All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Albania: Prerequisites for banks’ bad debt tax deduction streamlined


Juliana Xhafa of Ernst & Young outlines new changes to the conditions required for banks and other financial institutions to have bad debts qualify for tax deductibility.

In addition to existing law provisions and related administrative guidelines of the Minister of Finance, which provide for certain conditions to be cumulatively fulfilled in order for the impairment of bad debts to be considered as deductible expense for Albanian corporate income tax purposes, the Ministry of Finance of Albania recently introduced a new guideline (Instruction No. 14 dated May 23 2013) providing for more clarity about when such impairments become tax deductible especially for banks and other financial institutions.

Specifically, the guideline stipulates that banks, branches of foreign banks and other financial institutions licensed by the Central Bank of Albania to engage in lending activities may claim tax deduction on the write-off of bad debts as follows:

· 365 days after submission of a request to the bailiff’s office for the initiation of compulsory enforcement procedures if the loan is secured by movable or immovable properties; or

· 365 days after the issuance of a writ of execution by the court if the loan is not secured by movable or immovable properties.

The guideline of the Ministry of Finance provides for unified deductibility rules of recognising bad debt by these institutions, enabling them to apply consistent rules for the tax recognition of debt impairments and eliminate the risk of subsequent tax adjustments upon a tax audit.

The existing law provisions require the following conditions to be met:

· The amount must have been recognised earlier in the taxpayer’s income;

· All possible legal means must have been exhausted by the taxpayer to collect the debt (and documented with a court decision or decision of any other competent institution acknowledged by law); and

· The bad debt must be written off in the accounting books.

Juliana Xhafa ( is tax services manager at Ernst & Young, principal Corporate Tax correspondent for Albania.

more across site & bottom lb ros

More from across our site

Corporations risk creating administrative obstacles if the pillar two rule is implemented too soon, sources say.
Important dates for the Women in Business Law Awards 2023
The Italian government published plans to levy capital gains tax on cryptocurrency transactions, while Brazil and the UK signed a new tax treaty.
Multinational companies fear the scrutiny of aggressive tax audits may be overstepping the mark on transfer pricing methodology.
Standardisation and outsourcing are two possible solutions amid increasing regulations and scrutiny on transfer pricing, say sources.
Inaugural awards announces winners
The UN’s decision to seek a leadership role in global tax policy could be a crucial turning point but won’t be the end of the OECD, say tax experts.
The UN may be set to assume a global role in tax policy that would rival the OECD, while automakers lobby the US to change its tax rules on Chinese materials.
Companies including Valentino and EveryMatrix say the early adoption of EU public CbCR rules could boost transparency of local and foreign MNEs, despite the short notice.
ITR invites tax firms, in-house teams, and tax professionals to make submissions for the 2023 ITR Tax Awards in Asia-Pacific, Europe Middle East & Africa, and the Americas.