Annual tax return
1. Every person subject to this law is required to declare to the tax authority all income, whether taxed in any manner or exempt from tax. For natural persons under 18 years of age, the tax return is filed by their legal guardian.
2. The annual tax return is filed with the tax authority no later than March 31 of the year following the tax year for which the return is filed.
3. If the taxpayer has died, the return is filed by his legal heirs for the total income earned up to the date of death.
4. If the taxpayer changes tax residence, he must file a tax return for any income generated up to the date of the change in residence.
5. The method of declaration, including electronic filing, and the relevant declaration forms shall be submitted in accordance with the provisions of the guidance issued by the minister responsible for finance for the implementation of this law. Taxpayers who maintain accounting in accordance with the requirements of the relevant law submit the annual return together with the financial statements, as well as other data specified in the guidance of the minister responsible for finance for the implementation of this law.
6. The tax payable by the taxpayer is paid into accounts authorized by the state budget treasury.
Documentation requirements
1. The tax base is determined by adjusting the expenses and revenues reported in the income and expense statement, in the manner prescribed by this law.
2. The document used as the basis for justifying expenses for tax purposes is the invoice, as defined in the applicable legislation on invoices and the monitoring system for turnover for cash and non-cash sales, as well as any other document prepared or issued in accordance with the guidelines approved by the minister responsible for finance.
Prepayments
1. This article applies to:
a) self-employed persons or sole traders, for their business income; and
b) entities.
2. During the following tax period, the taxpayer prepays to the tax authorities' account the quarterly installments of income tax by March 31 for the months of January, February, and March; by June 30 for the months of April, May, and June; by September 30 for July, August, and September; and by December 31 for October, November, and December. Installments may also be paid on a monthly basis, no later than the 15th of each month, in the amounts as follows:
a) for each of the months of January, February, and March of the following tax period, the amount of the profit tax for the tax period two years prior, divided by 12;
b) for each of the other nine months of the following tax period, the amount of income tax for the preceding tax period divided by 12.
3. Cases of tax prepayments when the taxpayer commences operations during the tax period of the second preceding year, during the prior tax period, or in the subsequent tax period are detailed in the guidance of the minister responsible for finance.
4. In the event that the taxpayer, at any time during the tax period, demonstrates to the tax authorities that the income tax for this tax period will be, in a significant manner, lower than the income tax for the previous period or the second preceding period, the tax authorities shall accept the reduction of advance payments in accordance with the rules set forth in the guidance of the minister responsible for finance.
Part of Instruction No. 26, dated September 8, 2023, on Income Tax
“63. Prepayments
63.1 Calculation of prepayment installments during the tax year for corporate income tax
The taxpayer subject to corporate income tax, during the tax year, prepays the monthly/quarterly installments of income tax:
– by March 31, for the months of January, February, and March;
– by June 30, for the months of April, May, and June;
– by September 30, for the months of July, August, and September; and
– by December 31, for the months of October, November, and December.
Based on the data from the previous year's taxable income statement, filed by the taxpayer, Declaration that must be filed by March 31 of the following year, the tax administration calculates the monthly and quarterly installments of corporate income tax prepayments for the April–December period of the following year and for the January–March period of the year after that. The prepayment installments are notified to the taxpayer electronically in his account by April 10 of the following year.
The calculated prepayment installments are paid by the taxpayer at the end of each quarter, but they may also be paid on a monthly basis, by the 15th of each month. When the prepayment installments are paid on a quarterly basis, each quarterly installment is calculated as the sum of the monthly installments for the respective quarter.
63.2 Calculation of installments for prepayments of corporate income tax:
63.2.1 In cases where the taxpayer has more than one prior tax period in which they commenced economic activity, the monthly installments of advance income tax payments are calculated as follows:
Example for calculating prepayments for the current year 2023 and beyond:
The profit tax for 2022 was 1,200,000 lekë, while the profit tax for 2021 was 1,080,000 lekë. The monthly/quarterly prepayment installments for 2023 will be:
– Therefore, for the first quarter of 2023, the prepayment installment was determined in April of the previous year, 2022, based on the 2021 taxable income declaration. Specifically: for the January–March 2023 period: 1,080,000/12 months = 90,000 lekë/month. The total prepayment for the January–March 2023 quarter will be 90,000 x 3 months = 270,000 lekë.
