Businesses are being penalized, they are demanding changes to the categorization of local taxes

Various businesses raise concerns about incorrect calculation of local tax liability for 2025, not taking into account the turnover achieved in 2024.

A restaurant entity with a turnover of 7.6 million lek in 2024 has been treated as a business with a turnover of over 8 million lek for 2025, being categorized in a higher tax bracket.

As a result, this entity has been assessed a liability of 112 thousand lek to be paid for 2025 for the temporary educational infrastructure tax and the cleaning fee of 22.8 thousand lek, which is the liability for businesses in the turnover range from 2 million to 8 million lek per year.

According to Law No. 9632, dated 30.10.2006 “On the local tax system”, as amended, the categorization of businesses for tax purposes is based on the turnover achieved in the previous year.

This means that for 2025, the turnover of 2024 must be taken into account to determine the relevant tax bracket.

Referring to the decision of the Municipal Council "On the approval of the system of local taxes and fees in the city of Tirana" for the calculation of the temporary educational infrastructure tax for the business category of production units (which also includes restaurant business activity) with annual turnover, in the range of 0 to 2 million lek is 8,000 lek per year.

For businesses with a turnover of 2 to 8 million lek, the tax liability is 9,000 lek per year.

For businesses with a turnover of over 8 million lek, the tax is 27,000 lek per year.

The cleaning fee for retail businesses, category "Restaurant, fast food, etc. similar" with annual turnover in the range of 0 to 2 million lek, the tax is 5,750 lek per year. For businesses with turnover from 2 to 8 million lek, the tax is 13,800 lek per year. For businesses with turnover over 8 million lek, the tax is 85,100 lek per year.

The obligation to pay the first installment of local taxes, including the cleaning tax, the sign tax, the educational infrastructure tax, the land tax, the agricultural land tax and the building tax is due by April 20 (where 50% of the value is paid), while the deadline for paying 50% of the remaining value of the obligation is June 30.

Accountants from one of the accounting studios in Tirana raise concerns that there are many businesses that in one year of operating their activity have spent over 8 million lekë and pay local taxes as a large business, given that they had the responsibility of paying profit tax in 2023.

Then, for 2024, they were under 8 million lek, but the taxes did not change the tax liability and the municipality continued to charge them since they were registered with profit tax and not with simplified profit tax.

The General Directorate of Local Taxes and Tariffs confirms to Monitor that the categorization is done based on the turnover achieved in the previous year and this information comes from the General Directorate of Taxes.

According to them, for the tax year 2024, tax responsibilities apply according to Law No. 8438 dated 28.12.1998 "On Income Tax" and this information is used to determine the value of the local liability of taxpayers for 2025. Also, according to them, for any change that the subject undergoes, it must self-declare based on Law 9920 "On Tax Procedures".

"Referring to the specific regulation set out in Decision number 158, dated 26.12.2019 of the Tirana Municipal Council "On the approval of the system of local taxes and fees in the city of Tirana", as amended, regarding the calculation of local obligations, we inform you that the tax liability of the entity applies.

This information comes to the General Directorate of Local Taxes and Tariffs from the General Directorate of Taxes, according to a periodic communication between the two institutions based on the relevant cooperation agreement.

Based on Law No. 9632, dated 30.10.2006 "On the local tax system", as amended, the categorization is made based on the previous tax year. Consequently, for the determination of the 2025 obligations, the information collected for the 2024 tax year will be used.

We hereby inform you that, referring to the transitional provisions of Law No. 29/2023 "On Income Tax", as amended, specifically letter "e" of point 1 of Article 69, which stipulates that for the tax year 2024, tax liabilities will apply according to Law No. 8438, dated 28.12.1998 "On Income Tax", as amended, consequently leaving in force the tax liability for this year as well, which as explained above, is used in determining the value of the local liability of taxpayers for the year 2025.

In conclusion, we clarify that the legal-tax concepts newly introduced by Law No. 29/2023 "On Income Tax", as amended, will be valid starting from the tax year 2025, which will serve for the calculation of local obligations for 2026."

Even accounting experts claim that there are numerous cases where coordination is lacking between regional tax directorates and local tax offices to reflect cases of turnover changes, which must be corrected by entities to tax inspectors./MONITOR