TIRANA, June 27 – Albania’s government has made public in the latest Official Gazette the tables on declaration of personal income, which oblige everyone working or making a profit to declare their annual earnings by April 30 of each year. According to the Ministry of Finance, individual income statements will be made according to forms approved by the Ministry, and it comes at a time of fiscal amnesty, which targets a total formalization of the economy. The Official Gazette publishes various forms to be included in the declaration process, starting from the form of payment of individual income tax, individual annual statement of income for foreign individuals, and individual annual statement of income. The process of disclosure in Albania will be implemented for the first time according to predetermined limits set by law. According to the latter, the deadline for disclosure is April 30, following the tax period for which declaration is made. “The first obligation of the declaration is April 30 for the fiscal year 2011,” reads the instruction of the Ministry of Finance. The declaration must be submitted to the Regional Tax Department.
An income statement will have to come from all citizens and residents who are employed or have income from other sources. This does not exclude foreigners who have income in the territory of Albania. “The self-employed residents, domestic or foreign, who have income from the operation of small business, along with statement of business practice which they must submit by March 31 next year, should declare the profit after tax (benefit in the form of personal income) in the individual annual statement of income, just like other individuals, no later than April 30 of the year following the tax period for which the declaration is made,” stated the Ministry. The declaration may also be filed by persons who have no legal obligation to do so, but who want to benefit from deductible expenses.
What are considered deductible expenses and how they are calculated? The government, when it approved the personal statement of income format, defined the category of obligations to be recognized as an expense deductible for citizens. Thus, this category includes expenses for social security and health, and voluntary contributions to pensions, bank interest in credit for education, for themselves or for children and dependents under their custody, deductible expenses for health treatment, for themselves or for children and dependents under their custody.
In a second decision, the government has determined that the maximum deductible expense for health treatment is 8,532 leks, while for a family costs should not exceed 32,000 in total value. At the end of the year, if it turns out that a citizen has paid more tax than the obligation resulting from the disclosure, then the difference comes in the form of a tax return. Referring to the tables and the government’s decision, a family consisting of parents and two children will benefit from a deductible of up to 8,532 leks for health treatments if the annual income of each of the parents does not exceed 800,000 leks. So if the head of the household is the man, and he has gained a total annual individual income of 700,000 leks, and the wife has made a total annual individual income of 600,000 leks, the obligation to submit the annual statement of income as the head of the household falls on the man, and the wife files a separate statement in the model adopted by completing the respective sections of individual annual statement of income. Since the household head for the tax period has made an annual individual income of 700,000 leks (i.e. less than the limit of 800,000 leks), he has the right to benefit from the recognition of expenses deductible in the value of 8,532 leks. For children, since they have no income, (in the example), they must be declared in the statement of the head of the family and his wife, by checking the relevant boxes in section 17, “Dependent persons” of section A of the annual individual statement income. In case of completion of the declaration by the individual rather than the head of the family, annual costs for treatment, for the part not covered by compulsory health insurance, are also 8,532 leks. In case of completion of the declaration by the head of the family, according to the law on income tax, annual costs for treatment, for themselves or for children and for other dependents, for the part not covered by compulsory health insurance, are 8,532 leks for each member of family, but no more than 32,000 leks in total for the family. All individual income that results from salary or profit from small business, dividend, or gross income from rental and sale of real estate, interest, net profit from investment in securities or immovable property, the amounts received in a lottery or other games of chance, income from intellectual property, licenses, capital gain from donation, income received abroad or any kind of other income must be declared.
Experts remain skeptical
Experts are skeptical as to whether or not the government initiative will be implemented considering the lack of capacities it has to handle around 1 million individuals who would complete the tax declarations. Xhavit Curri, a tax expert, tells reporters that by 2012 individuals will have to fill out their income and expenditure declarations for 2011, but very few people have been informed of this obligation and no awareness campaign has been launched. “Starting from this year, taxpayers will have to save their receipts, but no one has told them about this, not to mention the fact that the majority of points of sales still do not have a cash register and do not issue receipts.” According to financial experts, it will be difficult for Albanians to adjust to the system and for the government to implement the complicated deductible and refund system it has approved. Self-employed people with an annual turnover of up 2 million lek, and individuals with personal income of up to 200,000 lek will be excluded from the declaration form.
