albania

Construction Industry in Albania and Tax Administration

General overview of construction industry in Albania
Construction is one of the most dynamic sectors of the Albanian economy, with a real growth of 14% for the recently period of 2008. Construction activity is concentrated in the major urban centers. State participation in the construction sector is mainly focused on infrastructure and engineering constructions. State financing for engineering constructions constitute 85 % of total state financed construction.
Private sector construction is mainly focused on flats and buildings for families, which comprise about 82% of the total financing of private construction. The more people in the economy, the greater the demand for housing. it is households that demand housing services: typically one household per house. The size and demographic composition of households is variable and not entirely exogenous.
Construction Industry – Accounting and Tax Legislation
Invoices between the owner/builder and the subcontractors should be standard GDT invoices and are required to be raised on a monthly basis. All other suppliers’ invoices will be obtained as and when supplies are made, e.g. when cement and steel rods are delivered. Other accounting records such as the sales and purchase ledgers will be present together with a stock inventory. The records will follow the normal pattern of accounting, however, the accounts may relate to one particular construction. In the event a building contractor is involved in the more than one construction it will be necessary for the accounts to reflect the costs for each site separately so as to be able to determine the final cost in total. There is likely to be a building account, where all the costs relating to that particular construction are itemized.
Taxation of construction and repair works includes:
1. VAT
2. Profit tax and Personal Income Tax
3. Withholding tax
4. Dividend taxation
5. Local taxes and;
6. Employment taxes
One of the amendments to the Albanian Value Added Tax Act, includes the supply of buildings, except in the process of construction, is an exempted supply and also the renting of buildings is an exempted supply, except in cases of a) renting for a period of not more than two months; b) accommodation in hotels or resort buildings.
Since 2005 various interpretations were given by GTD to clarify misunderstandings with respect to land and buildings. To understand the implications of VAT and buildings, certain key definitions should be explained.
Land and Trusted Contractors List building
The person desirous of having a building constructed is the person “erecting” such building. Leasing a land or a site is an exempted supply, except the cases when the land is used for parking of transport vehicles and other means of transport. The parking of means of transport and other movable vehicles is VAT taxable. Services supply in construction, thus the process of construction and maintenance of buildings, are taxable supplies. The renting of buildings, unless they are public property, by the central or local government authorities, is taxable. Leasing of public buildings by central or local government bodies shall be considered an …