Tirana GMT +1
EY
Rr. Ibrahim Rrugova, Godina Sky Tower
6th Floor
1001 Tirana
Albania
Executive and immigration contacts
Nevena Kovacheva +359 (2) 817-7146 (resident in Sofia) Email: nevena.kovacheva@bg.ey.com
Anisa Jasini +355 (4) 241-9575, Ext. 131 Email: anisa.jasini@al.ey.com
Immigration contact
Soena Foto
A. Income tax
+355 (4) 241-9575, Ext. 136 Email: soena.foto@al.ey.com
Who is liable. Individuals who are resident in Albania are subject to tax on their worldwide income. Nonresidents are subject to tax on income derived from Albania sources only.
The following individuals are considered resident for tax pur poses in Albania:
• Individuals who have a permanent residence, family or vital interests in Albania.
• Albanian citizens serving in a consular, diplomatic or similar position outside Albania.
• Individuals who reside in Albania consecutively or nonconsecutively for at least 183 days during a tax year, regardless of their nationality or country of vital interests. The calculation of the residence period in Albania includes all of the days of physical presence, including holidays.
Income subject to tax. Individuals are subject to tax on the fol lowing categories of income:
• Employment income
• Self-employment and business income
• Dividends
• Interest from bank deposits and securities
• Royalties
• Income from rentals and leases of real property and loans
• Income derived from transfers of ownership rights over immov able property
• Income derived from transfers of quotas or shares
• Income derived from gambling and other games of chance
• Other income
These categories of income are described below.
Employment income. Employed persons are subject to income tax on remuneration and all benefits received from employment. Employment income includes the following:
• Salaries, wages, allowances, bonuses, and other remuneration and benefits granted for services rendered in a public office or in private employment
• Directors’ fees
Self-employment and business income Self-employed individu als must register as entrepreneurs with the National Business Centre for tax purposes. Businesses with annual turnover up to ALL14 million are subject to 0% income tax, while businesses with annual turnover over ALL14 million are subject to income tax at a rate of 15% on their profits. Businesses operating in the agriculture sector or the automotive industry or engaged in soft ware production and development are subject to a reduced tax rate of 5%. Businesses operating in the agriculture sector are subject to a reduced tax rate of 5%. Entities certified as agrotourism entities on or before 31 December 2021 are subject to 5% tax rate, which is applicable for a 10-year period. The tax base equals the difference between total gross income and total deductible expenses. Self-employed individuals must make advance payments on a quarterly basis, file the annual tax return and pay the tax due for the year less advance payments made by 10 February of the following year.
Businesses with turnover up to ALL8 million must also file the annual tax return by 10 February of the following year.
Dividends. Dividends received by individual shareholders or part ners in commercial companies are subject to tax at a rate of 8%.
Amounts received for decreases in the total of participation quo tas or capital withdrawals by partners or owners of initial capital are considered dividends received and are taxed to the extent that the amounts are paid out of the company’s capitalized profits and not from contributions in cash or in kind by the owners.
Interest from bank deposits and securities. Bank interest and interest on securities, other than interest generated from govern ment treasury bills or other securities issued before the law “On income tax,” as amended, entered into force in 1999, are taxed at a rate of 15%.
Royalties. Taxable royalties (intellectual ownership payments) are considered to be income generated from the use of, or the right to use, literature, artistic or scientific works, including mov ies, tapes, radio records, patents, trademarks, sketches or models, designs, secret formulas, technological processes and industrial, commercial or scientific information. The tax rate for royalties is 15%.
Income from rentals and leases of real property and loans Taxable income from rentals and leases of real property and loans includes any periodic compensation in cash or in kind that an individual generates from the leasing of real estate and lending of replaceable items (for example, funds). This income is sub ject to income tax at a rate of 15%.
Income derived from transfers of ownership rights over immovable property The taxation of income derived from transfers of ownership rights over immovable property is discussed in Capital gains.
Income derived from transfers of quotas or shares. The taxation of income derived from transfers of participation quotas or capi tal shares is discussed in Capital gains
Income derived from gambling and other games of chance The payer of income from gambling and other games of chance must withhold a 15% tax and remit it to the tax authorities within 24 hours after making the payment.
