Tax Administration clarifies interested taxpayers that for inputs and agricultural machines imported or purchased on the spot, which on 31st December 2018 result in goods stock and stock has been paid VAT on purchase, this amount will be accounted for in the expense account and will be recognized as a deductible expense for the fiscal effect after the deductible VAT adjustment is made.
The taxpayer does not enjoy this right to lend VAT if these purchases serve VAT-exempt supplies.
Referring to Article 69 “VAT Reduction”, letter c) of the Law No.92 / 2014, “On value added tax in the Republic of Albania”, as amended, and Article 53, point 3, letter b) of the Instruction Nr. 6, dated 30.01.2015 “On Value Added Tax in the Republic of Albania”, as amended, the taxable person has the right to deduct from the VAT calculated for taxable transactions, VAT paid or to be paid, was paid on import for imported goods, in order to carry out taxable transactions with the right deduction.
According to the definition in Article 51 of the aforementioned law, supply of inputs and agricultural machines is a supply exempt from VAT. For these supplies, according to the legal changes, there has been a switch from a taxable supply with a right of deduction of VAT to an exempt supply without VAT deduction. For this, taxpayers who carry out these supplies must carry out the adjustment of the input VAT.
It is also considered a supply against payment when a taxable person uses a commodity in an excluded sector of activity without a right to deduction, where that commodity was entitled to full or partial deduction of VAT at the time of purchase or its use. For the correct conduct of the procedure, where there is a change in the use of a commodity within the activity of the taxable person, from a taxable activity with the right of deduction of VAT, to an unjustly excluded activity VAT deduction, the deductible VAT adjustment must be made.
In point 3.6 of the Instruction no. 5, dated 30.01.2006 “On Income Tax” amended, it is determined that the deductible VAT is not accounted for in the expense account but reduces the VAT calculated on the sale, being accounted for in the VAT account. Exceptionally cases where VAT on purchases is not credited under the Law “On VAT” and the instruction for its implementation, in such cases this amount of VAT will be accounted for in the expense account and will be recognized as a deductible expense fiscal effect.
News Source: GDT