Dear Reader,

I have the pleasure of sending you our June 2008 publication, Tax Newsletter, to update you on the most recent and expected changes to tax-related legislation in Albania. I also include contact details of our tax experts who will be pleased to offer you personalised advice.

For more information, please visit our website www.pwc.com/al.

Yours faithfully,

Laura Qorlaze, CPA (USA)Country Director

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Tax NewsletterKeeping clients/professionals up-to-date*

Introduction About UsTax Highlights

Issue No.2June 2008

1. Starting from 16 May 2008, services performed in connection with immovable properties will be considered as being carried out within the country where the immovable property is located, i.e. Albania, thus being subject to VAT.

2. A reverse charge mechanism has been introduced for services supplied from abroad, regardless of the nature of the service or the amounts involved, whereby the Albanian entity should issue a VAT invoice to itself and record the invoice as sale and as purchase.

3. Starting from 25 June 2008, for purposes of taxation of personal income individuals willbeequippedwithataxidentificationnumber. 4. Taxpayers are no longer required to submit VAT sale and purchase books to the tax authorities before the 14th of each month.

5. NewsimplifiedproceduresregardingVATreimbursementhavebeenintroduced.

6. Starting from 25 June 2008,thetaxpayerhastherighttoresubmitamodified/ corrected tax return within a period of 12 months from the date of the initial tax return and no penalty will be imposed.

7. Interest equal to 120% of the interest rate published by the Central Bank is payable by the taxpayer on unpaid tax liabilities.

For more information please refer to the relevant sections below:

Introduction About UsTax Highlights

Home PrintTax Newsletter

Corporate taxation

Indirect taxation

Individual taxation

Other taxes

Tax Procedures

Introduction About UsTax Highlights

Home PrintTax Newsletter

Corporate taxation

Indirect taxation

Individual taxation

Other taxes

Tax Procedures

Corporate taxation

No developments to be noted.

Introduction About UsTax Highlights

Home PrintTax Newsletter

Corporate taxation

Indirect taxation

Individual taxation

Other taxes

Tax Procedures

Indirect taxation

Value Added Tax (VAT)

BasedonInstruction17publishedintheOfficialGazette64,May2008,thefollowing changes enter into force starting from 16 May 2008.

Changes in status: The taxpayer is required to inform the National Registration Centre (NRC) of any changes related to its status within 30 days from the date the change occurs.

Services related to immovable properties: Services performed in connection with immovable properties will be considered as being carried out within the country where the immovable property is located.

Therefore, services such as, but not limited to, the following will be considered as being performed in Albania, and, therefore, will be subject to VAT:a. Designb. Construction, installation, reconstruction, and maintenancec. Supervision, any type of expertise,d. Leasing

Reverse charge mechanism for services supplied from abroad: When a foreign entity, for whom Albania is not the place where it engages in taxable activities (i.e. a non registered foreign entity) provides services to an Albanian registered entity, then the Albanian entity should issue a VAT invoice to itself and record it as sale and as purchase, thus applying the reverse charge mechanism.

Exempt supplies: Servicesprovidedbynon-profitorganisationsareVAT-exempt if the following criteria are met:

a. Services are offered for the purpose of spiritual welfare, andb. Thenon-profitorganisationchargesreducedprices

However, in cases where the above criteria are not met, and if the non-profitorganisation’sannualturnoverexceeds8millionLek(approx.65,000Euro), the organisation is required to register for VAT purposes.

The supply of educational services is no longer exempt from VAT.

Introduction About UsTax Highlights

Home PrintTax Newsletter

Corporate taxation

Indirect taxation

Individual taxation

Other taxes

Tax Procedures

Indirect taxation

Value Added Tax (cont)

Tax filing: Taxpayers are no longer required to submit VAT sale and purchase books to the tax authorities before the 14th of each month.

In addition, VIP taxpayers and taxpayers registered with the Tirana Tax Office (excludingsmallbusinesses)candownload theVAT returns fromtheofficialwebsiteoftheGeneralTaxDirectorate(GTD).

VAT deduction on fuel purchases: As introduced in the past, taxpayers have the right to deduct VAT if the fuel is used solely for technological purposes. However, with the new change in the law, the responsibility to provide evidence to the tax authorities that the fuel is used only for technological purposes rests with the taxpayer (and is not subject to pre approvalfromtheGTDasinthepast).

