New package: All 2020 fiscal changes, how the legislation on fiscalization is adapting

The Fiscal Package this year comes with a positive boost for the automotive industry, setting a 51% tax rate for businesses that join it, while the tax rate for other businesses is 15%. Athletes and companies that sponsor sports are granted tax relief, and the tax legislation is adapted for fiscalization. Penalties become progressive, and taxes on luxury cars are eased. The new fiscal changes, which are expected to take effect in 2020, aim to stimulate investments in the automotive industry, support sports activities, and adapt tax legislation—particularly the Tax Procedure Law and the VAT Law—through fiscalization, a new Ministry of Finance project for the invoicing process expected to be implemented starting in spring 2020. The legal changes, due to the fiscalization project, also include certain penalties across the chain of actors in this initiative, from device administrators to businesses and consumers. With the new changes, fines for device usage violations are progressive from small businesses to larger ones, ranging from 50,000 to 150,000 lek. Additionally, the 2020 Fiscal Package adjusts the taxation of luxury cars with a downward trend, depreciating their value by 10% per year. This year's Fiscal Package comes with a positive incentive for the automotive industry, setting a 5% rate for the tax benefit for businesses that join it, while the tax rate for other businesses is 15 %. Albania has no tradition in vehicle manufacturing, but it certainly has a long-standing tradition, dating back to the monist period, in certain industries producing electrical parts and other lighter equipment needed by the automotive industry. This facilitation was undertaken as part of a joint regional plan to attract the automotive production support industry to the region, with Macedonia and Serbia leading the way. The Chairman of the Chamber of Commerce, Nikolin Jaka, gave his assessment of the incentives for the automotive industry. According to him, the government must support the manufacturing and processing sectors as a healthy foundation for boosting exports and increasing employment. The 2020 Fiscal Package does not have direct impacts on revenue, but aims to stimulate investments in the vehicle industry sectors and to revitalize sports activities.

5% profit tax for automotive industry businesses

Albania is aiming to become part of the automotive industry's production chain. In the 2020 Fiscal Package, an amendment to the income tax law was proposed to incentivize the automotive industry by reducing the corporate tax rate to 5% for legal entities engaged in economic activities in this sector. The automotive industry in Albania is in its infancy and currently faces difficulties competing with the conditions, capacities, and potential offered by other countries in the region for this type of industry. Since neighboring countries, such as Serbia or Macedonia, have a more established culture and industry of this kind, they have simply continued and further developed it by improving their level of expertise and know-how. The Ministry of Finance argues in the accompanying report to the legal amendments that the proposal for fiscal incentives in the automotive industry aims not only to help our country compete in this sector with the countries of the region, but also to enable the attraction of investments in this industry. With these changes, the promotion of investments in the automotive industry sector will also contribute to increasing the number of businesses operating in this field, as well as the creation of new jobs. International practice recognizes several forms of incentives for specific industry sectors, for which growth and development are considered important. Specifically, these incentives can consist of, for example, tax relief on the profits of companies operating in these sectors, or the recognition of deductible expenses in excess of the normally allowed amount for tax purposes. Through this draft law, a reduction of the corporate income tax rate from the standard rate is proposed, aiming to create favorable conditions for improving the climate for the development of the domestic automotive market.

Athletes and companies that sponsor sports are granted tax relief.

The government has decided to support sports activities by easing the tax burden on artists and companies that sponsor sports activities. This is also intended to be achieved by exempting from personal income tax the bonuses awarded to athletes and sports teams that are part of sports federations recognized by the relevant legislation for results achieved during sporting activities. Meanwhile, reliefs are also proposed for legal entities with taxable annual profits exceeding 100 million lekë, for amounts sponsored in the field of sports, recognized as deductible expenses for the purpose of calculating the tax on profit for the tax period, are deductible up to three times the value of the sponsored amount. For taxpayers who invest in business projects exceeding 1 billion lek, the carryforward of losses to be made over a 5-year period, is proposed so that these investments with significant values and which generally have a considerable duration, have the opportunity to cover the resulting losses with profits in the five following tax periods, according to the principle “The first loss is more painful than the last.” The draft law also aims to harmonize Law No. 8438 of December 28, 1998, “On Income Tax,” as amended, with the new law “On the Invoice and the Monitoring System of Turnover.”

