Albania: Tax/Customs Update

Last Updated: 17 March 2017
Article by Kalo & Associates

1. Amendment to Excise Law

A new amendment no.126/2016 "On some changes and additions to the Law no.61/2012 "On excise in the Republic of Albania", as amended", is effective as of January 1st, 2017. Some of the main changes brought by this latest amendment include the followings:

  • Biofuels used in the transport sector become subject to excise reimbursement for the value of the excise duty paid corresponding to the quantity of the "BIO" product, up to 5%. The reimbursement shall be performed until 2020.
  • Energy products such as petroleum gases and other gaseous hydrocarbons (with NC 27 11) will be subject to excise duty only if such products will be used as fuels for vehicles in road transport.
  • The increase of the excise for tobacco products was cancelled for 2017. As of January 1st, 2018, the excise tax will be increased to ALL 5,750 for 1,000 cigarettes. Further, the excise tax is aimed to be increased annually to ALL 6000 for 1,000 cigarettes in 2019, ALL 6,250 for 1,000 cigarettes in 2020 and ALL 6,500 for 1,000 cigarettes in 2021. The excise tax rate for cigarillos and cigars is increased to ALL 4,400/kg as of January 1st 2017. The tax rate for other manufactured tobacco and tobacco substitutes remains unchanged amounting to ALL 4,400/kg; whereas, a reduced excise tax rate of ALL 2,500/kg shall apply for manufactured tobacco from leafs grown in Albania.
  • Important changes are made to the Chapter XII of the Excise Law concerning applicable penalties.

2. Amendment to National Taxes Law

A new amendment no.127/2016 "On some changes and additions to Law no. 9975, dated 28.7.2008 "On national taxes", as amended", is effective as of January 1st, 2017.

Some of the main changes include the followings:

  • The value of the vehicles considered as luxury vehicles is changed from ALL 7 000 000 to a value equal to or exceeding ALL 5 000 000;
  • Circulation and carbon taxes shall apply on diesel and petrol which is included in the composition of biofuels;
  • Diesel and petrol that is produced in Albania but is subject to exportation is circulation and carbon taxes exempt;
  • The royalty tax rate for the composition of the metallic minerals in the mineral byproducts is being reduced from 2/3 to 1/2 of the royalty tax rate as defined specifically by this Law.

3. Amendment to Income Tax Law

A new amendment no.129/2016 "On some additions to Law no. 8438, dated 28.12.1998 "On income tax", as amended", was published on January 6, 2017, in the Albanian Official Gazette and it is effective 15 days following the date of official publication.

The most important changes include the followings:

  • In case of loans, borrowing or financing from related parties, the expense of extra net interest rate that exceeds 30% of the taxable income before interest and tax, depreciation and amortization (EBITDA) will not be recognized as deductible expenses in the relevant tax period. Each interest expense which is nondeductible may be carried forward in the consecutive tax period, except when the taxpayer's ownership or voting rights has changed by more than 50 %. The above does not apply to banks, credit financial institutions, insurance and financial leasing companies.

    This change will become effective as of 1st of January 2018.
  • The expenses of banks regarding annual and extraordinary contributions made pursuant to the Law on recovery and extraordinary intervention in the banks in the Republic of Albania, are considered as deductible expenses for purposes of the taxable income.

4. Change of some customs tariffs

A new amendment to Law no.128/2016 "On some changes to Law no.9981, dated 8.9.2008, "On approval of customs tariffs rates", as amended", was approved.

According to this amendment, starting as of January 1st, 2017, the customs tariffs are reduced to 0% for some specific raw materials used in the inward processing industry (please see the relevant Nomenclature Code).

5. Changes to the banking legislation:

A new Law no.131/2016 "On some changes to the Law no. 9962, dated 18.12.2006 "On banks in the Republic of Albania" as amended" was published in the Albanian Official Gazette on January 11, 2017 and will become effective 6 months following the date of official publication.

