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 boost 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 fiscalization, also include certain penalties in the chain of actors in this project, from device administrators to businesses and consumers. Under the new changes, fines for device usage violations are progressive, ranging from 50,000 to 150,000 lek for small businesses up to the largest ones. Additionally, the 2020 Fiscal Package regulates 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 boost for the automotive industry, setting a 51% tax rate 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 time of monism, in certain industries producing electrical parts and other lighter equipment needed by the automotive industry. This measure was taken as part of a joint regional plan to attract the automotive manufacturing support industry to the region, with Macedonia and Serbia leading the way.
The Chairman of the Chamber of Commerce, Nikolin Jaka, offered assessments on incentivizing the automotive industry. According to him, the government should support the manufacturing and processing sectors as a healthy foundation for boosting exports and increasing employment.
The 2020 Fiscal Package does not have direct revenue impacts but aims to stimulate investments in the automotive industry and 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, a change was proposed to the income tax law aimed at incentivizing the automotive industry sector by reducing the corporate tax rate to 5% for legal entities engaged in economic activity in this industry.
The automotive industry in Albania is in its infancy and currently struggles to compete with the conditions, capacities, and potential offered by other countries in the region for this type of industry. Since countries in the region, such as Serbia or Macedonia, have a longer-established culture and industry of this kind, they have simply continued and further developed it by enhancing their level of expertise and know-how. The Ministry of Finance argues in the report accompanying the legislative changes 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 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 certain industry sectors, for which growth and development are deemed important. Specifically, these incentives may consist, for example, of tax relief on the profits generated by companies operating in these sectors, or even of allowing deductible expenses in excess of the normally permitted amount for tax purposes.
Through this draft law, a form of profit tax reduction from the standard rate is proposed, aiming to create favorable conditions for improving the climate for the development of the domestic automotive industry 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 sport, recognized as deductible expenses for the purpose of calculating the tax on profit for the tax period, are deductible in an amount equal to three times the value of the sponsored amount.
For taxpayers investing in business projects exceeding 1 billion lek, a five-year carryforward of losses is proposed, since these investments are of considerable value and generally span a significant period of time. to have the opportunity to offset the resulting losses with gains in the next five 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 amendment, 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 up to six seats plus one, which meets at least one of the following conditions:
Displacement equal to or greater than 3000 cm3; or
-An amount equal to or greater than 5,000,000 lek.
With the proposed changes in this draft law, the vehicle's value is intended to be depreciated each year by 10 percent 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.
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-funded.
Penalties have also been amended to unify the late‐payment penalty for the annual tax on used vehicles with penalties imposed for tax obligations of the same nature provided for in the Law on Tax Procedures.
In Article 4, paragraph 3, of the current Law “On National Taxes” it is provided that “…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 tax 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 “5 per cent of the amount of the unpaid obligation for each month of delay, but not more than 25 per cent per year” is replaced. is replaced with the phrase “pursuant to Article 114 of Law No. 9920, dated May 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 changes aim to increase the commission received by the DPSHTRR by 5% on the initial registration fee and the annual fee for luxury vehicles. Currently, the rate for both 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 initial registration fee and the annual fee for luxury vehicles become 5,100 TET.
This proposal is being made because the DPSHTRR, as a public legal entity that is self-financing, and given the relatively high costs involved in changing the criteria for classifying a vehicle as a “luxury car” in the IT system. The lack of data on vehicle value in the DPSHTRR's information system has made the work of inspection, the completion and verification of the vehicle's value for all those vehicles that were considered to be classified as “luxury vehicles,” have resulted in significant corresponding expenditures, particularly in human resources, at a time when the DPSHTRR as an agent does not receive any revenue from this tax. Additionally, the DPSHTRR has opened offices in other counties to collect taxes and be as close as possible to taxpayers.
These changes aim to expand the category of persons with disabilities eligible for exemption from annual taxes on used vehicles and to exempt the payment of annual taxes on early vehicles of historical interest and for collecting purposes, in accordance with applicable laws and regulations.
Procedures are adapted to fiscalization.
The Law on Tax Procedures will change next year, primarily 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 invoicing and the revenue monitoring system, which, after completing the consultation phases, has been submitted to the Council of Ministers for review and approval.
In this context, since the draft law on invoicing and the turnover monitoring system introduces innovations and changes to the invoicing and turnover monitoring system, including electronic invoicing in the near future (e-invoice), it is necessary to harmonize and adapt the relevant provisions of the Law on Tax Procedures concerning invoicing with the provisions of this draft law, the Ministry of Finance clarifies.
