The import tax formerly charged to importing car owners will be replaced by another annual tax which will be paid periodically when these vehicles undergo their annual technical inspections
TIRANA, July 5 – A new draft law lifting customs duties for the import of cars and taxes for their sales within Albania is expected to revive the domestic market which has been in stagnation since mid-2010 following the approval of a law significantly increasing taxes on the sale of used cars. The draft law prepared by the Finance Ministry foresees that cars entering Albania for the first time will pay only the 20 percent Value Added Tax (VAT) when cleared through customs; but the import tax formerly required will be replaced by another annual tax which will be paid periodically when these vehicles undergo their annual technical inspections. The new payment includes carbon tax and other fees which will be calculated based on the cars’ characteristics (age, condition, etc.) and the kind of fuel they use. Changes will also affect the law on the sale of used cars.
The new draft which has not been officially published yet is expected to be approved by Parliament this month along with budget cuts and wage and pension increases.
Earlier this year, Prime Minister Sali Berisha reiterated his stance on the need to review the tax on the sale of used cars, saying that the current tax had blocked the market.
Since mid-2010, when a new law which increased taxes on the sale of used cars took effect, the sale of cars under legal contracts has declined– as car owners began resorting to authorization or donation practices to sell their cars. The Ministry of Finance’s data show that tax on sold preowned cars dropped by 7.1 percent to 2.6 billion lek in 2010. The situation continued worsening even during the beginning of this year when revenues dropping by 22.2 percent year-on-year during the first four months of this year, stated the Finance Ministry.
The current tax varies depending on the car’s horsepower, years of usage from the moment the customs duty has been paid, and the kind of fuel it uses. It is calculated by multiplying the car’s number of cylinders, with a fixed coefficient of 0.5 for each year of use and a fixed tariff of 25 Lek for diesel and 20 lek for petrol. In this way, the owner of a car with an engine of 2000 cc imported in 1998 will have to pay a customs duty of 300,000 lek (3,000 USD) if selling the car, but only 50,000 lek (500 USD) if the car has had its customs import tax paid in 2008. These changes to the national tax system were aimed at discouraging the use of old cars in Albania and meeting the Stabilization and Association Agreement ‘s (SAA) commitment to removing fixed-rate taxes for imported used cars from EU member countries.
