Fiscal treatment for free items/ gifts – Sale invoice procedure in Albania

Law No. 92/2014 “On VAT in the Republic of Albania” Article 9 “Supply of goods against payment”, defines: “The supply of goods is considered to be carried out against payment, in whole or in part, if the supplier directly or indirectly receives or has right to receive payment in cash or in kind for that supply, whether from the person supplied or any other person”

As above, the goods which are given free of charge, based on a contractual relationship between the parties, the supply will be subject to VAT, since the agreement between the parties does not affect the implementation of laws in the fiscal field.

Supply of goods against payment are considered:

1) The items given for free or on promotional discounts
2) The items self-consumed by the company

The company cannot issue the invoice for products that are given for free at a price not less than the purchase price (described below what is included in purchase price).

Referring to the aforementioned legal framework, the fiscal treatment of free products for VAT and profit tax purposes will be such that THE TAXABLE VALUE will include all the elements defined in the provisions of the law that constitute the taxable value.

What is included in the TAXABLE VALUE?

Specifically, Article 39 “Taxable value”, defines that: The following elements are included:

  • custom taxes, duties, fees and similar payments, with the exception of VAT.
  • secondary costs, such as commission, packaging, transport and insurance costs that the supplier charges to the buyer or customer.
  • for the purposes of letter “b”, of this point, those foreseen in separate agreements are also considered as secondary expenses.

When a taxable person receives goods that are part of the assets of the business, for his private purpose or that of his staff, or for purposes other than those of his economic activity, if that he has fully or partially deducted the VAT on the purchase of this product or the elements that make up the product.

Supply of goods against payment are NOT considered:

3) Samples

Instruction no. 6, Date 30.01.2015 “On value added tax in the Republic of Albania”, Article 16 “Determination of gifts of small value and samples”, defines that: “In points 3 and 4 of the article 9 of the law are not considered as supply against payment cases where a taxable person uses, business goods such as gifts of small value or samples.

As the supply of samples is not considered a “supply of goods against payment”, the fiscal treatment does not require for the invoice to be issued with VAT. That is why a sale invoice of sample products can be issued with 0 (value).

For the purposes of applying the provided provision, sample are considered those objects directly related to the performance of activities of taxable persons, which are offered to consumers, regular or potential customers and are not for sale purposes. These objects are not for sale purposes or are not sold, as they are in a condition that makes it impossible to sell them. The goods that are given as business samples must be marked as such and must have a different shape or packaging compared to the goods that are intended for sale”