2020, tax on luxury cars is eased

In the 2020 Fiscal Package, the government has eased taxation on luxury cars by depreciating their value by 10% per year. With this change, the Ministry of Finance is aiming to clarify the vehicle's value for the purposes of the criteria that a vehicle must meet to be considered a luxury vehicle. Currently, the Law “On National Taxes,” as amended, defines that a “luxury vehicle” is considered a passenger car with seating for up to 6+1, which meets at least one of the following conditions: - Engine displacement equal to or greater than 3000 cm³; or - A value/price equal to or greater than 5,000,000 lek. The proposed amendments in this draft law aim for the vehicle's value to be depreciated each year by 10% of the remaining value. It is also provided that the sale price of vehicles classified as “luxury vehicles” cannot be lower than the vehicle's depreciated value as determined by the depreciation schedule. The Ministry of Finance explained that this proposal stems from a significant number of claims filed with the DPSHTRR regarding the year-over-year decline in the value of vehicles classified as luxury vehicles. Such claims or complaints from vehicle owners about the vehicle's price are numerous, a fact that imposes financial costs on DPSHTRR, a public legal entity that is self-financing. Penalties have also been changed to unify the late‐payment fine for the annual tax on used vehicles with fines established for tax obligations of the same nature provided for in the Law on Tax Procedures. Article 4, paragraph 3, of the current Law “On National Taxes” provides: “…The owner of the vehicle who fails to pay this tax within 10 days from the end of the prescribed validity period, is required to pay a penalty of 5 % of the unpaid amount for each month of delay, but not more than 25 % per year. 18 % of the annual revenue from this tax is allocated to the local government budget. The procedure for allocating revenues to the budgets of local government units is determined by a Government Decree, based on the number of registered vehicles by local government unit.” With the proposed amendments in this draft law, the phrase “of 5 % of the amount of the unpaid obligation for each month of delay, but not more than 25 % per year” is replaced. is replaced with the phrase “pursuant to Article 114 of Law No. 9920, dated 05/19/2008 ‘On Tax Procedures in the Republic of Albania’, as amended” and the phrase “18 percent” is replaced with the phrase “25 percent”. The further amendments aim to increase the commission received by the DPSHTRR by 5 % for the initial registration fee and the annual fee for luxury vehicles. Currently, the commission for the initial registration fee and the annual fee for luxury vehicles is set at zero percent. With the proposed changes in this draft law, the commission for the initial registration fee and the annual fee for luxury vehicles will become 5 %. This proposal is being made because the DPSHTRR, being a public legal entity that self-finances, and on the other hand, the costs are relatively high for making changes to the criteria for classifying a vehicle as a “luxury vehicle” in the IT system. The lack of data on vehicle value in the DPSHTRR's information system has made the work of controlling, completing, and verifying the vehicle's value for all those vehicles that were considered to be classified as “luxury vehicles,” have incurred considerable corresponding expenses, especially in human resources, at a time when the DPSHTRR as the agent does not receive any revenue from this tax. Additionally, the DPSHTRR, in order to collect taxes and be as close to taxpayers as possible, has opened offices in other districts as well. These changes aim to expand the category of persons with disabilities eligible for exemption from the annual tax on used vehicles, to exempt early vehicles of historical interest from the annual vehicle tax, and to regulate collection in accordance with applicable laws and regulations.

Procedures are adapted to fiscalization.