The Ministry of Finance and Economy has drafted the bill “On Invoicing 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 issued and registered invoices without cash, in real time, by the tax administration of the Republic of Albania.
Penalties change, fines become progressive.
With the proposed legislative amendments 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.
Registered taxpayers with tax liability under the simplified profit tax for small businesses and for VAT are fined 100,000 lek, but not less than the amount of VAT owed.
Taxpayers registered with tax liability for income tax and VAT are fined 150,000 lek, but not less than the amount of the missing VAT.
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.
According to the proposed amendments, a taxpayer who, for the second time within a calendar year, commits an infringement is fined 100,000 (one hundred thousand) lekë for taxpayers subject to the simplified small business profit tax without VAT, and 200,000 (two hundred thousand) lekë for taxpayers of 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 carried out for the most recent periods not yet assessed, but not exceeding three months, using the alternative methods provided for in Articles 71 and 72 of this law. Furthermore, the business's operations are suspended at the location where the violation was detected for 30 calendar days, after which the suspension is lifted.
if the taxpayer pays the imposed penalties.
The amendments provide that a taxpayer who issues a tax receipt with a preprinted value that does not include the elements specified in this law and in the implementing regulations for tax receipts/tickets with a preprinted value 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 shall be fined an amount of 50,000 (fifty thousand) lek.;
Failure to issue value-stamped service tickets produced by authorized institutions and used in various sectors is punishable by a fine of 10,000 lek.
Under the current tax procedures law, which is in effect, 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, which includes 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 profit tax for small businesses who are not registered for VAT, and other taxpayers, are fined 50,000 lek.
Taxpayers registered with tax liability for the simplified profit tax for small businesses, and for VAT, are fined 100,000 lek.
Registered taxpayers with tax liability for profit tax, in accordance with the law on income tax and VAT, are subject to a fine of 150,000 lek.
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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 via self-service devices.
Infringements for maintainers of fiscalization devices
According to the proposed legislative amendments, the producer and/or maintainer of software, who is not registered in the register of software producers or maintainers, before starting 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 turnover monitoring system, is fined 1,000,000 lek for this violation.
The producer or maintainer of the software, whose program is used by the entity issuing invoices, does not enable the fiscalization procedure and, if the software includes features that circumvent the fiscalization procedure of the invoice issued in accordance with the law governing invoices and the monitoring system of turnover, is subject to a fine of 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 with the tax liability of simplified profit tax for small businesses who are not registered for VAT, and other taxpayers, are fined 50,000 lekë.
Registered taxpayers with tax liability under the simplified profit tax for small businesses and for VAT are fined 100,000 lek, but not less than the amount of the missing VAT.
Registered taxpayers with tax liability for profit tax, in accordance with the Income Tax Law and the VAT Law, are subject to a fine of 150,000 lekë, but not less than the amount of VAT evaded, if:
-Does not issue or send the e-Invoice and accompanying documents in accordance with the law governing invoicing and the monitoring system for turnover;
issues and sends e-Invoices and accompanying documents that do not comply with the e-Invoice usage rules;
It is not registered in the central e-Invoice exchange registry.
The person who is required to accept the e-Invoice, in accordance with the law regulating invoices and the monitoring system for turnover, is fined:
Registered taxpayers with tax liability 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 tax liability for the simplified profit tax for small businesses and for VAT are fined 100,000 lek.
Taxpayers registered with tax liability for income 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 e-Invoice usage rules;
does not accept or process e-Invoices and accompanying documents in accordance with the law governing invoicing and the monitoring system for turnover;
-performs e-Invoice payments in violation of the provisions of the law governing the invoice and the monitoring system for turnover.
The person who acts as an information technology intermediary providing e-Invoice issuance/delivery services that do not comply with the law regulating invoices is fined 50,000 lekë for each invoice.
Failure to collect the invoice, fines
The buyer or any recipient of an invoice issued for payment in cash who does not retain the issued invoice and, at the request of an authorized official of the tax administration, fails to present the invoice received after leaving the seller's place of business, is punishable by:
-100,000 lekë if it is a registered taxpayer for VAT and/or Income Tax
-50,000 lekë if it is a taxpayer registered for the Simplified Profit Tax.
-2,000 lekë if it is an individual, a final 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 providing cashless payment services for e-Invoices issued by the entity that has implemented the fiscalization procedure, does not record the payment made, and does not notify the tax administration via the electronic system immediately after the payment, in accordance with the law governing invoices and the monitoring system of turnover.
Source: Monitor Magazine.