February 2009
Tax NewsletterDeloitteCentral Europe
2
3Tax Newsletter
Deloitte Central Europe
Albania
Qualication o NPOs or Public Benet StatusLaw No. 10003, dated 6 October 2008 made signicantmodications impacting the application o article 24“Non-Prot Organizations” o Law No. 7928, “On VAT,”dated 27 April 1995. The new law species that onlycertain NPOs that supply religious services, as well asNPOs with “public benet status” which supply goodsand services with a reduced price are eligible or VATexemption status. The new decision o the Councilo Ministers, Decision No. 1679, dated 24 December2008 sets out the procedures o the application oNPOs or the public benet status. While previously, itcould determine whether an NPO qualied or the VATexemption by meeting the objective criteria set orthin the Law on VAT under the new decision, NPOs nowmust apply to the Ministry o Finance or the “publicbenet status.” This introduces a signicant subjectiveelement to the criteria or qualiying or VAT exemptionstatus. The MOF has not yet provided any guidanceindicating what specic criteria would be taken intoaccount in determining whether a NPO can be grantedthe public benet status.
VAT declaration and VAT exemption limitationwith regard to NPOs
According to the written clarication No. 9355 datedon 22 July 2008, published by the ormer director othe General Tax Directorate, Mr. Arben Segjini, withregard to Non-prot organizations, it is stated that in allcases where a non-prot organization is beneting romunds, grants, sponsorships, and membership and othersimilar income, such unds should be used in accordancewith the status and objectives o the NPO. Otherwise,such NPOs would be deemed to be providing services inreturn or payment.Instruction No. 17.4 dated on 26 December 2008incorporates the interpretation o the ormer Directoro GTD stipulating that VAT would not be exempt iconsideration is provided in return or a donation.The new instructions speciy that donations made(in the absence o payment o consideration) areconsidered as non-taxable supply under the ollowingconditions:Donations based on programs or unds declared by
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the donor or the maintenance and developmento the civil society, either as support or institutionalstrengthening o the NPO or or the exercising othe activities or the benet o the general public or/ and certain sections o the public;The dedication o such unds rom the donors is
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based on the internal regulations o the donor and/oris made public beore or during the donation; andThe only beneciaries o these unds are NPOs.
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Double Taxation Treaties
Albania has continued to expand the list o countrieswith which it has double taxation treaties. Albaniaentered into a double tax treaty with Latvia (in orcein December 2008) and Austria (in orce in September2008) and are both eective on 1 January 2009.In addition, according to the Decision o Councilo Ministers, No.1635, dated 17 December 2008,the implementation o a Double Tax Treaty with Kuwaithas been accepted in principle. This commences the rstlegal step in implementation o such treaty.
Bulgaria
Tax treaty between Bulgaria and the UnitedStates
A tax treaty between Bulgaria and the United States hascome in orce. The treaty applies to income realized asrom 1 January 2009.US investors may take advantage o the treaty mostlywhen realizing Bulgarian source interest and royalties(where the Bulgarian withholding tax could be lowereddown to 5%), as well as service ees and capital gains(which could be exempted rom this tax).The treaty is particularly useul to Bulgarians investingin the United States, as it substantially mitigates the USwithholding tax burden.While oering important benets, the treaty alsocontains many limitations, conditions and exceptions.
VAT on services related to real estate in Bulgaria
Eective 1 January 2009, oreign suppliers o servicesrelated to real estate in Bulgaria are no longer requiredto register or VAT in Bulgaria and charge Bulgarian VAT.Instead, the VAT or such services is sel-chargeable bytheir recipient.
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Deloitte CE Tax Newsletter Feb09
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