Is your business prepared for a tax audit?
In the daily reality of running a business in Albania, one of the most delicate and often most frightening situations is when you receive notice of a tax audit. For many business owners, this moment is experienced as a shock: “Will they find any problems? Have we made any unintentional mistakes? Will we face fines or penalties?” These questions are common, but if we understand the process and prepare for it, a tax audit can be a manageable process and even an opportunity to improve the business's internal operations.
This blog helps you better understand what a tax audit in Albania involves, what the most common types are, how the procedure works, what your rights and obligations are, and what you can do today to be prepared when the time comes.
The main types of tax audits you should know
In practice, tax control can take three main forms, each with a different nature, objective, and impact on your business:
Tax inspection
This is an immediate, unannounced inspection carried out at your business premises. The purpose of the visit is to verify whether the fiscal devices (the fiscalization software) are being used properly and whether the actual employees working in the business are declared. Inspectors usually focus on visible elements: the existence of a receipt for every sale, the cash register's condition, the number of employees, and their presence at the workplace. Fiscal visits are common in the retail, restaurant, bar, and small service sectors, where the level of informality is high.
A simple violation, such as failing to use the cash register for a sale, can result in immediate fines.
Work order
Unlike a tax audit, this is a more relaxed procedure and is usually conducted without the physical presence of inspectors at your offices. The Tax Directorate may send an official request to clarify specific information related to your tax returns.
This includes cases where there are discrepancies between the statements of businesses that collaborate with each other, or when unusual transactions are identified (e.g., very large invoices, collaborations with suspended businesses, etc.). In this case, evidence-backed documents such as contracts, payment orders, correspondence with clients/suppliers, etc., are required.
The work order is not an in-depth inspection, but if it is not taken seriously, it can lead to more serious consequences.
In-depth on-site tax audit
This is the most complex and important of the three processes. The notification arrives a few days in advance and clearly specifies the period to be audited, the type of documentation to be reviewed, and the audit team. Inspectors come to the business premises and analyze every aspect of your tax filings: VAT, corporate income tax, personal income tax, payroll lists, balance sheet, bank transactions, relationships with suppliers and customers, administrative expenses, contracts, and internal documents.
This type of audit lasts from a few days to several weeks and concludes with a preliminary report, which may be contested. After reviewing any objections, the final report is issued, containing the Tax Administration's final decisions and any potential outstanding liabilities.
Legal rights and obligations of businesses during inspections
According to the Law No. 9920, dated May 19, 2008, “On Tax Procedures”, As amended, taxpayers have certain guaranteed rights, but also clear obligations.
You have the right to be notified of any audit except for a fiscal visit. Notification of an in-depth audit must be given at least 10 days before the audit begins. During the audit, you may request an extension to prepare documents, submit written explanations, and file objections to the preliminary report.
Also, any tax decision issued after the audit can be appealed to the Tax Appeals Directorate. If you do not receive a satisfactory decision, you have the legal right to go to court.
On the other hand, the business is required to retain all accounting and tax documentation for a period of five years. It is also required to allow inspectors to conduct audits without obstruction, to provide accurate information, and to respond within the legal deadlines to any request.
How does the tax audit process work in practice?
As soon as you receive notice of an in-depth tax audit, you should undertake thorough internal preparation. Identify the period to be audited and ensure that all tax returns have been filed and align with the supporting documentation.
Inspectors arrive at the business premises and usually begin with an introductory interview, where the purpose of the audit, the documentation required, and the deadlines are clarified. Then the review phase begins, during which transactions, payments, invoices, and accounting records are analyzed in detail. At this stage, additional information may also be requested.
After the review is completed, the preliminary report is issued. You have the right to submit reasoned objections within five days. This is followed by the final report, which may include additional obligations, penalties, or payment requests.
At this stage, if you do not agree with the results, you can file an administrative appeal and then pursue legal action.
Examples from the experience of Albanian businesses
A small business in the beach area was inspected for its use of the cash register. At the time of the inspection, it had not issued any receipts for the morning's sales. It was fined 100,000 lek and suspended for 30 days.
An export company received a work order to provide an explanation of a transaction with an overseas partner. Full documentation on the export, the contract, the customs documents, and the bank payments was requested.
A construction company faced an in-depth audit for the period 2020–2022. Undocumented expenses were identified in the accounting records. After the preliminary report, the company submitted a detailed objection with contracts and additional evidence. The administration partially accepted the objection and significantly reduced the amount of the fine.
How to prepare starting today and avoid surprises
If you want to sleep easy even if an audit notice arrives tomorrow, it's recommended that you take some measures to enhance your business's fiscal security.
Ensure your accounting is up to date and well-documented. Review your tax returns with an accountant to check for any discrepancies. Keep all invoices, contracts, and important communications on file. Conduct an internal audit every year to assess risks.
AlProfit Consult has helped dozens of businesses successfully navigate tax audits by proactively addressing issues through organized, up-to-date, and results-oriented work.
Contact us to conduct a preliminary analysis of your tax situation and to always stay one step ahead.