Value Added Tax (VAT) is a general tax on the consumption of goods and services.
VAT is applied as a percentage tax on the price of goods and services and becomes payable after deducting the VAT that directly burdens the cost elements of those goods and services.
The following are subject to Value Added Tax:
a. All supplies of goods and services carried out for consideration within the territory of the Republic of Albania by a taxable person;
b. All importations of goods into the territory of the Republic of Albania.
A taxable person is considered any person, regardless of their form of organization, who independently carries out an economic activity, regardless of the place, purpose, or result of that activity.
Economic activity includes any activity carried out by producers, traders, and persons supplying goods or services, including mining, agriculture, and professional activities.
Additionally, any resident person in Albania whose annual turnover from economic activity exceeds the value of 10,000,000 ALL—which is the minimum threshold for VAT registration—is considered a taxable person.
Please note, you are required to register:
Exempted from this rule are taxable persons who realize or anticipate realizing a turnover below the minimum registration threshold and import goods categorized as Tangible Fixed Assets (TFA) to be used for the purposes of their economic activity and not for trade. These taxable persons may import investment goods for use in their economic activity—which is subject to the small business regime under the law—without being required to undergo the normal VAT regime.
Taxable persons who carry out exports and whose turnover is below the minimum VAT registration threshold are not required to undergo the normal VAT regime.
When the person responsible for declaring and paying VAT is a taxable person not established in Albania (the country where the VAT must be paid), this person must appoint a tax representative in the Republic of Albania as the person responsible for the VAT payment.
The registration of the tax representative is handled by the Regional Tax Directorate.
You may deregister when your turnover in the last 12 calendar months falls below the minimum registration threshold. Deregistration takes effect 12 months after the date of submitting the request to switch to the small business regime.
The turnover used to calculate the registration threshold includes the total turnover realized from all taxable supplies of goods and services, excluding VAT, and includes exempt supplies and supplies taxed at a 0% rate.
Entities Not Considered Taxable Persons:
A "supply of goods" is defined as the transfer of the right to dispose of tangible property as an owner. The following transactions are also considered a "Supply of Goods":
A supply of goods is considered to be made for consideration (payment), in whole or in part, if the supplier directly or indirectly receives or is entitled to receive payment in cash or in kind for that supply, whether from the person supplied or any other person.
The transfer of an economic activity does not constitute a supply of goods or services within the meaning of this law; instead, it constitutes a transfer of assets from the transferring taxable person to another person, who is treated as the successor of the transferor.
The importation of goods is the release for free circulation of goods within the territory of the Republic of Albania, as defined in the customs legislation in force.
A "supply of services" is defined as any transaction that does not constitute a supply of goods. A service performed by an employee for their employer by reason of employment does not constitute a supply of services by the employee.
When goods are not dispatched or transported, the place of supply of goods is in Albania if the goods are located in Albania at the moment the supply is carried out.
When goods are dispatched or transported by the supplier, the buyer, or a third party, the place of supply is in Albania if the goods are located in Albania at the moment the dispatch or transport to the buyer begins.
When goods dispatched or transported by the supplier, the buyer, or a third party are installed or assembled (with or without testing) by or on behalf of the supplier, the place of supply is in Albania if the goods are installed or assembled in Albania.
The place of importation of goods is in Albania if goods originating from other territories are released for free circulation within the Albanian customs territory.
For goods which, upon entry into Albania, are not in free circulation and are subject to special customs regimes, the place of importation is in Albania if these goods are released from the aforementioned regimes or situations within the Albanian customs territory.
The place of supply of services is in Albania if the recipient of the service, a taxable person acting as such, has in Albania:
The place of supply of services is in Albania if the recipient is a non-taxable person, while the supplier, a taxable person, has in Albania:
Their business headquarters or a fixed establishment from which the services are provided; or
Their domicile or habitual residence, in the absence of a business headquarters or a fixed establishment.
In other cases, depending on the status of the recipient (taxable or non-taxable person) and the type of service provided, the place of supply of services may be an exception to the general rule.
For domestic supplies, the tax becomes chargeable and VAT becomes due when the supply of goods or services is carried out.
For importation of goods, the tax becomes chargeable and VAT becomes due when the importation of goods is completed.
For any payment made before the supply of goods is carried out or before the completion of the service, VAT becomes due upon receipt of the paid amount.
In cases where a tax invoice is issued before the supply, VAT becomes due at the moment the invoice is issued.
If partial or successive payments are made for supplies of goods or services, these supplies are considered completed at the end of each period to which the payments refer.
Supplies of goods and services provided continuously over a period of time, including construction operations, are considered completed in the same month in which the invoice is issued.
