On the VAT treatment of electric vehicles imported and sold in the Albanian territory

Within the framework of fiscal incentive policies promoting the use of environmentally friendly vehicles, the Albanian legislator has established specific VAT exemptions for vehicles powered exclusively by electric motors. These exemptions apply both at the time of importation and at the stage of the first supply of such vehicles in the domestic market.

The main legal basis for this treatment is Article 51, point (p) of Law No. 92/2014 “On Value Added Tax,” (in Alb.), as amended, which provides that:

“The following transactions of general interest shall be exempt from VAT:
(p) the supply of vehicles powered solely by an electric motor, which are new, with zero kilometers, and have not been previously registered for circulation in any other country, except for those specified in point 7 of Article 49 of this Law.”

This provision clearly aims to encourage the trade and use of new electric vehicles by reducing the tax burden during the initial stage of their circulation, exempting them from VAT both at import and at the first domestic supply.

In the legal interpretation of this exemption, a distinction must be made between the exemption at import and the exemption at supply (sale):

1. Exemption at Import

The importation of electric vehicles is exempt from VAT at the time of customs clearance, based on secondary legislation implementing the fiscal provisions of the VAT Law. This means that VAT is neither calculated nor paid at import, as the transaction is treated as an exempt activity. However, as with any VAT exemption, this also means that no right to deduct or credit input VAT arises in connection with this activity.

2. Exemption at the First Supply

Article 51, point (p), extends the scope of the exemption to the first supply in the domestic market of new electric vehicles, with zero kilometers and not previously registered in any country. This means that the first sale in the Albanian market, conducted by the importer or dealer of such vehicles, is exempt from VAT.
Consequently, the seller does not charge VAT on the invoice and has no right to deduct input VAT related to this supply, as the law classifies it as an exempt supply, not a zero-rated one.

3. Subsequent Sales

After registration and use of the electric vehicle, the exemption no longer applies. Once a vehicle is considered “used,” any subsequent supply is treated under the general VAT rules.
In cases where the seller is a taxable person (e.g., a dealer of used vehicles), the law allows the application of the margin scheme, whereby VAT is calculated only on the difference between the selling price and the purchase price.
When the sale is made by private individuals who are not taxable persons (i.e., not engaged in an economic activity), the transaction is outside the scope of VAT and does not give rise to a tax liability.

In summary:

• VAT exemption applies at import;
• VAT exemption applies to the first supply (sale of a new vehicle with zero kilometers) pursuant to Article 51, point (p);
• Subsequent supplies (sale of used vehicles) are taxable under the general VAT regime.

This interpretation aligns the legal framework with the objective of Albania’s fiscal policy, which seeks to facilitate and promote the use of electric vehicles by applying VAT exemption only to the initial stage of their circulation, import and first sale, while maintaining the ordinary VAT treatment for subsequent transactions in the market.