Other income Other forms of income include all types of income that are not identified in the categories mentioned above. This category includes the following:
• Income from sponsoring (for example, individuals not regis tered with tax bodies receive sponsoring from different sources and use the sponsorship for artistic or sports activities).
• Income from professional activities, including teaching, train ing and publishing articles in newspapers if the beneficiary is not registered with tax bodies and if such activities are of a temporary or secondary character.
• Cash contributions to share capital. Such contributions are taxable if they have not yet been taxed or if no sufficient evidence exists that they originate from sources that are excluded from the scope of Albanian taxation or that they are exempt from tax for other reasons.
Exempt income. The following types of income are exempt from personal income tax:
• Income received from obligatory and voluntary schemes for life insurance, pensions and health insurance and allowances for families or individuals with no or low income.
• Income received from pensions or similar remunerations of foreign citizens with Albanian origin or citizens of European Union (EU) countries having a residence permit in the Republic of Albania, or foreign citizens who have Albanian citizenship and are Albanian residents. The beneficiaries should have never been convicted in their country or in Albania and should obtain a positive response for exemption of their income from the respective Albanian authorities. The beneficiaries lose their right to exempt their income from taxes if they do not apply for the renewal of the residence permit.
• Scholarships received by students.
• Allowances received for diseases or disasters, up to 20% of the annual employment income earned by the recipient of the allowance.
• Benefits in cash or in kind granted to former landowners as compensation for an expropriation effected by the government for the public interest. This exemption must be proven by legal documentation explaining the nature of the income.
• Income in kind, such as food (antidotal), received from busi nesses that are allowed to pay such income under the law.
• Income excluded by international agreements approved by the Albanian parliament.
• Indemnities received by former political prisoners.
• Life and health contributions made by employers for the benefit of employees.
• Compensation for damages ordered by final court decision.
• Prizes received from the government for achievement in science, sport or culture.
• Income derived from the transfer of an ownership title with respect to agricultural land by a registered farmer to another farmer or a legal entity engaged in agricultural activity and income derived from the transfer of ownership between related family members through withdrawal from the property right or by donation of it, in the case of benefits resulting from joint ownership as per the Law on Land.
• Income derived from the transfer of ownership title with respect to a building and/or land through donation or relinquishment of property within the family (husband, wife and children; only once per beneficiary).
• Contributions made by employers to private pension schemes for their employees, to the extent they do not exceed the limits set forth in the law for voluntary pension contributions, cur rently set at ALL250,000 per employee per year.
• The return of investment, including capital gains, made through the assets of a pension fund during the administration by the administration company.
Taxation of employer-provided stock options. No specific rules in Albania govern the tax treatment of employer-provided stock options. Stock options are subject to personal income tax at the moment of exercise.
Capital gains
Transfers of ownership rights over immovable property Capital gains derived from disposals of real estate are subject to tax. The tax base equals the amount by which the sale price exceeds the acquisition cost. Transfers caused by donations are also consid ered. The value of the property taken into account on transfer may not be less than the “reference price” for such property. For this purpose, the “reference price” is the objective value per meter in the relevant area, as indicated in the reference table published by the Albanian Institute of Statistics for the main Albanian cities.
Effective from 1 January 2019, capital gains derived by nonresi dents from the alienation of immovable property located in Albania, exploitation and other rights regarding minerals, hydro carbons and other natural resources in Albania or information related to these rights are taxed in Albania.
Transfers of quotas or shares Capital gains derived from trans fers of participation quotas or capital shares include income from sales of quotas owned by partners in businesses or partnerships, income from sales of shares and income from sales or liquida tions of businesses. The tax base is equal to the following:
• Shares: difference between the sales value of the shares and nominal value or the purchase value
• Capital participation quotas: difference between the sales value and nominal value or the purchase value
• Liquidation: difference between the sales value or liquidation value of a business and book value
Effective from 1 January 2019, capital gains incurred by non residents from the alienation of shares deriving more than 50%
of their value, at any time during the last 365 days, directly or indirectly from immovable property located in Albania, from exploitation and other rights regarding minerals, hydrocarbons and other natural resources in Albania or from information related to these rights, are taxed in Albania.
Capital losses Capital losses are not deductible for tax purposes.
