The friendly percentage of profit tax for IT companies invites foreign investors to Albania.
Albania offers a fairly friendly legal framework for foreign investments, the main reason for the increase in the number of foreign investors, mainly in the IT field.
One of the facilities that was applied since 2018 with the Decision of the Council of Ministers no.730 dated 12.12.2018, by which all taxpayers who exercise the activity of software production/development may benefit from a tax rate of the profit/income tax of 5% .
The activities carried out by businesses in the field of software production/development, for which the tax rate of 5% profit tax is applied, are as follows:
- Software design-IT This includes software system requirements analysis, architecture design and detailed software system design;
- Development and maintenance of software systems – This includes programming of software systems, coding, installation, integration of all components, documentation, identification and correction of errors, modifications (after the software is put into operation), maintenance of all components , the system support as a set of components, which, in their operation, realize the purpose of the IT Solution;
- Software testing – This includes testing the functionality, workload, performance, acceptance, availability and security of the software system;
- Design and development of communication systems – This includes the analysis, planning, design, implementation, commissioning and maintenance of communication systems of IT equipment networks (LAN/ WAN/ WLAN/ MAN/ SAN/ CAN);
- Design and development of security systems – This includes analysis of customer security requirements, architecture design, component installations and configurations, commissioning, security testing and related maintenance;
- Migration systems development – This includes the transfer of data and related infrastructure from an old technology to a new technology;
- Improvement/upgrade of IT systems
- Operation, management, user support and technical/informatics audit for software systems
It is important to note that the activities that the business can perform must be in the field of information technology. When there are other activities, which are not part of this field, they should be separated in another form of business or company in order to keep benefiting from the 5% rate of Profit Tax.
In order to apply the reduced rate, entities must clearly reflect in the explanatory notes of the financial statements, the income that is realized from the activity/activity for which the 5% tax rate is applied, as well as the incurred expenses.
For more information on the procedures to be followed in order to avail of this opportunity and relevant declarations to be done at the tax office, let’s talk!
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