LAW. TAX. TRANSPARENCY

EC PROGRESS REPORTS OF BALKANS 2015

CHAPTER 16: TAXATION

EC Progress Report 2015 - SERBIA

EC Progress Report 2015 - MONTENEGRO

EC Progress Report 2015 - MACEDONIA

EC Progress Report 2015 - ALBANIA

EC Progress Report 2015 - KOSOVO

On indirect taxation, no progress can be reported on value added tax (VAT). Excise legislation still contains some discriminatory measures on imported spirits and coffee. Excise duty on electricity and on electronic cigarettes was introduced, as of August.

On indirect taxation, in January 2015 Montenegro transferred the competence on excises from the tax administration to the customs administration. Value added tax (VAT) rates were amended to further align with the VAT Directive. Inter alia, the new rules also ensure full alignment with the acquis on the exemption from VAT and excise duty for goods imported by persons travelling from third countries. A rulebook concerning the refund of excise duty on mineral oil was adopted, relevant to acquis requirements. Having repealed its excise duties on coffee on 1 January 2015, which had a discriminatory component; in February Montenegro introduced a new tax on raw and

On indirect taxation, amendments to the Law on Value Added Tax (VAT) came into force in January 2015. The legal basis for ‘e-invoices’ was established. Processing of VAT refund requests within the legal deadline improved. Regarding excise duties, a duty was introduced on petroleum coke and cigarette taxes were increased. A new law on prohibiting and preventing unregistered activities was enacted in December 2014 to reduce the informal economy and strengthen cooperation between different authorities.

On indirect taxation, the new value added tax law and implementing legislation came into force in January. The law seeks alignment with the VAT Directive but still contains exemptions (zero rates) which are not in line with the acquis. It sets clear deadlines for payment of VAT refund claims. Measures were taken to refund almost all VAT arrears. Legislation on VAT and on tax procedures was amended in July to provide for the establishment of a central unit within the General Directorate of Taxation which will process VAT reimbursement requests based on a risk model, with the aim of shortening the duration of the procedure. Implementing instructions on some VAT exception procedures were also adopted in June. The excise law was amended in December, increasing excise duties on tobacco products, making changes to

Despite an overall fall in imports, the 2014 reorganisation of the customs administration resulted in an increase of 3.9 % in the collection of revenues compared with 2013 and new systems reduced the scope for corruption.

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roasted coffee. excise duty on energy

drinks and removing excise duty on natural bitumen. Further work is needed to align excise rates with the acquis.

On direct taxation, the amended law on profit tax passed in December exempts humanitarian aid, and assistance provided to different levels of government

On direct taxation, the tax rate on gross personal income over EUR 720 per month was reduced.

There was progress on direct taxation. The profit tax law was amended so that since 1 January 2015 taxation is based on annual profit and no longer on distributed profit. Taxation of gains from games of chance and betting was further improved with the introduction of obligatory automated IT tracking of payments. Amendments to the Law on Personal Income Tax enacted in July include the regulation of the fiscal treatment of capital gains on sale of real estate.

On direct taxation, the rate of personal income tax levied on income from shares, rental of immovable property and copyright was raised to 15 %, while income deriving from voluntary pension schemes became exempt. Further steps remain necessary to improve transparency and public consultations on drafting fiscal legislation.

In taxation, Kosovo has started to implement the 2014-2018 strategy and action plan for preventing and combating the informal economy, money laundering and financing of terrorism.

On administrative cooperation and mutual assistance, Serbia signed an agreement to join the Fiscalis 2020 programme, which came into force in July

The law on tax administration was amended in February, to improve the collection of taxes and other duties, particularly where a taxpayer fails to settle their tax obligations. The amendments also introduced the fiduciary transfer of property ownership as a new means of ensuring tax

Progress was made in administrative cooperation and mutual assistance. The country was assessed as largely compliant with phase 2 of the peer review conducted under the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes. The recommendations of the peer review report should be

As regards administrative cooperation and mutual assistance, Albania has been participating in the EU’s Fiscalis 2020 programme since January. The tax administration is cooperating with the Italian revenue agency on transfer pricing issues under the OECD programme ‘Tax inspectors without borders’. Agreements on avoidance of

In 2015, Kosovo applied to join the Common Transit Convention and signed bilateral agreements with Albania on trade facilitation, including common transit, and on cooperation in criminal customs matters with the United Kingdom. The exchange of pre-arrival electronic information with regional customs administrations is

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collection, and several tax laws were amended, including on property tax and on the use of tobacco products. The amendments were also designed to define tax inspection measures and the amount of fines for tax violations in more detail. The 2015-2017 Economic Reform Programme (ERP) includes measures increasing excise duties, and a tax on games of chance. Montenegro introduced tax incentives to boost certain sectors, such as high-level tourism and construction, including exemptions from tax and customs duties for construction works on the Bar-Boljare highway (also foreseen in the ERP). Measures aimed only at some businesses, which are difficult to administer and could potentially distort the market, should be avoided.

adequately followed up. Further progress was made through double taxation agreements. The agreement on the country’s participation in the EU’s Fiscalis 2020 programme was ratified.

double taxation and prevention of tax evasion were concluded with Iceland and the Swiss Federation.

working well. Nevertheless, inconsistencies between the customs and excise code and the criminal code continue to hinder the fight against customs crime. The informal economy and smuggling across the border/boundary lines continue to harm the economy. Following an agreement in the Pristina-Belgrade dialogue, two new co-located crossing points have been agreed. The tax administration has continued to improve its human and administrative capacity. Progress has been made in introducing electronic services including online tax returns, verification and payment system and business registration centres (one-stop shop). There was no progress in modernising the administration’s internal IT platform and its procedures.