For goods which are not in free circulation and are subject to special customs regimes upon entry into Albania, the tax becomes chargeable and VAT becomes due when these goods are released from said regimes.
The taxable amount includes everything that constitutes the corresponding value that the supplier of goods or services receives or will receive from the buyer, client, or a third party in exchange for the supply—including subsidies directly linked to the price of these supplies—excluding VAT.
The taxable amount of imported goods consists of the value determined at import by the customs authority, based on the customs legislation in force in the Republic of Albania.
Elements Included in the Taxable Amount:
Elements Not Included in the Taxable Amount:
The standard value-added tax rate for supplies of goods and services, applied as a percentage of the taxable amount , is 20 percent.
The 0% VAT rate is applicable to:
In addition to the standard VAT rate, a reduced VAT rate may be applied as a percentage of the taxable value when provided for by the Law "On Value Added Tax."
The reduced rate of 6% is applicable to:
Goods intended to be transported in the personal baggage of travelers are also considered exports and are taxed at 0%, provided that:
Certain types of supplies of goods and services, for reasons of general interest or specific legal provisions, are exempted from VAT even though they fall within the scope of the tax. For further details, refer to Law No. 92/2014 "On VAT" – Articles 51-56. Ligjit nr.92/2014 “Për TVSH”– nenet 51 -56
A taxable person has the right to deduct from the VAT calculated for taxable transactions the amounts of VAT paid, to the extent that the goods and services received are used by the taxable person for the purposes of these taxable transactions.
Specifically:
The VAT Law provides detailed specific cases regarding the application of the right to deduct.
The right to deduct arises and is applied when:
If goods and services are used by a taxable person both for transactions that grant the right to deduct VAT and for transactions that do not, only the portion of VAT related to the first category of transactions is deductible.
Conditions for VAT Refund
A taxable person may request a refund of the excess VAT credit if:
a. The taxable person has carried forward the deductible VAT credit for 3 consecutive months; and
b. The VAT amount requested for refund exceeds 400,000 ALL.
Exporters have the right to request a refund whenever their credit balance exceeds 400,000 ALL, without being subject to the first condition (the 3-month period).
The tax administration completes the refund procedure within 30 days from the submission date of the request for exporting taxable persons.
The tax administration completes the refund procedure within 60 days from the submission date of the request for non-exporting taxable persons.
Taxable persons must submit the VAT refund request to the VAT Refund Directorate at the General Directorate of Taxes. This request is submitted using the approved form: "Request for VAT Refund", which can be found below.
The payment of the refundable credit balance is processed within five days through the treasury system, in accordance with the rules established by the Minister of Finance.
VAT is payable by the taxable person who carries out a taxable supply of goods or services, except where otherwise specified.
VAT is payable by the taxable person or the non-taxable legal entity, identified for VAT, to whom the services are supplied, if these services are provided by a taxable person not established within the territory of the Republic of Albania.
VAT is payable by any person who indicates VAT on an invoice.
When an issued invoice does not correspond to the actual supply of goods or services, or indicates a price that is not effectively paid by the buyer, VAT is payable by the person who issued the invoice.
For imports, VAT is paid by the person or persons responsible for paying customs duties, as defined in the Customs Code of the Republic of Albania.
VAT is paid by the person who releases the goods for free circulation from special customs regimes.
A taxable person to whom a supply of goods or services has been made—and who is aware, or cannot deny the fact, that the VAT due (or part of it) on this supply or any previous supplies has remained unpaid due to fraud—is jointly liable with the supplier for the payment of the VAT.
A taxable person must become identifiable. They must be equipped with a Unique Identification Number (NUIS) issued by the National Business Center (QKB), a number which is recorded on the certificate issued for this purpose.
The taxable person must ensure that an invoice is issued in the following cases:
The form and content of the VAT tax invoice are approved by the Minister of Finance.
A taxable person may issue a simplified invoice for values under 40,000 ALL, provided the buyer does not request a standard VAT tax invoice.
Books of Purchase and Sale: The taxable person is obliged to maintain a Purchase Book and a Sales Book, recording all purchases and sales made during the tax period (month). These books must be submitted electronically no later than the 10th day of the month following the declared tax period.
VAT Declaration: Every taxable person must submit a VAT declaration containing all necessary information used to calculate the VAT due, the deductible VAT amount, the taxable values of transactions related to these calculations, and the value of exempt supplies.
Submission Deadline: The declaration model is approved by the Minister of Finance. The VAT declaration must be submitted no later than 14 days after the end of the declared tax period.
The special VAT application regimes in Albania are as follows:
Download:
Source: General Directorate of Taxes.