|Dorina Asllani Ndreka|
The government of Albania has announced a new tax reform which includes the removal of the obligation to pay the simplified income tax for small businesses with annual turnover up to €36,000 (or 5 million ALL).
This reform, which entered into force as of the 2016 fiscal year, also includes a tax reduction of two and a half percentage points for businesses with annual turnover between €36,000 to €58,000 Euros (5 million – 8 million ALL). There are approximately 100,000 businesses which will benefit from this reform and it is expected that the new measures will help increase the general turnover of the economy and assist the economic development of the country.
The lack of business regulation continues to be one of the main problems of the Albanian economy. In order to find a solution for this issue, the government has initiated tighter control of Albanian businesses in relation to the observance of the tax legal framework. Additionally, the Prime Minister has announced a new tax regime for small and medium businesses in Albania, which also entered into force with the beginning of the new fiscal year. Specifically, the changes announced include:
- The total abolishment of the simplified profit tax for businesses with a turnover up to 2 million ALL. These companies now pay a flat tax on profit in amount of 25,000 ALL;
- the total abolishment of the simplified profit tax for businesses with a turnover between 20 million and 50 million ALL, which now pay a 7.5% tax on profit; and
- the reduction of the simplified tax on profit (from 7.5% to 5%), for businesses with turnover between 5 million ALL and 8 million ALL.
Despite the fact that the small businesses (those with turnover not exceeding 50 million ALL) will not have to pay tax on income, they must declare their total turnover based on the invoices for all their purchases and sales. Every year – to February 25 – these businesses will have to submit the declaration of their annual incomes and expenses.
The above-discussed changes are applicable from the 2016 fiscal year. The number of small businesses and self-employed persons that will benefit from these changes and whose tax on profit will become zero has been estimated to be around 83,300. Furthermore, there are 15,900 businesses whose simplified tax on income will be reduced to the 5% rate.