Following the trailblazing efforts by countries such as Italy, Hungary and Spain, this past year has seen an increase in European countries announcing digital tax control reforms. Earlier this year, Albania joined the ranks of France and Poland by announcing the introduction of a continuous transaction controls (CTC) system, called fiscalization. This scheme requires clearance of invoices by the tax authority prior to their issuance.
Fiscalization in a nutshell
Taxpayers must use certified software to transmit e-invoices to a centralized invoicing platform in real-time. They can either exchange invoices electronically or in paper form.
There are two types of certified software, so-called fiscalization systems, which will be used.
- For cash transactions (e.g. point-of-sale), invoices should be issued using approved fiscal devices with printing capabilities.
- For non-cash transactions, invoices should be issued through an approved software solution which is capable of performing certain functions, including digital signing.
The e-invoice process
The supplier creates the invoice containing the defined mandatory content requirements and a signature based on a certificate issued by the Albanian National Agency for Information Society (NAIS). The tax authority, after clearing the invoice, generates a unique identifying number (NIVF) before returning the invoice to the supplier. The supplier adds the NIVF to the invoice and then issues it to the buyer.
Like, for example, the tax control regime introduced in India this year, the Albanian framework doesn’t regulate how invoices are exchanged between the parties, which can be electronic or in paper form.
The fiscalization procedure also covers supporting documents, such as transport documents. In this case, a QR code of the accompanying invoice should be printed and sent with the goods.
Data from the invoices sent to the government’s central platform will, on a monthly basis, automatically populate the taxpayer’s VAT ledgers. These are maintained on the central platform. It will also populate the monthly VAT returns.
The fiscalization scheme introduces reporting requirements for the Albanian payment services providers. They should record and report, on a daily basis, payments of e-invoices in respect to non-cash transactions.
The CTC system applies to all taxpayers subject to VAT and income tax in Albania, with minor exceptions. It will be rolled-out in a phased manner starting from 1 September 2020, as follows:
From September 2020: All cash transactions by taxpayers subject to VAT and corporate income tax (CIT) with an annual turnover exceeding 8 million lek.
From January 2021:
- Cash transactions by taxpayers subject to VAT and simplified CIT with an annual turnover between 2 million and 8 million lek
- Cash transactions by taxpayers subject to simplified CIT with an annual turnover not exceeding 2 million lek
- Non-cash B2G transactions.
From July 2021: non-cash B2B transactions.
The fiscalization law is in line with the EU VAT Directive and Directive 2014/55 on e-invoicing in public procurement, and consequently brings the Albanian law in line with the EU approach to e-invoicing. While additional legislation is needed before the fiscalization law can be implemented, Albania has proven to be serious about implementing clearance tax controls to help combat VAT fraud.
Its efforts to introduce a robust CTC system have not only continued during the turbulence and economic challenges of 2020, but, perhaps more importantly, significant progress has been made. In April, the first Ministerial Guidance was published, which regulates the requirements for the software solutions that will be used. All in all, this is an impressive development in the fight against fraud for this small country.