Non-profit organizations (NPOs) in Albania are, as a rule, exempt from corporate income tax. This includes humanitarian associations, international organizations under specific agreements, foundations, and non-bank financial institutions established by a decision of the Council of Ministers, as well as film production houses subsidized by the National Center of Cinematography.
However, if an NPO carries out economic activity and generates taxable income, it is obliged to register for corporate income tax and pay the relevant liabilities, regardless of the turnover thresholds applied to VAT.
To benefit from the income tax exemption, NPOs must ensure that their income is used for the purposes defined in their statute and not for profit distribution to members or founders. In case of violation of these conditions, they may lose their exempt status and become subject to corporate income tax.
Any entity that carries out commercial or economic activity and generates profit is obliged to pay corporate income tax. This includes several types of companies: general partnerships, limited partnerships, limited liability companies (LLC), joint-stock companies, as well as any other entity not provided for in these categories, including non-resident entities and those under special tax regimes.
There are several entities exempt from corporate income tax. These include:
Although these entities are exempt from income tax, they still have several other obligations. They must submit the tax declaration and financial reporting statements within the same deadlines as those subject to corporate income tax. This is a measure to ensure transparency and accountability, making it possible to monitor the financial activity of these entities, even if they do not pay income tax.
In this way, even exempt entities must maintain regular and complete reporting to ensure that their activities comply with the laws and regulations in force.
Corporate income tax applies to commercial companies, foreign branches, and certain sectors with special regimes. Some entities, such as foundations and non-profit organizations, are exempt from this tax but must submit financial statements. Residency is determined if an entity has a permanent establishment or management and control in Albania.
Dividend income may be exempt from tax if conditions such as holding shares for at least 24 months are met. Interest expenses are deductible up to 30% of EBITDA, while other expenses, such as fines and penalties, are non-deductible.
The standard corporate income tax rate is 15%, but certain sectors, such as agritourism and software production, benefit from lower rates or temporary exemptions.
Profit declaration is made by March 31 of the following year, and tax prepayments are carried out quarterly. Foreign tax credits help avoid double taxation.
Losses can be carried forward for up to 5 years, with exceptions for changes in ownership. Depreciation for long-term assets is applied using clearly defined methods for consistency.
Special rules apply to the construction sector and international transactions. Business reorganizations may benefit from exemption from capital gains tax.
Tax losses are carried forward for up to 5 years, following the "earliest loss carried first" rule. In case of ownership changes or business reorganizations, carryforward rules may change. Supplementary declarations can be submitted to correct erroneously declared taxes.
The transfer of assets outside of Albania is taxed at 15% of the market value. In cases of reorganization, capital gains are not taxed, enabling development without obstacles.
Sectors such as agritourism, the automotive industry, and software production benefit from temporary tax incentives until 2029. Taxpayers with an annual income below 14 million ALL are exempt from tax until 2029.
Declarations are submitted by March 31 and include all forms of income tax. The tax administration may request full documentation to verify deductible expenses.
Depreciation is applied according to straight-line methods for long-term assets. Specific rules for deductions and documentation apply to inventory and bad debts. For different tax periods, prepayments are adjusted based on reported profits.
The new law provides for the continuation of certain incentives from the previous law, while new formulas for prepayments and exemptions are being phased in through 2025. For exporters and specific sectors, exemptions from prepayments and tax credits apply.
Read more for details on concepts and the calculation of corporate income tax (corporate profit tax) here. https://alprofitconsult.al/tatime/sipermarres/tatimi-mbi-te-ardhurat-e-korporates-tatimi-mbi-fitimin-korporativ/