Deductible expenses. In general, the gross amount of income is subject to tax and deductions do not apply. However, tax residents can claim deductions for the following expenses:
• Interest on bank loans used for the education of the individual and/or his or her dependent family members
• Health care expenses for medical treatment that are not covered by health insurance for the individual and/or his or her depen dent family members
Rates
Employment income. Salaries and compensation relating to employment are taxed at the rates set forth in the following table.
Monthly taxable income Tax rate Tax due Cumulative tax due ALL % ALL ALL
First 30,000 0 0 0
Next 120,000 13 15,600 15,600
Above 150,000 23 — —
Other types of income Albanian resident entities, government institutions and other specified entities must withhold a 15% tax from all other types of income paid. This tax is considered to be a final tax. These types of income include rent, interest, capital gains, royalties and income from gambling and games of chance. For a discussion of the types of income subject to tax in Albania, see Income subject to tax.
B. Other taxes
Tax on buildings. The tax on buildings is a tax paid annually by owners or users of buildings. The tax is imposed on all buildings used for residential or business purposes and also applies to buildings under construction that have not yet been completed within the time frame stipulated in the construction permit. The following are the tax rates:
• 0.05% of the value of the buildings used for residential purposes
• 0.2% of the value of the buildings used for business purposes
• 30% of the relevant tax rate for the construction surface of buildings under construction that have not yet been completed within the time frame stipulated in the construction permit
Certain building categories are exempt from the tax on buildings, including, among others, the following:
• Public buildings
• Buildings used for social housing purposes
• Buildings used by religious communities
• Four- and five-star hotels
• Structures with special status
• Structures that exercise their activity under a brand name
• Buildings for cultural purposes under temporary or permanent state protection that are used only for nonprofit purposes
• Buildings for residential purposes in which a retired person or a person with a social pension resides if the person’s family is composed of retired persons or dependents that are incapable of working
Tax on hotel accommodations. The tax on hotel accommodations is calculated based on the duration of stay and the category of the lodging. For four- to five-star hotels, the tax on hotel accommo dations is ALL105 to ALL350 per night per person, depending on the hotel location; for bed and breakfasts, dormitories, and motels, the tax is ALL35 to ALL140 per night per person, depending on the location of the lodging.
Tax on waste disposal. The tax on waste disposal is determined at the municipality level. It is payable by individuals and legal enti ties residing or performing economic activity in the municipality.
Tax on construction land. Construction land tax is calculated based on the surface of the construction land. Depending on the local government units in which the construction land is located, the tax rates vary between ALL0.14 per square meter to ALL0.56 per square meter, annually, for residential buildings and ALL12 per square meter to ALL20 per square meter, annually, for commercial buildings.
Tax on agricultural land. Annual agricultural land tax is calculated based on the area in hectares of the land. The tax ranges from ALL700 to ALL5,600 per hectare, depending on the category of the land and the municipality in which the property is located.
Tax on infrastructure impact. The tax on infrastructure impact is imposed on new construction works, such as buildings and infrastructure projects. For housing constructions or commercial units, the tax rate on infrastructure impact ranges from 4% to 8% of the selling price per square meter. This category of invest ments also includes existing buildings conditioned by the imple mentation of a concession contract, and commercial and business centers. For the construction of buildings in the tourism or indus trial sectors, buildings for public purposes and buildings built for personal use, the tax rate ranges from 1% to 3% of the value of the investment for buildings located outside Tirana, while the tax rate ranges from 2% to 4% for buildings located in the munici pality of Tirana.
For infrastructure projects, such as the construction of national roads, ports, airports, tunnels, dams and energy infrastructure, including machinery and equipment for these projects, the tax on infrastructure impact is 0.1% of the value of the investment, but not less than the cost of the rehabilitation of the damaged infrastructure if such cost is not included in the investment projections.
For buildings that are under legalization process, the tax rate on infrastructure impact is 0.5% of the investment value. The legal ization process is provided in the law on legalization of buildings. This law provides to owners of buildings that are built without the permission of the relevant public authorities the right to legal ize and register their buildings. The tax rate on infrastructure impact for housing constructions in mountainous areas ranges from 0% to 3% of the investment value. The mountainous areas
in which such tax is imposed is defined by the relevant Municipality Council.
