Lack of updates in the categorization of businesses for local taxes, experts call for legal unification

Following concerns raised by businesses about inaccuracies in the calculation of local taxes for 2025 due to the failure to update the realized turnover, experts claim that the problems are created by the lack of coordination between regional and local tax directorates.

Legal auditor and tax consultant Julian Saraçi said that registrations in the Central Tax Registry and tax declarations in the central tax system are simultaneous for all other public institutions, however, they do not automatically translate into updating local tax obligations.

He brings to attention numerous cases where changes in turnover reported by businesses to tax authorities have not been reflected in the calculation of local taxes or cases of new registrations.

 "The lack of coordination between municipalities and the central administration, despite the existing bilateral agreements they have, remains worrying. We have our clients who have been opening their businesses for months, have also sent a notification for registration in local taxes (even though they are not required to do so) and still do not have the relevant invoice to pay local taxes, even though the deadline is 30 days after opening the business."

Or we have cases where our clients have changed their category due to increased turnover and this was not reflected in the system in time and there was no invoice for payment generated, but it appeared after 3 years, along with fines and late payment interest, even though the willingness and correctness to pay was there at all times.

To solve these problems, he recommends that initially it is necessary to unify tax legislation for local taxes with the law "On Income Tax".

 "The division of taxpayers according to turnover (0-2-8 million lek) conflicts with the current limit of 14 million lek set in the organic revenue law. This discrepancy encourages avoidance of formalization and unfairly penalizes businesses for small differences in turnover."

Meanwhile, according to him, businesses should request invoices on time, follow category changes even though it is not their obligation to notify, to avoid unnecessary penalties.

Businesses, uncertainty with the calculation of local taxes for 2025: Update of 2024 turnover missing

The failure to reflect the real turnover of 2024 created anomalies in the local tax obligations of several businesses in Tirana. A specific case is that of a restaurant, which for 2024 had a turnover of 7.6 million lek, while in 2023 it had realized 8.3 million lek. Although the entity reported the new turnover to the Tirana Regional Tax Directorate, the obligation for 2025 was calculated on the old turnover, classifying it as a large business.

According to municipal council decisions, businesses are categorized into several bands based on annual turnover: Small business: 0–2 million lek and over 2–8 million lek; Large business: over 8 million lek. The level of local taxes, such as the cleaning fee and the temporary educational infrastructure tax, varies according to these categories.

Accounting firms in Tirana note that many businesses that exceed 8 million lek in a year, pay as large businesses even when they fall below this threshold the following year. The reason is that the registration with profit tax is not automatically changed in the system, and the municipality continues to charge them as such.

On the other hand, the General Directorate of Local Taxes and Tariffs explained to Monitor that the categorization of entities is based on the turnover achieved in the previous year, according to data received from the General Directorate of Taxes. For the tax year 2024, the tax classification is based on Law No. 8438, dated 28.12.1998 "On Income Tax", and these data are used to calculate the local obligation for 2025. / MONITOR