– For the period April–December 2023: 1,200,000/12 months = 100,000 lek/month. The total for the nine-month period April–December 2023 will be 100,000 x 9 months = 900,000 lek, or 300,000 lek per quarter or 100,000 lek per month.
– For the period January–March 2024: 1,200,000/12 months = 100,000 lekë/month. The total for the first quarter of the next year, 2024, is 100,000 x 3 months = 300,000 lek, or 100,000 lek per month.
63.2.2 In cases where the taxpayer has fewer than one tax period since commencing economic activity, the monthly installments of advance income tax payments are calculated as follows:
Example
Data: Economic activity began on April 1, 2022. The taxpayer has stated that the estimated profit tax he calculates for the period April–December 2022 and January–March 2023 could be 100,000 lekë per month.
According to the balance sheet filed for the 2022 business year, the profit tax for the April–December period amounts to 1,350,000 lekë.
Calculation of advance income tax payments for the following periods:
For the January–March 2023 period, the taxpayer's self-assessment in April 2022 has been taken into consideration, and the prepayments for this period will be 100,000 lekë per month or 300,000 lekë for the first quarter of 2023.;
– For the period April–December 2023: The declared profit for 2022 was 1,350,000 lekë: 9 months = 150,000 lekë per month. Therefore, for the period April–December 2023, the advance income tax payments will be 150,000 lekë per month, or 150,000 x 3 = 450,000 lekë per quarter, or 1,350,000 lekë for the nine-month period;
For the January–March 2024 period, prepayments will be 150,000 lekë per month, or 150,000 x 3 = 450,000 lekë for the three-month period.
63.2.3 In cases where the taxpayer commences operations in the following year, the monthly installments of advance income tax payments are calculated based on the taxpayer's projected statement of the estimated amount of profit and income tax, divided by the number of months remaining until the end of the year, but excluding the first month of registration. This calculation formula will also serve to determine the monthly advance payment installments for the first quarter of the following year. For the following nine-month period from April through December of the next year, the monthly installments of the income tax prepayments are calculated based on the data from the previous year's taxable income statement.
Example
The taxpayer registers on August 10, 2023, and declares that his income tax for the remaining period of 2023 will be 800,000 lek.
His monthly prepayment installments of income tax are calculated as follows:
– For each of the months of the September–December 2023 period: 800,000 : 4 = 200,000 lekë/month;
– For each of the months in the first quarter, January–March 2024: 200,000 lekë/month, or 200,000 lekë/month x 3 months = 600,000 lekë for the first quarter of 2024.
The same methodology will be used to calculate the monthly/quarterly installments of tax prepayments even in cases where previous tax periods resulted in losses.
63.3 Downward adjustment of monthly installments of corporate income tax prepayments. The taxpayer, in any month during the tax period, may request and demonstrate to the tax authorities that the corporate income tax for that tax period will be, in a material way, lower than the income tax for the preceding period or the second preceding period. In such cases, the tax authority, based on the taxpayer's arguments, documentation, and evidence, reduces the amounts of the calculated prepayments.
The arguments that a taxpayer may present to request the reduction or elimination of the calculated prepayment installments are:
When reported sales in the past three months, prior to the request for installment reductions, have fallen by more than 201 TP3T compared with the average monthly sales over the twelve months before this three-month period, installment payments are reduced in proportion to the decrease in goods and services sales.
– When purchases reported in the last quarter have fallen by more than 30% compared with the average monthly purchases over the 12 months preceding this quarter. The reduction in prepayment installments is made in proportion to the decrease in purchases of goods and services.
– When there are deficiencies in the performance of sales contracts for goods or services, construction contracts, etc., which will significantly reduce the taxpayer's activity and income for the remaining months of the following year, for which the reduction of monthly installments of the profit tax prepayments is requested.
When the contracts under which revenues were generated in previous years expire, or when the contracted public facilities or other public works are completed.
– When misfortunes or damages have occurred in the taxpayer's business during the following year and will lead to a significant reduction in economic activity.