Investments for the construction of four- and five-star hotels and structures that will exercise their activity under a brand name are exempt from the tax on infrastructure impact. Investments for businesses that operate in the field of agriculture as per the instructions in the law on tourism are exempt from this tax. Investments made for the reconstruction, repair and restoration of buildings intended for residential purposes that have been dam aged as a result of natural disasters are also exempt from this tax.
C. Social security
Contributions. Employers and employees contribute to a social security fund a percentage of the calculated monthly salary. The total contribution is 27.9%, of which 16.7% is borne by the employer, and 11.2% is borne by the employee. The contribution consists of a social security contribution of 24.5% (out of which 15% is borne by the employer and 9.5% is borne by the employ ee) and a health security contribution of 3.4% (out of which 1.7% is borne by the employer and 1.7% is borne by the employee). This remuneration cannot be lower than the minimum monthly salary set nationally, which is currently ALL30,000. The monthly remuneration is subject to social security contributions up to the maximum monthly salary amount for employed persons, which is ALL132,313. Self-employed persons must pay a health insur ance contribution of ALL2,040, which is twice the minimum amount of health insurance contributions, calculated as 3.4% of the minimum salary.
Totalization agreements. To provide relief from double social security taxes and to assure benefit coverage, Albania has entered into social security agreements with Austria, Belgium, the Czech Republic, Germany, Hungary, Kosovo, Luxembourg, North Macedonia, Romania and Turkey.
D. Filing and payment procedures
The tax year in Albania is the calendar year.
Employers must withhold personal income tax from wages and compensation paid, and they must pay the withholding tax to the tax administration by the 20th day of the following month. Employers must maintain records of payments in accordance with instructions issued by the Ministry of Finance.
Individuals earning income of ALL2 million or more must file a personal income tax return for the preceding year by 30 April. Income taxed at source must also be declared, but no personal income tax is calculated on such income.
Individuals earning income of less than ALL2 million do not have a legal obligation to submit the personal income tax declaration. They may do so if they want to benefit from the expense deduction scheme. However, individuals who are earning an income of less than ALL2 million and are employed by more than one employer must submit the personal income tax declaration for the preceding year by 30 April. They must calculate their income tax on the total income earned, deduct the already paid
income tax by the employers, and pay the income tax on the dif ference between the income tax calculated and the income tax paid by the employers.
E. Double tax relief and tax treaties
Tax treaties. Albania has entered into double tax treaties with the following jurisdictions.
Austria India* Poland
Belgium Ireland Qatar
Bosnia and Italy Romania
Herzegovina Korea (South) Russian Bulgaria Kosovo Federation China Mainland Kuwait Serbia
Croatia Latvia Singapore
Czech Republic Luxembourg* Slovenia Egypt Malaysia Spain Estonia Malta Sweden
France Moldova Switzerland Germany Montenegro Turkey Greece Netherlands United Arab Hungary North Macedonia Emirates Iceland Norway United Kingdom
* This treaty is not yet effective.
Foreign tax credit. Resident taxpayers may credit the foreign income tax paid in other countries on the income realized in such countries. The amount of the foreign tax credit may not exceed the amount of Albanian tax regarding such income.
F. Entry visas
Albania issues the following temporary visas:
• Type A visas, which are transit visas permitting a visit or transit passage. Holders of transit visas may not undertake employ ment or engage in profit-seeking activities.
• Type C visas, which allow the holders to stay in Albania up to 90 days in a 180-day period.
• Type D visas, which are issued to individuals who are planning to stay in Albania for more than 90 days within a 180-day period and who plan to apply for a residence permit. Such visas can be issued for the purposes of work, study, humanitarian activities or family reunion.
The following types of persons can enter, stay and travel through Albania up to 90 days within a 180-day period without a visa:
• EU and Schengen area citizens
• Citizens of countries exempted from the Schengen visa require ment as a result of the liberalization of the visa regime
• Holders of a valid multi-entry Schengen, UK or US visa
• Holders of a valid residence permit in one of the Schengen member states
• Citizens of countries with which Albania has entered into inter national agreements, such as citizens of Armenia, Azerbaijan, China Mainland, Kazakhstan, Kosovo, Turkey and Ukraine
• Citizens of certain jurisdictions, such as Bahrain, Belarus, India, Oman, Qatar, the Russian Federation, Saudi Arabia and
Thailand, for the period of 1 April 2021 through 31 December 2021
• Other persons, based on the principle of reciprocity as enacted by a Council of Ministers’ decision
G. Work certificates and permits
The Ministry of Finance is in charge of the policies for the employment of foreign citizens. Work permits are issued to for eigners by local institutions (labor office, immigration sector) and the Directory of Immigration Issues.
