Regardless of where you’re based, you have to comply with Albanian VAT rules if you have clients in Albania. VAT, or Value Added Tax, is a consumption tax levied on the purchase of almost all goods and services. While you might already know that, you might be unaware of the specific rules surrounding your services, which you should follow if you want to stay VAT compliant in Albania as a freelancer.
If you are a freelancer in Albania and are confused by VAT and the rules that apply to your services, you're in the right place. Xolo provides products that will help you automate boring VAT aspects. And this guide, we'll give you a detailed picture of VAT rates and obligations you have when running your freelance business in Albania.
Who is Required to Register for VAT in Albania?
Wondering if you really need to spend your valuable time registering for VAT? Maybe not. Keep reading!
You have to register for VAT if you, as a freelancer:
- Carry out any form of economic activity within the Republic of Albania.
- Have an annual turnover that exceeds 10 million Albanian leks(ALL) - this is the VAT registration threshold.
If your annual turnover is between 5 million ALL and 10 million ALL, you are not required to register for VAT. However, you have the liberty to register for it voluntarily. If your annual turnover is less than 5 million ALL, you will fall outside the VAT system and do not have the option to register for VAT.
You must ensure that you register for VAT within 15 days from the date you have exceeded the minimum threshold.
If you are required to register for VAT, you can follow these simple steps to register yourself:
- Head to the Albanian Government e-filing Tax portal
- Register yourself with the following necessary details: your name, personal phone number, identity card number, email, etc.
- Post-registration, you will receive a VAT registration number that is required for all your tax-related activities.
Albanian VAT Rate for Freelancers
Standard VAT rate in Albania for freelancers is 20%
But how much VAT are you required to pay? What are the different VAT rates in Albania? There are three different VAT rates in Albania, and freelancers must charge the amount that applies to their products and services.
- Standard VAT Rate – Albania follows a standard VAT rate of 20%, which is applied as a percentage of the taxable value.
- Reduced VAT Rate – Certain goods and services follow a reduced VAT rate of 6%; these include the supply of books, advertising services by audiovisual media, ‘Agrotourism’ certified structures providing accommodation, and accommodation services.
- Zero-rated Goods & Services – Albanian Tax authorities charge a 0% VAT rate for various goods and services; these are services related to maritime activities, international transport, export of goods, gold supply to Central Bank of Albania, and any supply under diplomatic arrangements. Although there are no charges on zero rates, you should record sales of goods and services and create a report based on your returns.
The appropriate VAT rate is expected to be charged on every sale made to a resident of Albania. Apart from this, any discount that you give your clients as a freelancer is excluded from the taxable value. For instance, if you provide a service worth 3,000 ALL to your client but charge them only 2,750 ALL, the taxable value will remain 3,000 ALL.
VAT Calculation in Albania for Freelancers
Now that you are well informed about the different rates, here’s an insight into how VAT is calculated in Albania:
VAT charged = VAT charged on the sale of goods – VAT paid on purchasing any material related to the goods.
If the VAT paid is more than the VAT charged to the buyer, the difference acts as VAT credit and can be carried forward to the following months. In contrast, if the VAT charged is more than the VAT paid, the difference is to be paid to the state of Albania.
How to Register for VAT in Albania as a Freelancer
The Albanian government has adopted a system known as the Fiscalization System to carry out all its VAT and other tax-related procedures. After registering, you will be given a unique identification number at the National Business Center.
- You are then required to issue an electronic VAT invoice for the goods or services you provide to your client.
- The Ministry of Finance is required to approve the VAT tax invoice.
- If the value of your services is less than 40,000 ALL, you have the option of issuing a simplified invoice.
- You are required to register all the sales and purchases you carry out during the taxable period of one month, every month.
- The government’s tax information system will generate your monthly purchase and sales ledgers and the monthly VAT returns in your account in the central invoicing platform based on the information you provide.
- You are required to review these ledgers, and you have the option of adding any other information needed before the 10th of the following month.
- You also need to submit the VAT declaration, which includes:
- Information needed to calculate your claimable VAT.
- The VAT value that is reducible.
- Value of the supplies that are exempted from VAT.
- The declaration has to be submitted before the 14th of the following month and has to be approved by the Ministry of Finance.
VAT Refund in Albania for Freelancers
If your VAT credit has been carried forward for more than three continuous months and totals to 400,000 ALL or more, you have the right to claim a VAT refund by applying to the Department of VAT at the General Directorate of Taxes. You can claim the VAT refund online as well as offline.
You will receive the refund within 60 days from the date applied, through the Treasury system, per the rules laid down by the Ministry of Finance.
VAT for Expat Freelancers in Albania
If you are a non-resident, a fiscal code is used to identify and register you as a non-resident taxpayer in Albania. This fiscal code acts as the Personal Identification Number mentioned on your Identification Card.
Albania will be considered the place of supply of your service if the person who has received your service has a business or a permanent establishment in Albania. To complete your VAT payment, you must appoint a tax representative within the Republic of Albania.
If you are a non-resident and a non-taxable person, Albania will be considered the place of supply only if your supplier has a business or a permanent establishment in Albania.
How to Automate VAT Activities as a Freelancer in Albania with Xolo
Learning and applying all the Albanian VAT guidelines into your freelance business can be challenging confusing, especially if you’re flying solo and manage every aspect of your administration at once. Luckily, at Xolo, we offer highly-automated management solutions that can handle all VAT tasks and help you with freelancer invoicing, allowing you to focus on activities that actually make you money.
- Xolo Go is a digital invoicing tool and business partner that allow you to send EU VAT-compliant invoices to clients with VAT being calculated and added automatically. You'll also have a business bank account, a business dashboard and a way to painlessly upload your expenses and get reimbursed.
- Xolo Leap will help you register and set up your dream EU freelance business secured by Estonian e-Residency and you'll avoid complexities of running a traditional one. Run a highly-automated online company as a freelancer with us without any concerns with VAT or any other compliance aspect!
