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

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Having repealed its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.

EC Progress Report
2015 - ALBANIA

EC Progress Report
2015 - KOSOVO

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.

LAW. TAX. TRANSPARENCY

roasted coffee.

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.

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

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.
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

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 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 20142018 strategy and
action plan for
preventing and
combating the
informal economy,
money laundering
and financing of
terrorism.

As regards
administrative
cooperation and
mutual assistance,
Albania has been
participating in the
EUs 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 prearrival electronic
information with
regional customs
administrations is

LAW. TAX. TRANSPARENCY

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

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

adequately followed
up. Further progress
was made through
double taxation
agreements. The
agreement on the
countrys
participation in the
EUs 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
administrations
internal IT platform
and its procedures.

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

LAW. TAX. TRANSPARENCY

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 20142019 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
inspectorates
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.

LAW. TAX. TRANSPARENCY

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 Offices
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
EUs customs code. In
the coming year,
Kosovo should in
particular:
implement customs
legislation in line with
EU practice;
strengthen the
Kosovo tax
administrations
internal IT platform,
its internal

LAW. TAX. TRANSPARENCY

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.