Key issues


As a significant share of the Albanian economy is deemed to be informal, for several years the possibility of a fiscal amnesty has been at the centre of political debate, and until recently this issue remained a discussion in principle only. However, the debate has gained momentum in recent months, with input from opposition representatives, economists and other interest groups.

As this is a highly sensitive issue, the government is seeking broad political consensus with the opposition. Due in part to recent allegations of political bribery made in the media, discussion has mainly focused on the scope of the amnesty, as well as the benefits and/or consequences that may result therefrom.

In a change to past discussions, this time round the government is debating specific measures. According to unofficial sources, during its latest meeting, the Council of Ministers passed a draft law. However, the text of this draft law has been circulated only unofficially and as yet no official publication is available.

Based on the unofficial draft law, the main areas of concern for the proposed amnesty are as follows:

  • the legalisation of cash income;
  • the legalisation of undeclared movable and immovable property;
  • the legalisation of income from the revaluation of certain assets; and
  • the cancellation of customs, social security and healthcare contributions and tax obligations, as well as penalties for late payment and interest.

All registered taxpayers (both physical and legal entities) and all Albanian citizens who are unregistered for tax purposes may benefit from the proposed amnesty, with the exclusion of any person who is subject to property declaration moratoriums to the High Inspectorate of Declaration and Audit of Assets under the Law on the Declaration and Audit Of Assets, Financial Obligations of Elected Persons and Certain Public Officials (9049/2003).

The benefits of the proposed amnesty may be exercised through appropriate self-declarations to be filed by December 31 2011.

Key issues

According to the unofficial draft law, companies subject to corporate tax may benefit from the amnesty as follows:

  • Companies may cancel any unpaid tax obligations registered with the tax authorities before December 31 2008;
  • Companies may cancel 50% of the unpaid tax obligations registered with the tax authorities between January 1 2009 and December 31 2009, provided that the remaining 50% of the obligation is paid within the implementation period of the law (ie, by December 31 2011); and
  • Companies may cancel 50% of the tax obligations for undeclared obligations related to tax periods up to December 31 2010, together with any related penalties and late payment interest, provided that within the implementation period of the law (ie, by December 31 2011) a self-declaration is filed and the other 50% of the tax obligation is paid or compensated for through other available tax credits.

The draft law does not specify what it means by 'tax obligations' for the purpose of these provisions; however, it can be assumed that the term includes all taxes (eg, corporate income tax, value added tax (VAT)) except customs, social insurance and healthcare contributions, as they are treated separately in the draft law.

Moreover, all companies that have disclosed in their financial statements assets which are undervalued have the possibility to re-evaluate such assets. Any difference in the valuation shall be taxed at a rate of:

  • 6% for immovable properties; and
  • 7% for machinery and equipment

The re-evaluation shall be made at market value and the asset should be appraised by independent experts.

In addition, companies may benefit from the total or partial cancellation of customs, social insurance and healthcare contributions and/or late payment interest in relation to such contributions based on schemes similar to those described above, which take into consideration the tax period(s) to which the obligation relates, as well as whether certain self-declaration and payment criteria are met within the implementation period of the draft law (ie, by December 31 2011).


The most important concern raised by the implementation of the amnesty relates to the determination of the procedures to be followed and the clarity of the instructions to be issued. Based on previous experiences with the partial waiver of penalties, potential difficulties are likely to be of a technical nature – for example:

  • the identification of the tax obligations subject to the amnesty;
  • the reconciliation of tax amounts between taxpayers and the tax authorities;
  • the timely notification of taxpayers regarding their obligations; and
  • the relevant payment deadlines.

In addition, the provisions of the draft law should be carefully evaluated as to the economic impact that they may have on businesses and the general tax system. For example, the VAT scheme will be distorted by the declaration of VAT that has not previously been declared, as the VAT on sales will remain a cost to the seller. In turn, this raises the question of whether such additional cost shall be an allowable expense for corporate income tax purposes, since the cost will be recognised in a different tax period from the original one. If not, the benefit from the partial cancellation of the original VAT obligation or related penalties might be lost, as such cancelled obligation will be collected by the tax authorities in the form of other taxes (eg, corporate income tax).

Although the proposed amnesty has generally been well received, especially by taxpayers, the question of whether it will serve its purpose (ie, to legalise business activities and the Albanian market in general) has yet to be answered. Based on the experience of the last 20 years and trends in progress, the legalisation process will require much more effort by the authorities than merely the proposed amnesty. More emphasis should be placed on the legalisation of physical persons and non-registered activities through the reinforcement of tax declaration and collection procedures, as well as monitoring.

However, as Albania will be having local elections in May 2011, the fate of this proposal will depend on the future political situation.

For further information on this topic please contact Brunila Leskaj at Hoxha Memi & Hoxha by telephone (+355 4 2 27 4558), fax (+355 4 2 244 047) or email (