The new amendments of the Law on Banks are not expected to affect substantially the entities of this Law, as the main aim was the alignment with the new Law on 133/2016 "On recovery and extraordinary intervention in the banks in the Republic of Albania", by abrogating some legal instruments which will be introduced in the later Law.

In addition to the above, the amended Law brings some changes to the ranking of settlement of liabilities. Accordingly, in the case of liquidation of the bank or of branch of the foreign bank, claimed liabilities, secured with any collateral, securing charge or financial collateral, are repaid according to the conditions as provided for this purpose, whereas the liabilities for the other accepted claims shall be repaid by preference over all other liabilities, in accordance with the following ranking of claimed liabilities:

  • necessary and reasonable expenses incurred by the liquidator, Bank of Albania (the Authority for Extraordinary Intervention) and Deposit Insurance Agency for purposes of the implementation of the instruments and competencies of extraordinary intervention;
  • creditors of the new loans granted to the bank or branch of the foreign bank after the extraordinary intervention and appointment of liquidator;
  • secured deposits which have not been compensated by the Deposit Insurance Agency;
  • the part of the secured deposit of individuals, entrepreneurs and commercial companies, which surpasses the maximum coverage ratio from the insurance deposit scheme;
  • unsecured liabilities with any collateral, securing charge or financial collateral;
  • subordinated liabilities, which contain contractual clauses for purposes of determining such liabilities in the relevant ranking;
  • unsecured capital instruments be any means of collateral, securing charge or financial collateral, which are not shares;
  • liabilities against shareholders which derive from the ownership over shares.

6. New Law on recovery and extraordinary intervention in the banks in Albania

A new Law no. 133/2016 "On recovery and extraordinary intervention in the banks in the Republic of Albania" was published in the Albanian Official Gazette on January 11, 2017 and will become effective 6 months following the date of official publication. The Law no.133/2016 is partially aligned with the Directive 2014/59/EU dated May 15, 2014 (Banking Recovery and Resolution Directive-BRRD).

This new law aims to set a clear legal basis, determine the criteria, procedures, indicators and especially the role of the institutions involved in the recovery and extraordinary intervention in banks, where the later face serious financial crisis. Accordingly, it makes available to the Bank of Albania as the Authority for Extraordinary Intervention a set of legal instruments to intervene in a stage that is sufficiently early where a bank is in the verge of collapse in order to ensure the continuity of financial and economic functions critical to the bank, thus, minimizing the effect that the collapse of a certain bank has over the financial system and economy of the country as a whole.

In relation to the broad range of powers granted to the Authority for Extraordinary Intervention i.e. the Bank of Albania, the later has the right to dismiss and replace the administrators of the bank and its governing bodies, the right to appoint a special administrator, the right to transfer shares, assets and liabilities of the bank to third parties without the approval of the shareholders or creditors, and the right to cancel the existing shares and the issue of the new shares for purposes of replacing the existing shareholders.

Within this Law, the extraordinary intervention is a procedure that starts on the basis of certain expressly defined criteria, such as being the following:

  1. The bank does not fulfill or there is a risk that very soon in time will not fulfil its obligations;
  2. There is no reasonable perspective that another measure taken by the bank, the banking group or the shareholders of the bank or a supervisory measure or early intervention measure, taken by the Supervisory Authority pursuant to Law No. 9662, dated 18.12.2006 "On banks in the Republic of Albania", as amended, or under this law, can restate the bank within a reasonable period, in good financial conditions and within the supervisory indicators;
  3. the bank extraordinary intervention is necessary for the public interest. In addition, the main objectives aimed by means of the extraordinary intervention measures are the followings:

    1. Ensure the continuity of critical functions of the bank;
    2. Avoid any serious negative consequence to the stability of the financial system by preventing the spread of risks and maintaining market discipline;
    3. Protect public funds by minimizing the extraordinary public financial support;
    4. Protect depositors insured by the Deposit Insurance Agency;
    5. Protect the funds and other assets of clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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