VAT reimbursement: The new instruction introduces a few changes as far as VAT reimbursement is concerned. These changes consist of the following:

For amounts up to 450,000 Lek the taxpayer is reimbursed without being subjected to a tax audit, provided that:a. The taxpayer has previously submitted a reimbursement request, andb. The taxpayer has been audited at least once during the last 3 years

For amounts between 450,000 and 800,000 Lek the taxpayer is reimbursed without being subjected to a tax audit, provided that:a. The taxpayer has previously submitted a reimbursement request, andb. The taxpayer has been audited during the last 12 months.

For amounts between 800,000 and 2,000,000 Lek the taxpayer is reimbursed without being subjected to a tax audit, provided that:a. The taxpayer has previously submitted a reimbursement request andb. The taxpayer has been audited during the last six months.

In cases where:a. A reimbursement request is for an amount higher than 2,000,000 Lek, orb. Thereimbursementrequestismadeforthefirsttime then the tax authorities are required to verify the reimbursement request and approve it within 30 days from the date of request.

Introduction About UsTax Highlights

Home PrintTax Newsletter

Corporate taxation

Indirect taxation

Individual taxation

Other taxes

Tax Procedures

Individual taxation

No developments to be noted.

Introduction About UsTax Highlights

Home PrintTax Newsletter

Corporate taxation

Indirect taxation

Individual taxation

Other taxes

Tax Procedures

Other taxes

No developments to be noted.

Introduction About UsTax Highlights

Home PrintTax Newsletter

Corporate taxation

Indirect taxation

Individual taxation

Other taxes

Tax Procedures

Tax Procedures

BasedonthenewLaw9920publishedintheOfficialGazette85,June2008,the following changes enter into force starting from 25 June 2008.

Tax identification number for individuals: For the purpose of filing taxreturns and making tax payments, individuals are required to obtain a tax identificationnumber.

Interpretation of tax provisions:TheGTDisobligedtoprovideinterpretation,upon request from the taxpayer, on tax matters related to the specificcircumstances of the taxpayer.

Changes in status: The taxpayer is required to inform the tax office onany changes related to its status within 15 days from the date the change occurs.

Non-operating (passive) taxpayers: The tax authorities shall categorise the taxpayer as a non-operating entity if for 12 consecutive months:

a. The taxpayer does not perform any economic activitiesb. The taxpayer does not submit any tax returnsc. The taxpayer declares the termination of its economic activities

The transfer of the taxpayer to the “non-operating” category does not remove the existing tax liabilities of the taxpayer that arose during the period of its activity.

The obligation for the use of cash registers (cash machines): The taxpayers engaged in activities where payments for goods and services sold are not made via banks, are required to use cash registers (cash machines). TheCouncilofMinistersapproves the technicalspecificationsof thecashregisters (cashmachines), whereas theMinistry of Finance approves theprocedures and documentation for the use of cash registers.

Corrections of tax returns: Thetaxpayerhastherighttoresubmitamodified/corrected tax return within a period of 12 months from the date of the initial taxreturn.Thesubmissionofthemodified/correctedtaxreturnsshallnotbesubject to penalties. However, the taxpayer must pay late-payment interest on the unpaid tax liability.

Tax return submission deadlines: The taxpayer can postpone the submission of the tax returns up to 30 days after the deadline stipulated by law.This is,however,subjecttoadvancenotificationoftheTaxAuthoritieson the potential delay. This provision is not applicable as far as tax payments are concerned.

Late payment interest: Interest equal to 120% of the interest rate published by the Central Bank is payable by the taxpayer on unpaid tax liabilities.

Introduction About UsTax Highlights

Home PrintTax Newsletter

Corporate taxation

Indirect taxation

Individual taxation

Other taxes

Tax Procedures

Tax Procedures (cont)

Bankruptcy procedures: Thetaxofficerequeststhecourttostartbankruptcyprocedures for a taxpayer when:a. Theentityhasbeenclassifiedas‘non-operating’fortwoyearsb. The tax liability of the taxpayer cannot be collectedc. There is a negative equity for at least three consecutive years d. There is no trading activity or there are unsettled liabilities for at least two years

Tax inspection procedures: The new law introduces a few changes with regardtotaxinspectionproceduresandthetimelineoffilinganobjectiontothe tax inspection report. The following graphical presentation depicts the new procedures and the related timetable:

01/01/2008 18/03/2008

01/02/2008 01/03/2008

07/01/2008Tax inspector prepares

the tax inspection report

14/01/2008Taxpayer receives the signed report

19/01/2008Taxpayer appeal

the inspection report

31/01/2008Tax inspector

reviews the report 16/02/2008Taxpayer receives

the final report

18/03/2008Tax Inspection Report

is enforced

26/01/2008Tax inspector

receives the appeal 09/02/2008

Tax inspector issues the final report.

