EXTRAORDINARY TAX FOR ENERGY PRODUCERS



*Photo by American Public Power Association on Unsplash

 

The Albanian Government is considering to impose an extraordinary payment for energy companies with regard to the profits that they have been realized due to the spike of energy prices caused by the ongoing war in Ukraine.


For this purpose, a draft law titled “on the establishment of solidarity contribution during the period of energy crisis” has been distributed.


The purpose of the draft law is to establish a “solidarity contribution” for producers of electric energy, with the aim of redistributing the extraordinary profits in support social protection schemes.


Note that the below is based on the initial considerations of the disturbed draft, and the final version of the act could differ substantially.


To whom will the “solidarity contribution” apply?


The “solidarity contribution” is intended to be applied to Albanian resident taxpayers that produce electric energy and trade such energy on the basis of liberalized prices.


What will be the rate of the “solidarity contribution”?


The “solidarity contribution” is intended to be applied at a rate of 50%. The “solidarity contribution” rate will be levied starting from 2023, and will be calculated as the product of the energy quantities sold during the previous year, with the difference between the average market price achieved during the previous year and the reference price indicated in the draft, of 8.5 Lekë/kWh (approx.. EUR 7.25/kWh).


When will the “solidarity contribution” become due?


The “solidarity contribution” is intended to be calculated by the Tax Authorities in January 2023 and become due and payable in two equal installments, by the end of March 2023 and the end of November 2023.


What will be the duration of the “solidarity contribution”?


The extraordinary tax is intended to be applied for 2023 as well, if the average HUPEX price for the year will be higher than EUR 180/MWh. In any case, the new law is expected to remain in force until 31 December 2024.


What are the issues of the “solidarity contribution”?


First, despite the fact that the draft is very careful to use the term “solidarity contribution” and not taxation, this is effectively an extraordinary tax, which could be deemed to be retroactively applied to pas periods (i.e. 2022). Under the Albanian Constitution, retroactive taxation is prohibited. Further, the constitutional criteria proportionality and for passing extraordinary measures must be met.


Second, the application of the intended “solidarity contribution” could be deemed as discriminatory and ad personam, considering that it would only apply to a very limited number companies. The number of electric energy producers that sell energy on the basis of liberalized prices is currently on a single digit level, and draft does not apply to traders of electric energy.


Finally, under the draft law energy producers are still required to normally apply the requirements of the corporate taxation law on the actual profit generated for 2022, without the possibility to use the “solidarity contribution” as a deductible expense.


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