On operational capacity and computerisation, electronic services to taxpayers were further extended

On operational capacity and computerisation, a comprehensive analysis and documentation of

Progress was made on administrative and operational capacity. Revenue collection increased. The Public Revenue

As regards operational capacity and computerisation, a new IT system was deployed in the tax administration as of

The customs service has further improved its legislative, administrative and organisational capacity. The first

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and revenue increased. The use of e-declarations became compulsory for a large number of tax declarations. Efforts to combat the grey economy intensified, with reinforced checks on VAT compliance. A new programme for 2015-2020 to transform the tax administration was adopted in June. As a positive development, it includes quarterly performance indicators to assess compliance with objectives. While public communication has improved, the tax administration should upgrade taxpayer service and simplify administrative procedures. Efforts are needed to train staff more effectively. The new wellequipped data centre has become fully operational this year; but maintaining staffing in the IT division has become a challenge due to wage competition from the private sector. The tax administration has intensified work on

IT interoperability systems (automatic exchange of information among revenue administrations and other institutions) was carried out, and the testing phase of the interoperability architecture has started. The 2014-2019 Business Strategy for the tax administration was adopted in November. The IT Department of the tax administration introduced a new tax accounting subsystem, designed to eliminate deficiencies of the Tax Administration's information system, in line with audit recommendations. The agreement for Montenegro to participate in the Fiscalis 2020 programme was concluded

Office (PRO) continued to develop the compliance risk management system and a Council for Compliance was established. The efficiency of the internal audit and control system improved. The PRO further improved work processes based on the ISO 9001/ 2008 quality management system. The tax inspectorate’s capacity was strengthened by new methods to prevent tax evasion. As of 2015 cash registers are compulsory and the PRO now monitors online cash turnover in real-time. ‘E-tax’ services have been further expanded. The law on prohibiting and preventing unregistered activities aims to reduce the informal economy through stronger control mechanisms, such as joint inspections with other control bodies, increased information sharing and controls. Modernising the IT system should be a priority and part of an overall modernisation strategy.

January. Personal income tax declarations must now be made via electronic means. Initial technical problems encountered by taxpayers have been resolved. Coordination between the tax and customs administrations has been strengthened by ensuring their IT systems are interoperable. Measures were taken to fight fiscal evasion in the fuel market. The General Directorate of Taxation strengthened its cooperation with the High Inspectorate for Declaration and Audit of Assets and Prevention of Conflicts of Interest. The management and revenue collection capacities of the tax administration need to be enhanced to ensure tax compliance and prevent further revenue slippages.

steps towards merging the customs and tax administrations into a single revenue agency have been taken. The merger of 41 investigation units also brought positive results. Kosovo Customs operate throughout Kosovo, although to a limited extent in the north. The capacity to enforce tax collection in northern Kosovo remains extremely limited. The existing backlog of complaints against the customs and tax administrations was finally dealt with and, as a result, the Independent Review Board dealing with such cases was abolished in December 2014.

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improving supervision by training of tax inspectors in various fields, in line with EU methodology. The discretionary powers of individual tax inspectors should be further reduced. Some work was also done to improve operational activities to curb the informal economy, notably against illegal trade in fine-cut tobacco and cigarettes and in games of chance and gambling activities.

Serbia is moderately prepared in the area of taxation. Some progress was made with the adoption of the 2015-2020 programme to transform the tax administration. This should strengthen strategic management and planning of taxation. In the coming year, Serbia should in particular: → improve operational activities to curb the informal economy; → further align national rules on

Montenegro is moderately prepared in the area of taxation. Some progress was made in this field. In the coming year, Montenegro should in particular: → continue its efforts on reinforcing its administrative capacity and, in particular, the IT support for the Tax administration.

The country is moderately prepared in the area of taxation. Some progress was made. The Law on Special Zones for Technological and Industrial Development is still not compliant with the EU Code of Conduct for Business Taxation. In the coming year, the country should in particular: → continue to fight tax fraud, tax evasion and the informal economy; → further develop the Public Revenue Office’s compliance risk management system and strengthen its audit

Albania is moderately prepared in the area of taxation. Some progress was made, in particular as regards legislative approximation with the acquis on value added tax (VAT) and excise. Revenue performance in 2014 increased, as a result of tax increases and improvements in the tax administration, but did not increase as budgeted in 2015. In the coming year, the country should in particular: → implement new VAT legislation effectively, which entails raising awareness among businesses and training tax officials; → strictly implement

Kosovo is moderately prepared in the area of customs and at an early stage in taxation, with some progress made in both areas. It took some initial steps towards merging the customs and tax administrations and upgrading internal controls. Customs legislation is largely compliant with the EU’s customs code. In the coming year, Kosovo should in particular: → implement customs legislation in line with EU practice; → strengthen the Kosovo tax administration’s internal IT platform, its internal

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excise goods, including those on imported spirits and coffee, with those of the acquis; → further simplify and unify tax procedures and better train staff.

capacity and function; → bring fiscal provisions on technological development zones into line with the EU Code of Conduct for Business Taxation.

measures to prevent new VAT arrears and address businesses’ complaints about VAT refund delays; → ensure the new IT system is effective in reducing arbitrary practices, fraud and corruption and improving information exchange.

performance controls and the fight against corruption; → step up the fight against the informal economy and tax evasion and prevent any undue influence on the work of their institutions.