Corporate Taxation System in Albania

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Albania is diligently working on building an etiquette for itself as being a tax and expat friendly country.

While other countries are currently making taxpayers mad and on the brink of moving away, Albania is building its status of becoming the new hub for reduced tax with a simple 10% deducted for personal, capital and corporate winnings.

The system of taxes covers personal tax on income, on profit, on real estate plus the VAT. The system has been constantly modernizing since 1996 and went through different stages: they changed the VAT and then they increased it to 20%, they passed a new law on personal and profit tax, they modernized their tax collection system and launched new services. Consequently, they introduced a new Customs Code to make like simpler and less ambiguous.

Albania covers any individual that creates an income and any turnover between 2 and 8 million is excused from profit tax. The only taxes they pay are personal and VAT covering. The ones residing in Albania do pay taxes on income from inside or outside the country and these people are:

  • Those who reside in Albania permanently, are Albanian citizens or have official status in Albania.
  • Those who live there for more than 183 days within a year period. A citizen pays taxes for all incomes, no matter the source. Non-Albanian citizens only pay tax on incomes from inside the country.

Personal income tax derives from these categories:

  • Salaries or compensation for labor
  • Dividends and bank deposits that generate profit interest or any bearing securities
  • Royalties income, loans, leasing or any commercial activity
  • Other income

No personal income tax applies to:

  • Scholarships, pensions or social security benefits provided by the Albanian social security system
  • Compensation for medical reasons or death of close-ones
  • Compensation for expropriation for the public interest
  • Income under rules of international agreements that allow no tax paying
  • Income generated by officials, diplomats or other international official functions of people from other countries

Tax on Property

Low tax regime: 1% when buying a property in Albania.

Taxes for buying: 1% covering notary and actual purchase with VAT at 0% for new constructions.

Costs of buying: With relatively low prices on real estate, the costs of buying are at a medium level. Costs of legal management are around 1000 euros plus 1% notary and purchase fees and around 2% of the property value for a mortgage.

Taxes for selling: no taxes come from selling properties

Yearly tax for property: it depends on the size and location of the property, but it is minimum.

Tax for Real Estate

If you own more than one residential property in Albania, your tax will range accordingly: from 5 to 30 (~ 0,04 euros to 0,2 euros)/square meter on the first property and double for all extra properties.

Withholding tax

Dividends and profit sharing:

10% tax on all dividends and profit shares

Paid interest for any individual has a 10% tax

Profit from selling higher is 10% of the difference

Owning 25% or more of stocks in a company makes you exempt from taxes.

All payers need to keep evidence of amounts paid and make them available to authorities when needed or requested.

Health Insurance

1,7 % deducted from the salary paid by the employer.

Corporate Income tax

15% for Albanian or foreign companies that activate inside the country.

Albanian Companies pay tax for all profit, either from international operations or local. Foreign Companies pay taxes on income only on income generated through a working point inside the country or through Albanian sources.

Profit tax

Using a formula, all taxpayers need to pay one month in advance. They also use as reference the previous 2 years of activity and the amount must be paid until the 15th of every month.

VAT (Value Added Tax)

All individuals and registered entities are subject to VAT payment. It is mandatory to register and taxable supplies are used as the base for such calculation. Vat is 20% and applies to all sale goods and services or imports. For any refundable claims, you have a 60-day timeframe to apply.

Compared to past practices, you no longer have to declare the value of your sales and products by the 14th of every month. All taxable supplies or financial support will be included in the turnover of each year. The turnover means the whole price that a buyer pays including VAT.

0% rate VAT

In the case of:

  • Goods for export outside Albania
  • Services and goods involving international transport of either passengers or goods.
  • Goods and services dedicated to maritime commercial activities. Any kind of import-export activity needs to be registered and is subject to paying VAT.

Non-VAT supplies:

  • Building or land sale or lease
  • Financial services
  • Specific services of non-profit organizations
  • Postal, medical services and medical equipment or supplies.
  • Donations

VAT declaration

Two copies of the filled-in form need to reach the bank in agreement with GDT no later than 14 days after the tax period date.

Penalties

Failure to register or to administer lawfully the supplied goods or services are subject to penalties. These penalties are the same that apply to corporate income tax. The lack of fiscal invoices for VAT transactions generates a penalty of 100% of the entire undeclared tax.

Tax offenses: fiscal evasion, failure to pay taxes to the state budget, alteration of documents regarding tax and VAT information.

Employment income

All income holders are subject to paying taxes and income includes salaries, wages, bonuses, benefits and any remuneration coming from labor and services, directors’ fees.

Self-employment income

A self-employed individual needs to register with the Commercial Register in order to pay taxes. Any income that comes from performed services or activities that have a profit of 2 million or more pay a 10% tax.

Smaller activities with less than 2 million profit will have a fixed tax established accordingly.

Social Security contribution

Any employed person is covered by the taxes paid by the employer to the state.

Local Taxes

Small Businesses

The tax on small businesses is paid in 4 equal rates over the course of the year. If the profit is anywhere in the range of 2 – 8 million, then they become subject to a simplified tax of 7,5% instead of 10%. Smaller businesses even with profit of under 2 millions pay a tax of approximately 179 euros due in the first half of the fiscal year.

Temporary Taxes

The county or municipality reserves the right of applying temporary taxes at any time having the interest of the society and community in focus. More information should be found in every municipality tax office.