 The Law on Tax Procedures will change most next year in order to adapt to fiscalization. The Ministry of Finance clarifies that this draft law aims to harmonize the relevant provisions of the Law on Tax Procedures in our country regarding invoicing with the provisions of the draft law on the invoice and the monitoring system of turnover, which introduces an innovation in the process of invoicing and monitoring transactions, the harmonization and unification of administrative violations related to invoicing matters, as well as the regulation of certain technical issues related to the administration of tax obligations proposed by the General Directorate of Taxes. This project has also been materialized in the draft law on the invoice and the turnover monitoring system, which, after passing the consultation phases, has been submitted to the Council of Ministers for review and approval. In this context, since the draft law on the invoice and the turnover monitoring system introduces innovations and changes to the invoicing and turnover monitoring system, including the electronic invoice in the near future (e-invoice), it is necessary to harmonize and adapt the relevant provisions of the Law on Tax Procedures regarding invoicing with the provisions of this draft law, the Ministry of Finance explains. The Ministry of Finance and Economy has drafted the bill “On the Invoice and the Transaction Monitoring System,” which proposes the creation of a new invoicing and monitoring system for business transactions in the country, accompanied by an innovation in fiscal devices. The main purpose of this law is to create a registry of entities that issue invoices and thus to control their content, to monitor all issued invoices (regardless of whether they are paid with or without cash) during the execution of B2C (Business to Consumer) transactions, B2B (Business to Business) and B2G (Business to Government), as well as the payments of invoices issued and registered without cash, in real time, by the tax administration of the Republic of Albania.

Penalties change, fines become progressive.

With the proposed legislative changes to the Tax Procedure Law, the penalty scheme for failure to issue the accompanying invoice is changing. Small businesses that are not registered for VAT and that do not issue invoices, or issue them with incomplete elements under the new legal amendments, are fined 50,000 lek. Taxpayers registered under the simplified business profit tax and VAT are fined 100,000 lek, but not less than the amount of VAT evaded. Taxpayers registered with tax liability for profit tax and VAT are fined 150,000 lekë, but not less than the amount of VAT owed. In addition to the fine imposed under paragraph 1 of this article, for taxpayers registered for VAT a tax assessment is made for the last three months using alternative methods. Under the proposed amendments, a taxpayer who commits an infringement for the second time within a calendar year is fined 100,000 (one hundred thousand) lekë for taxpayers subject to the simplified business profit tax without VAT, and 200,000 (two hundred thousand) lekë for taxpayers subject to the simplified small business profit tax with VAT, 300,000 (three hundred thousand) lekë for other taxpayers registered for corporate income tax and VAT. For taxpayers registered for VAT, a tax assessment is made for the most recent undeclared periods, but not more than three months, using the alternative methods provided for in Articles 71 and 72 of this law. Furthermore, the business is subject to a suspension of operations for 30 calendar days at the location where the violation was found, which is lifted if the taxpayer pays the imposed penalties. The amendments provide that a taxpayer who issues a pre-printed value tax invoice that does not contain the elements specified in this law and in the implementing regulations for pre-printed value tax invoices/tickets is subject to a fine of 50,000. The taxpayer who issues a tax invoice in which they have recorded a value different from the supply value or the posted price is fined an amount of 50,000 (fifty thousand) lek; Failure to issue service tickets with preprinted values, produced by authorized institutions and used in various sectors, is punishable by a fine of 10,000 lek. Under the current tax procedure law, the fine for failing to issue tax receipts and invoices was 50,000 lekë, and there was a reassessment of the goods' value for each business category.

Fines in the fiscalization procedure

The taxpayer who is required to issue an invoice or accompanying invoice, in accordance with the law governing invoices and the turnover monitoring system, is subject to a fine if they fail to install the electronic invoicing device, or fails to acquire a mobile electronic invoicing device and a fiscal printer that contains software for the electronic signature of the invoice and does not provide an internet connection for the electronic exchange of data with the tax administration as follows: -Taxpayers registered with the tax liability of simplified business income tax for small businesses, who are not registered for VAT, and other taxpayers are fined 50,000 lek. -Taxpayers registered with the tax liability for the simplified business income tax and for VAT are fined 100,000 lek. Taxpayers registered with the tax liability for profit tax, in accordance with the law on income tax and for VAT, are fined 150,000 lekë. if: The above fines also apply to businesses that do not obtain from AKSHI the digital certificate specified for the electronic signature of the invoice, or accompanying invoice, and for the identification of the taxpayer issuing the invoices. Fines also apply to businesses that do not issue invoices through the electronic invoicing devices specified in the letter and that do not implement the fiscalization procedure for sales made through self-service devices.