– When lines are closed, certain activities are cut back, and the workforce is significantly reduced, etc., as a result of the contraction of operations.
In cases where the conditions under which the prepayment installments were reduced have changed, the tax administration increases them.
63.4 Upward adjustment of the monthly installments of corporate income tax prepayments.
In cases where, based on the data declared for the first nine months of the following year, it is found that the taxpayer has increased their average monthly revenue from the sale of goods and services by more than 10% compared to the average monthly revenue of the previous year, the tax administration may adjust upward the prepayments for the last quarter of the year. The increase in prepayment installments cannot exceed 75% in accordance with the percentage growth in revenue resulting from the comparison of the current year with the previous year.
Example
The average monthly gross income in 2022 was 100,000 lek.
The average monthly gross income from January to September 2023 is 130,000 lek.
The average monthly revenue growth is 30%.
The increase in prepayment installments for the October–December period will not exceed 22.51 TP3T.
(30 % × 75 %) of prepayment installments calculated at the beginning of the year.
The taxpayer:
– may accept the assessment of the tax administration;
– may upwardly revise it beyond the tax administration's assessment and require higher advance payments; or
– may challenge the increase in prepayments made by the tax administration, according to the procedures not provided for in tax appeal.
In cases where the taxpayer himself determines that the estimated income tax for the following year, will be more than 10% higher than the monthly prepayment installments calculated under the law, he must file an estimated profit tax return for the fiscal year no later than September 10. On this basis, the tax administration increases the installments for the months of October–December of the following year.
Example
– Invoices calculated for January–March: 300,000 lekë (100,000 lekë/month).
– Calculated installments for April–September: 1,200,000 lek (200,000 lek/month).
January–September installments: 300,000 + 1,200,000 = 1,500,000 lek.
– The pre-calculated monthly installments for October, November, and December: 600,000 lekë (3 × 200,000).
– Installments for the entire fiscal year: 2,100,000 lek (300,000 lek + 1,200,000 lek + 600,000 lek).
The profit tax assessed by the taxpayer, self-declared by September 10, is 2,700,000 lekë, which is over 10 percent higher than the monthly installments of the calculated prepayments [(2,700,000 lek – 2,100,000 lek)/2,100,000 lek = 28%]. Under these conditions, an additional installment of 200 is estimated for the months of October–December.000 lek per month (2,700,000 lek – 2,100,000 lek = 600,000 lek => 600,000 lek/3 months = 200,000 lek/month). In total, the prepayment installment for the October–December quarter will be 600,000 lekë + 600,000 lekë = 1,200,000 lekë for this quarter. If, as a result of the audit through in-depth inspection and tax assessment, it is determined that the taxpayer's profit in the previous year was declared lower than that resulting from the audit, the tax administration may increase the previously calculated prepayment installments for the following year and the first quarter of the year after that. The increase in prepayment installments is based on the additional amount of profit resulting from the reassessment compared to the declared profit.
The tax administration notifies the taxpayer of the increase in prepayment installments, in accordance with the provisions of Law No. 9920 of May 19, 2008, “On Tax Procedures in the Republic of Albania,” as amended.
63.5 Calculation of prepayment installments during the tax year for personal income tax on business and self-employment income.
The taxpayer subject to personal income tax on business and self-employment, during the tax year, prepays the quarterly installments of the personal income tax:
– by March 31, for the months of January, February, and March;
– by June 30, for the months of April, May, and June;
– by September 30, for the months of July, August, and September; and
– by December 31, for the months of October, November, and December.
Based on the data from the personal income tax return on business income/self-employment, for the previous year, submitted by the taxpayer, a return that must be filed by March 31 of the following year, the tax administration calculates the quarterly installments of advance payments of personal income tax from business/self-employment for the April–December period of the following year and for the January–March period of the next year. The prepayment installments are notified to the taxpayer electronically in his account by April 20 of the following year.
