,000 lekë, but not less than the amount of VAT owed.;

d) A person who carries out economic and commercial activities without registration, as defined in Article 41 of this law, shall be fined 50,000 lek.

2. The tax authority determines the amount of missing VAT upon discovering the violation by valuing the goods found without an invoice at the market price.

3. For the violations provided for in paragraph 1 of this article, in the event of a recurrence, the tax administration, in addition to the penalties specified in paragraph 1, shall criminally prosecute the taxpayer in accordance with the provisions of Articles 116 and 131 of this law.”

Article 26

In Article 123 “Violations for failure to issue invoices and accompanying invoices,” paragraph 3(a) is amended as follows:

“a) a fine of 50,000 lekë for taxpayers of personal income tax from business or self-employment; 100,000 lekë for taxpayers of personal income tax from business or self-employment with VAT; 1,500,000 lekë for taxpayers subject to corporate profit tax.”

Article 27

In Article 124 “Violations in the Invoice Fiscalization Procedure and the Turnover Monitoring System,” in subparagraphs a), b), and c) of paragraph 1, the following amendments are made:

“a) Taxpayers registered with tax liability for personal income tax from business or self-employment who are not registered for VAT, and other taxpayers, are fined 25,000 lekë.

b) taxpayers registered with tax liability for personal income tax on business or self-employment and for VAT are fined 50,000 lek.;
c) Taxpayers registered with corporate income tax liability are fined 75,000 lek.”

Article 28

In Article 127 “Obstruction of tax control or investigation,” paragraphs 1 and 2 are amended as follows:

“1. A taxpayer who directly or indirectly obstructs a tax audit or investigation by the tax administration, shall be subject to a fine of 100,000 lekë for taxpayers classified as merchant natural persons or self-employed individuals, and 1,000,000 lekë for taxpayers classified as entities or high-net-worth individuals.

2. The amount of the fine, provided for in the first paragraph of this article, is approved by the Director of the Regional Tax Directorate or similar units, or by the head of the institution or their delegate for inspections conducted by the structures of the General Directorate of Taxes, and by the head of the local government tax unit for taxpayers who pay local taxes and fees.”

Neni 29

This law takes effect 15 days after its publication in the Official Gazette and applies retroactively to January 1, 2023.

Source: https://konsultimipublik.gov.al/

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