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Tailor-made laws in the Western Balkans and Turkey

Amending the law on the VAT threshold  - Tailor-made laws in the Western Balkans and Turkey

Amending the law on the VAT threshold 

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Introduction

One of the measures that the government claimed would help to fight high levels of grey economy activity was the lowering of the VAT threshold. The new law forced small businesses to enter the VAT scheme. By closing the gap in the trade chain and forcing small businesses to ask big businesses to issue invoices, it was expected that there would be an increase in VAT declarations from big businesses (see here).

Country
Albania
Sector
Public finance
Type of Law
Capturing a market, an industry or public resources

Description of the law

One of the measures that the government claimed would help to fight high levels of grey economy activity was the lowering of the VAT threshold. The new law forced small businesses to enter the VAT scheme. By closing the gap in the trade chain and forcing small businesses to ask big businesses to issue invoices, it was expected that there would be an increase in VAT declarations from big businesses (see here).

The change was enabled by Article 4 of Law No. 107/ 2017, which stipulates that the minimal threshold for VAT registration is regulated by decision of the Council of Ministers. In accordance with Article 4, Article 2 of the Council of Ministers' Decision No. 652 of 10 November 2017 lowered the threshold for VAT registration for companies to an annual turnover of ALL2 million (approximately €16,000). The vast majority of businesses in the category are small retail firms, such as grocery shops.

The move was criticised as counterproductive to the achievement of the stated objective. Some investigative media reports also denounced it as a tailor-made law that served the interests of a few supermarket chains (such as the Big Market chain, which is owned by an MP in the ruling Socialist Party).