Government decides to reduce tax on dividends and income tax

Government decides to reduce tax on dividends and income tax
Tax on dividends will go down from 15% to 8% and there will not be as many employees who will be taxed 13% on their incomes. These are the two key points of next year’s government tax policy. This draft has been prepared by experts of the ministry of Finance and according to this draft, tax that will be paid on dividends will be reduced, while the number of employees who will pay 13% of income tax in the country will increase. “All residents of the Republic of Albania, central and local government institutions, non-profit organizations and every other organization are obliged to pay 8% on dividends”, the draft states. Meanwhile, according to the draft “the 8% tax on dividend will also apply on undistributed profits made during 2017 and before, on condition that these profits are not capitalized”. Experts argue that “such measure will reduce taxes for investors, promoting a faster allocation of capital in the economy or a growth in consumption”, adding that the 15% tax on dividend and 15% corporation tax generates a 27.75% corporation tax for investors. After reducing tax on dividend to 8%, the tax rate for investors goes down to 21.8%. On the other hand, according to the new draft, there will also be a reduction of income tax for employees on high salaries. According to the government, people earning up to 150.000 lek a month will be taxed 13%. This means that 15.400 employees in the country will no longer have to pay a 23% income tax; instead they will only pay 13%.

 

 

 

DIVIDEND

 

It will remain 15% for:

  1. interests and similar payments;
  2. remuneration for copyrights and intellectual property;
  3. remuneration for technical services, management services, consultancy services, financial services and security services;
  4. remuneration for being a member of a board of directors;
  5. remuneration for the construction, installation or supervisory works;
  6. rents;
  7. remuneration from acting shows, musical shows or sport shows, including payments made to people who employ artists or sportsmen;
  8. individual incomes from gambling and casinos

Changes/Proceeds from the sale of assets or rights should be taxed in Albania

Revenues which are generated in Albania must be taxed in Albania. This is another concept introduced by experts of the ministry of Finance as part of next year government tax policy. According to them, the purpose of this is to prevent profits from being moved in tax havens or in countries which have low taxes. In this context, the proposed changes according to which, revenues generated by the direct or indirect sale of assets/rights from their owners, regardless of the complexity of the property structure and which are directly linked to the assets/rights generated in the territory of the Republic of Albania, should be taxed in Albania. Changes of direct ownership within the territory of the country will be taxed the same way.

PROPOSALS

Other changes in VAT for public transport and excise on tobacco

With next year’s government tax policy, experts have also proposed the reduction of Value Added Tax on public transport for vehicles which have a capacity of more than 10 people. Experts are also proposing a 6% reduction on adverts broadcasted by TV networks. The package also contains other changes in the excise on tobacco, which proposes an increase to 6 thousand lek/kg as opposed to 4400 lek/kg.  Meanwhile, as far as customs charges are concerned, authorities are proposing a single charge of 10% to be paid by all refrigerator trucks in order to guarantee honest competition for all importers who operate in this field. Another important proposal relates to the expansion of the tax base.

 

 

 

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