31/12/2007Tax Inspection field-work

is completed

Tax assessment procedures: The new law introduces a few changes with regardtotaxassessmentproceduresandthetimelineoffilinganobjectiontothetaxnotification.Thefollowinggraphicalpresentationdepictsthenewprocedures and the related timetable:

01/01/2008 16/02/2008

01/02/2008

10/01/2008Tax Authorities send to

the taxpayer the notification

17/01/2008Taxpayer receives

the notification

16/02/2008Taxpayer appeals the evaluation

Taxpayer pays the tax liability

16/02/2008 14/03/2008

01/03/2008

16/02/2008 14/06/2008

01/03/2008 01/04/2008 01/05/2008 01/06/2008

14/03/2008(Decision of TAD in favour of tax authorities)

Taxpayer pays tax liabilities and penaltiesTaxpayer objects TAD decision

14/03/2008(Decision of TAD in favour of taxpayer)

Reimbursement of overpaid liability to taxpayer

Tax authorities objects TAD decision

27/01/2008Tax Notification enters into force

14/06/2008TAD responds to taxpayerIn case of non-response ,

taxpayer address directly to court

For further details please visit our website www.pwc.com/taxsummaries , orcontact:TaxManager–LoretaPeçi,phone:+35542242254ormobile+355692021329

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For further details please visit our site www.pwc.com/al, orcontact:ManagerAdvisory,EldaMero,phone:+35542242254ormobile+355692021706

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For further details please visit our site www.pwc.com/al , or contact:AuditManager–KlediKodra,phone:+35542242254ormobile+355692081370

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Our services

Tax

TheAlbanianPricewaterhouseCoopersTaxServicesGroupdrawson the expertise of tax specialists who have extensive knowledge of the Albanian tax framework and the issues faced by companies operating or wishing to invest in Albania. Our staff has a total experience of some 16 years in tax advice, tax compliance work and tax accounting. Our combination of local experience and a“one-firm”cultureenablesustoprovidestate-of-the-arttaxadvice, responsive to local conditions and requirements, to a wide range of clients, including local private enterprises and leading international corporations. Our range of services encompasses:

Global Compliance Services (GCS)

Accounting compliance services - including bookkeeping and preparingstatutory(group)financialstatementsPayroll administration services - services including gross to netcalculations,employers’registrationsandjoiners’andleavers’administrationIndirect tax compliance - preparing VAT returns and registersCorporate income tax compliance - preparing annual and periodic payment of account returns, tax provisioning and tax accountingPersonal tax compliance - preparing personal income tax and social and health contribution returnsBank administration services - administration of payment processes on behalf of and upon the authorisation of the clientCorporate Secretarial services - including statutory compliance andfilingrequirement.

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•Preparationofindividualincometaxreturns•Adviceontheimpactofchangesinlocaltaxreturns•Informationontheconsequencesofchangesin

compensation programs or practices

Ongoing Tax Consulting Services

•Adviceabouttaxconsequencesassociatedwithnewor proposed legislation

•Assistanceinnegotiatingtaxliabilitieswithtaxauthorities•Determinationoftaxliabilitiesand/orassistanceinthepreparationandfilingofappropriatetaxreturnswith the tax authorities•Reviewofassessmentnoticesandassistance during tax audits

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This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information containedinthispublicationwithoutobtainingspecificprofessionaladvice.Norepresentationorwarranty(expressorimplied)isgivenastotheaccuracyorcompletenessof the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers Albania, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.©2007PricewaterhouseCoopers.Allrightsreserved.PricewaterhouseCoopersreferstothenetworkofmemberfirmsofPricewaterhouseCoopersInternationalLimited,eachof which is a separate and independent legal entity. is a trademark of PricewaterhouseCoopers LLP (US).