Albania – VAT Requirements for Foreign Digital Services Providers

The Albanian General Directorate of Taxes released an official notice reminding foreign companies that provide digital services to Albanian consumers of their VAT obligations. The notification aims to increase awareness among foreign digital service providers, promote voluntary compliance with VAT rules and regulations, and highlight equal treatment for all taxable persons and fair market competition.

Key VAT Requirements

Under the Law on tax procedure and VAT Law, foreign companies that provide digital services to Albanian non-taxable persons must appoint a tax representative in Albania, register for VAT, and apply a 20% standard VAT rate on all their supplies. Additionally, the in-scope companies must accurately and timely report and pay any due VAT through the appointed tax representative.

If digital services are provided to a VAT-registered taxable person, the reverse-charge mechanism applies, where the buyer is responsible for paying VAT. Consequently, in these B2B transactions, foreign providers are not liable for VAT through their tax representatives.

The official notice from the General Directorate of Taxes also lists digital services, including telecommunication, radio and television, website supply, web-hosting, distance maintenance of programmes and equipment, software, supply of music, films, and games, and remote teaching services.

Those who fail to meet these requirements will be subject to administrative and legal actions from the Tax Authority, such as tax audits, which could result in severe penalties, fines, and interest.

Conclusion

The initiative to encourage voluntary VAT compliance by foreign digital service providers is part of the government's Medium-Term Revenue Strategy 2024–2027 and Tax Authorities 2024-2028 Strategy. Following the official notification, all foreign digital companies should review their internal procedures and determine whether they fulfill VAT compliance requirements.

Additionally, any foreign digital company that plans to enter the Albanian market should carefully examine VAT rules and regulations. One of the first steps to consider in the compliance process is to find and appoint a tax representative.

Source: General Directorate of Taxes