63.5.1 Calculation of prepayment installments
63.5.1.1 In cases where the taxpayer of personal income tax from business/self-employment has more than two tax periods in which they commenced economic activity, the quarterly installments of advance payments of personal income tax from business/self-employment are calculated as follows:
Example for calculating prepayments for the current year 2023 and beyond:
The personal income tax on business/self-employment for 2022 was 120,000 lek, while for 2021 this tax was 108,000 lek. The quarterly prepayment installments will be:
– For the January–March 2023 period: 108,000/12 months = 9,000 lekë/month. The total for the January–March 2023 quarter will be 9,000 x 3 months = 27,000 lekë for this quarter.
– For the period April–December 2023: 120,000/12 months = 10,000 lekë/month. The total for the April–December 2023 nine-month period will be 10,000 x 9 months = 90,000 lek, or 30,000 lek per quarter.
– For the January–March 2024 period: 120,000/12 months = 10,000 lekë/month. Total for the first quarter of the next year: 10,000 x 3 months = 30,000 lekë. Therefore, for the first quarter of the following year, the prepayment installment was determined in April of the preceding year, based on the 2022 personal income statement from business and self-employment.
63.5.1.2 In cases where the taxpayer has fewer than one tax period in which they commenced economic activity, the quarterly installments of the personal income tax advance payments on business/self-employment income are calculated as follows.
Example
The data
Economic activity began on April 1, 2022. The taxpayer has stated that the estimated personal income tax on business/self-employment for the period April–December 2022 could be 10,000 lek per month.
According to the balance sheet filed for the 2022 business activity, the personal income tax on business/self-employment for the April–December period amounted to 135,000 lek.
Calculation of personal income tax prepayments from business/self-employment for the following periods:
For the January–March 2023 period, the taxpayer's self-assessment from April 2022 will be taken into consideration, and the prepayment for this period will be 30,000 lekë for the first quarter of 2023.
– For the period April–December 2023: the personal income tax on business/self-employment declared for 2022 was 135,000 lekë: 9 months = 15,000 lekë per month. Therefore, for the April–December 2023 period, the advance income tax payments will be 15,000 lekë x 3 months = 45,000 lekë each quarter.
For the January–March 2024 period, prepayments will be 15,000 lekë x 3 months = 45,000 lekë for this quarter.
63.5.1.3 In cases where the taxpayer commences activity in the following year, the quarterly installments of advance payments of personal income tax on business/self-employment are calculated based on the taxpayer's projected statement of the estimated amount of personal income from business/self-employment, and the tax on that income, divided by the number of months remaining until the end of the year, but without taking into account the first month of registration. This calculation formula will also serve to determine the prepayment installment of personal income tax on business/self-employment for the first quarter of the following year. For the following nine-month period from April through December of the next year, the quarterly installments of the business/self-employment personal income tax prepayments are calculated based on the data from the previous year's taxable personal income statement.
Example
The taxpayer registers on September 10, 2023, and declares that the personal income tax on his business/self-employment for the remaining period of 2023 will be 60,000 lek.
His quarterly prepayment installments of tax are calculated:
– For the last quarter October–December 2023: 60,000 lekë,
– For the first quarter of 2024: 60,000 lek.
The same methodology will be used to calculate the monthly/quarterly installments of tax prepayments even in cases where previous tax periods resulted in losses.
6. Adjustment of personal income tax installments on business and self-employment income. A downward adjustment of personal income tax installments on business and self-employment income may be requested by the taxpayer at any time, whereas an upward adjustment may only be made for the last quarter of the year.
…
5. If the tax authorities assess that based on the indicators of the first nine months, the revenues for the upcoming tax period will exceed by more than 10 percent the average monthly revenues of the previous period each month, they may increase the prepayments for the last quarter of the year in accordance with their estimated revenues.
Supplemental tax return
1. In the case where the taxpayer finds that the tax payable on his most recent income tax return should have been higher or the tax loss lower, he is required to file an additional tax return and pay the difference between the previously declared payable tax and the supplementary payable tax, in accordance with the provisions of the applicable legislation on tax procedures in the Republic of Albania.
2. In the event that the taxpayer determines that the tax payable on his most recent income tax return should have been lower or the tax loss higher, he is required to file an additional tax return in accordance with the provisions of the legislation in force on tax procedures in the Republic of Albania.
Source: General Directorate of Taxes.