In implementation of the provisions of Law No. 92/2014, dated July 24, 2014 “On Value Added Tax in the Republic of Albania,” as amended,

The right to deduct VAT included in the purchase price of a good or service is exercised by the buyer when the VAT becomes payable to the supplier. The conditions that must be met to exercise the right to deduct VAT are as follows:

Documentation

Deductible VAT is the VAT shown on the tax invoice issued by the supplier, as well as the VAT paid on imports, as shown on the customs import document (customs declaration).

For the completion of the VAT return, the taxable person must possess the VAT purchase invoice for domestically made acquisitions, which shows them as the buyer, or any other document, such as the import declaration, which shows them as the recipient of the imported goods.

Warning!
The VAT deduction on purchases is claimed based on the original tax invoice issued by the supplier and completed in accordance with the requirements set forth in the law.

For VAT deduction purposes, a notarized copy of the purchase invoice is also considered valid (in case the original invoice is lost), provided that the seller retains his own copy of the invoice and has declared it. Without this invoice, the right to deduct the VAT paid, or to have it paid on purchases, cannot be exercised.

Criteria for the taxable person

1. For VAT deduction on the sale of goods and the provision of services, one must have an invoice drawn up in accordance with Articles 96 through 105 of the Law.;
2. For VAT deduction on supplies for which payment is made, when self-supply is involved, it must be documented with an invoice.;
3. To claim VAT deduction on imported goods, one must possess a declaration proving importation, issued at the time the goods are released for free circulation in the territory of the Republic of Albania.;
4. When the buyer is required to pay VAT, i.e., applies the VAT self-billing scheme, they are entitled to deduct the VAT on purchases according to the issued invoice, as specified in paragraph 2 of Article 99 of the Law.

The moment at which the right of deduction is exercised

The taxable person exercises the right to deduction at the moment the tax liability arises. Consequently, the right to deduction arises for the taxable person, and that person holds a tax invoice or an import declaration in accordance with the requirements of the law.,

The right to deduct is exercised in the return for the period in which the supply or import was made. This is also the period in which the VAT becomes deductible. The VAT return in which the right to deduct is exercised pertains to the period corresponding to the date of issuance of the tax invoice by the supplier, as defined in Article 99 of the Law, or the date indicated on the customs declaration, which is recognized as the date of release of the goods.

If the taxable person does not claim the VAT deduction in the tax period in which the right to deduct arises, they may deduct this amount of deductible VAT after that period, but no later than 12 tax periods including the period in question. After 12 periods, this invoice is recorded as “purchase with non-deductible VAT.” VAT cannot be deducted before the period in which the right to deduct it arises.

Declaration

The taxable person, from the amount of VAT calculated on the total taxable value of all taxable supplies made during a tax period, deducts the amount of VAT for which the right to deduct has arisen during the same tax period.

If for a tax period the amount of deductible VAT exceeds the VAT calculated as payable, then for that tax period the taxable person has a deductible VAT surplus, The VAT that is refunded to the taxable person once the criteria set out in Article 77 of the Law are met.

Source: General Directorate of Taxes.