Infringements for maintainers of fiscalization devices

 According to the proposed legal amendments, the producer and/or maintainer of software who is not registered in the register of software producers or maintainers, before beginning to offer or maintain software for the issuance of invoices, or accompanying invoices, to the Tax Administration, in accordance with the law governing invoices and the monitoring system of turnover, is fined 1,000,000 lekë for this violation. The producer or maintainer of software, whose program is used by the entity issuing invoices, does not enable the fiscalization procedure and if the software contains features that bypass the fiscalization procedure of the invoice issued in accordance with the law governing invoices and the monitoring system of turnover, is fined 1,000,000 lekë for this violation.

Violations in the procedure for issuing, sending, and receiving the e-Invoice.

 According to the proposals of the Ministry of Finance, a person who is subject to the issuance of an e-Invoice, in accordance with the law governing invoices and the turnover monitoring system, is fined: -Taxpayers registered under the simplified profit tax for small businesses who are not registered for VAT, and other taxpayers, are fined 50,000 lek. -Taxpayers registered with the simplified business income tax and VAT responsibilities are fined 100,000 lekë, but not less than the amount of the missing VAT. -Taxpayers registered with tax liability for profit tax, in accordance with the law on income tax and for VAT, are fined 150,000 lekë, but not less than the amount of the missing VAT, if: -Fails to issue or send the e-Invoice and accompanying documents in accordance with the law governing invoicing and the turnover monitoring system; issues and sends e-Invoices and accompanying documents that do not comply with the rules for the use of the e-Invoice; is not registered in the central register for e-Invoice exchange. A person who is required to accept an e-Invoice, in accordance with the law governing invoices and the monitoring system for turnover, is subject to a fine: Taxpayers registered with the tax responsibility of the simplified profit tax for small businesses, who are not registered for VAT, and other taxpayers are fined 50,000 lek. Taxpayers registered with the tax liability for the simplified profit tax for small businesses and for VAT are fined 100,000 lek. Taxpayers registered with tax liability for profit tax and VAT are fined 150,000 lekë, but not less than the amount of the missing VAT if: -accepts and processes e-Invoices and accompanying documents that do not comply with the rules for using e-Invoices; -does not accept or process e-Invoices and accompanying documents in accordance with the law governing the invoice and the monitoring system for turnover; -makes payments for e-Invoices in violation of the provisions of the law governing invoicing and the monitoring system for turnover. An information technology intermediary that provides e-Invoice issuance/delivery services in violation of the law governing invoices is fined 50,000 lek for each invoice.

Failure to collect the invoice, fines

The buyer or any recipient of an invoice issued for cash payment who fails to receive the invoice and, upon request by an authorized representative of the tax administration, does not present the invoice obtained after leaving the seller's business premises, is punished with: -100,000 lekë if it is a taxpayer registered for VAT and/or Corporate Income Tax -50,000 lekë if it is a taxpayer registered for the Simplified Income Tax. -2,000 lekë if it is an individual, end consumer. Under the current law, the fine for consumers was 1,000 lekë. Penalties are 00.000 lekë per case, if the bank or financial institution that provides cashless payment services for e-Invoices issued by the entity that has implemented the fiscalization procedure, fails to record the payment made, and also fails to notify the tax administration of this payment through the electronic system, immediately after the payment, in accordance with the law governing invoices and the monitoring system for turnover. Source: Monitor Magazine.