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Albania

Country Name: Albania
Currency: Albanian Lek (ALL)
Primary Tax Authority: General Directorate of Taxation (Drejtoria e Përgjithshme e Tatimeve – DPT)
Key Legislation:

  • Law on Corporate Income Tax
  • Law on Personal Income Tax
  • Law on Value Added Tax (VAT)

Fiscal Authority Allocation

Centralized Fiscal System:
Albania operates under a centralized tax system. The General Directorate of Taxation (DPT) is responsible for administering and collecting national taxes, including corporate income tax, personal income tax, and VAT. Local governments collect property taxes and minor municipal fees.

Corporate Income Tax (CIT)

Standard Rates: 0%, 15%
Albania has a tiered CIT structure:

  • Companies with annual turnover up to ALL 14 million are exempt from CIT.
  • Companies with annual turnover above ALL 14 million are taxed at a flat rate of 15%.

Corporate Forms and Taxation:

  1. Limited Liability Company (Shoqëri me Përgjegjësi të Kufizuar – SH.P.K.): The most common corporate form in Albania, taxed at the applicable CIT rate based on turnover.
  2. Joint-Stock Company (Shoqëri Aksionare – SHA): Typically used for larger businesses, also taxed at 15% on income exceeding the threshold.
  3. Branches of Foreign Companies: Taxed on Albania-sourced income at 15%.

Exemptions and Incentives:

  • Free Economic Zones (FEZs): Companies operating in FEZs benefit from CIT exemptions for up to 10 years, with reduced rates thereafter.
  • R&D Incentives: Albania offers enhanced tax deductions for qualifying research and development expenditures.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 20%
Albania applies a VAT rate of 20% to most goods and services. A reduced rate of 6% applies to specific items, such as medicines, books, and public transportation.

Exemptions:
Healthcare, education, and financial services are exempt from VAT. Exports are zero-rated, allowing companies to reclaim VAT on input costs related to exported goods.

Personal Income Tax (PIT)

Progressive Rates:
Albania implements a progressive personal income tax system with the following rates:

  • Income up to ALL 30,000 per month: 0%
  • Income between ALL 30,001 and ALL 150,000 per month: 13%
  • Income above ALL 150,001 per month: 23%

Dividends:
Dividends are taxed at a flat rate of 8%.

Additional Mandatory Contributions

Social Security Contributions:
Both employers and employees are required to contribute to the social security system, which covers pensions, healthcare, and unemployment benefits.

  • Employer Contribution: 16.7% of gross salary.
  • Employee Contribution: 11.2% of gross salary.

Withholding Taxes

  • Dividends: 8%
  • Interest: 15%
  • Royalties: 15%
    Withholding taxes may be reduced under Albania’s double taxation agreements (DTAs).

Transfer Pricing Rules

Albania adheres to OECD transfer pricing guidelines. Related-party transactions must comply with the arm’s-length principle, and businesses are required to maintain transfer pricing documentation for cross-border transactions.

Special Tax Regimes

  • Free Economic Zones (FEZs): Businesses operating within FEZs benefit from tax exemptions and reductions for up to 10 years, as well as exemptions from VAT and customs duties on imported machinery and materials.
  • Tourism Incentives: The tourism sector enjoys various tax benefits, including reduced VAT rates and tax holidays for infrastructure investments in hospitality and tourism services.

Other Taxes

  • Real Estate Transfer Tax: A 3% tax applies to the transfer of immovable property.
  • Capital Gains Tax: Capital gains are taxed at 15%, with exemptions for the sale of property held for more than two years.
  • Excise Duties: Albania imposes excise taxes on alcohol, tobacco, and fuel.

Double Taxation Agreements (DTAs)

Albania has signed over 40 double taxation agreements with countries worldwide, including key partners such as Italy, Greece, and Germany. These treaties help prevent double taxation and reduce withholding taxes on dividends, interest, and royalties.

Local Taxes

Local governments in Albania collect property taxes and certain municipal fees. However, the overall tax structure is centralized, and income tax and VAT are managed by the General Directorate of Taxation.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by March 31st of the following tax year. Personal income tax returns must be filed by April 30th. The tax year coincides with the calendar year.

Penalties for Late Filing:
Penalties for late filing or non-compliance include interest charges and fines. The interest rate for overdue taxes is generally 0.06% per day.

Recent Developments

Tax Reforms for SMEs:
Albania has introduced new tax reforms aimed at reducing the tax burden on small and medium-sized enterprises (SMEs). This includes the elimination of CIT for companies with an annual turnover below ALL 14 million.

Green Energy Incentives:
The Albanian government is offering tax incentives for investments in renewable energy projects, including accelerated depreciation for green infrastructure and VAT exemptions on energy-efficient equipment.

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