Foreigners must apply for either a work permit or a certificate of exemption from the work permit. Citizens of the EU, Schengen area and western Balkan countries are exempt from the obliga tion to apply for a work permit but should apply for a certificate of exemption from the work permit.
Certificate of exemption from the work permit. The certificate of exemption from the work permit is issued to citizens of the EU and Schengen area and of the western Balkan countries. It has declarative purposes since citizens from these countries have equal rights with Albanian citizens in the employment sector. The certificate of exemption from the work permit is issued within seven days. To obtain the certificate, the following documents must be submitted:
• Application form
• Copy of the passport
• Individual employment contract or secondment contract between the foreign entity, the local entity and the individual employee
• Proof of accommodation
• If the above documents are filed by proxy, the relevant power of attorney
Work permit. The work permit can vary depending on the type of economic activity that the foreigners will perform in Albania. Type A/P work permits are issued to employees who have legally entered Albania, fall in the list eligible for this type of permit and have regular employment contracts.
Type A/P work permits are issued for the following terms:
• One-year term for the first application
• Two-year term, renewable two consecutive times
• Permanent term, after the expiration of the second two-year term for the work permit
To obtain a Type A/P work permit, the following documents must be submitted:
• Application form
• Passport (expiration date at least three months after the visa expiration date)
• Copy of passport information regarding generalities and other important information
• Individual employment contract or secondment contract between the foreign entity, the local entity and the individual employee
• Registration certificate (court decision or company extract from National Business Center) of the employer
• If the above documents are filed by proxy, the relevant power of attorney
• Five passport-size pictures
• Receipt for fee payment
H. Residence permits
Foreign citizens who plan to stay in Albania for more than 90 days within a 180-day period and who have entered Albania with a Type D visa or without a visa can apply for a residence permit. The duration of a residence permit may be three months, six months, one year, two years or five years, or the permit may be permanent. Residence permits with the first three periods of duration can be renewed up to five consecutive times. The twoyear residence permit may be renewed only one time. Foreigners may apply for a permanent residence permit if they have had a legal residence in Albania for five consecutive years and have a permanent activity. To obtain a residence permit, the following documentation must be submitted:
• Application form
• Passport (valid for at least three months after the expiration date of the visa)
• Copy of passport information regarding generalities and other important information
• Criminal Records Clearance of the individual extracted in the last six months
• Rent or purchase contract for an apartment or house in Albania
• Personal/Family Certificate translated in Albanian, released in the last six months
• Three passport-size pictures
• Declaration from the host or employer about the purpose of stay
• Photocopy of the work permit or the professional license
• Health insurance certificate for Albania
• Medical report (for citizens of and coming from countries affected by epidemics)
• Fee payment receipt
I. Personal and family considerations
Marital property regime. The marriage property regime is based on the concept of common ownership, which means that property acquired after the marriage is deemed to be in joint ownership, unless otherwise agreed between spouses. The law distinguishes the separate property from the joint property of spouses even after the marriage. The following is considered separate property:
• Property that belongs to the spouse before the marriage and remains his or her property
• Property acquired during marriage through inheritance, dona tion or other forms of legal acquisition
Joint property is the property and income acquired through work during the course of the marriage, and the spouses are considered to be joint owners in equal share unless otherwise provided in a written agreement in accordance with the requirements of the law.
Forced heirship. Albanian succession law provides for forced heir ship for children under the age of 18 and disabled dependents.
Driver’s licenses. Expatriates with valid residence permits may drive legally in Albania with their home-country driver’s licenses
if their home-country licenses are valid and if the expatriates are not resident in Albania for more than one year. If the driver’s license does not comply with the form provided by international agreements, such license must be accompanied by an official translation of the license into Albanian.
Holders of a valid driver’s license issued by an EU country, Canada and other countries that have signed a mutual agreement with Albania or that have signed the conventions and agreements of the United Nations on driver’s licenses may convert their driver’s license in Albania without any prior test.