albania-personal-tax-guide

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The Albanian parliament adopted Law 29/2023 On Income Tax, which was published in the Official Gazette on 2 May 2023 and will enter into force on 1 January 2024. The new law regulates the taxation of income for individuals and corporations. The existing Law No. 8438, dated 28 December 1998, “On income tax” amended, was abolished. This chapter provides information based on the new law.

A. Income tax

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 purposes 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 non-consecutively 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.

• Individuals who have a shop, a professional office, a factory or any other place from where they perform their activities in Albania, or have their regular residence, unless they have their permanent residence abroad throughout the fiscal year and have no permanent residence in Albania.

Income subject to tax. Individuals are subject to tax on various categories of income, including the following:

• Employment income

• Business income

• Investment income

These categories of income are described below.

Employment income. Employed persons are subject to income tax on remuneration and all benefits received from an employment arrangement, including the secondment of employees.

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

• Revenue realized by self-employed individuals rendering certain professional services, to resident entities or to permanent establishments of nonresident entities if either of the following conditions are satisfied:

80% or more of the revenues are generated directly or indirectly from a single client.

90% or more of the revenues are generated from less than three clients.

All benefits related to the employment arrangements are taxable, regardless of whether provided in cash or in kind, except for in kind benefits, including meals, work devices, medical treatments and other benefits made available to all employees under similar conditions. Certain other exemptions apply to compensation for expenses, such as per diems, and other remuneration received by the employees.

The sum of all income realized from employment is taxed on an annual basis.

Business income. Self-employed individuals and sole traders are subject to income tax on the income derived from their business activities, including passive revenues connected with their business activities, capital gains from the sale of business assets or business activities and from the revaluation of business assets contributed in kind to the capital of a company, either at its establishment or capital increase. Business income is taxed at the difference between the gross income from business less business expenses supported with fiscal documentation.

Alternatively, taxpayers with annual turnover below ALL10 million may opt to not keep books and records and deduct expenses at a percentage of their revenue, based on their activity. The following are the percentages:

• 60% of income for production activities

• 90% of income for wholesale trading activities

• 70% of income for the retail trade of goods and individual transport activities

• 60% of income for the activities of bars, restaurants, discos and similar establishments.

• 50% of income for services and crafts activities

• 30% of income for self-employed individuals rendering professional services

Investment income. Income from investment realized by individuals includes the following:

• Income from interest, dividends, royalties and rentals

area, as indicated in the reference table published by the Albanian Institute of Statistics for the main Albanian cities.

Transfers of quotas or shares, securities, and financial instruments. Capital gains derived from transfers of quotas or shares, securities, and financial instruments are taxed at a rate of 15% on the difference between the sales value and the acquisition cost. For listed securities, the sale and purchase values are determined by the market price at the moment of the transfer. For shares, quotas, securities and financial instruments acquired through inheritance or donation, the acquisition cost is the taxable value of these assets at the moment of their acquisition.

Capital losses. Capital losses may be offset against capital gains realized in the same tax year. Capital losses may not be carried forward.

Deductible expenses. In general, the annual gross amount of income is subject to tax and the following limited deductions apply:

• ALL600,000 for annual revenue up to ALL600,000

• ALL420,000 for annual revenue between ALL600,000 and ALL720,000

• ALL360,000 for annual revenue above ALL720,000

• ALL48,000 for every child under 18

• Up to ALL100,000 for tuition fees for children in case the annual revenue is up to ALL1.2 million.

Rates

Employment income. Salaries and compensation relating to employment are taxed at the following rates.

Business income. Business income of traders and self-employed individuals is taxed at the following rates:

Until 2029, taxpayers with annual turnover up to ALL14 million (approximately EUR140,000) are subject to 0% income tax.

The tax base equals the difference between total gross income and total deductible expenses. Self-employed individuals and sole traders 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 31 March of the following year.

Self-employed individuals must register as entrepreneurs with the National Business Centre for tax purposes. Until 2029, businesses with annual turnover up to ALL14 million are subject to 0% income tax. A reduced tax rate of 5% applies to businesses operating in the agriculture sector or the automotive industry until 2029, and to business engaged in software production and development until 2025. 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.

Investment income. Income from investment is taxed at the following rates:

Income type Tax rate (%)

Dividends 8

All other income 15

No deductions shall apply to investment income.

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 accommodations 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 entities 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.

Greece Netherlands United Arab

Hungary North Macedonia Emirates

Iceland Norway United Kingdom

India*

* 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. Visa regime

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 employment 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, or to science researchers, sports players, athletes, investors navigation crews or certain others.

The following types of persons can enter, stay and travel through Albania up to 90 days within a 180-day period without a visa:

• European Union (EU) and Schengen area citizens

• Citizens of countries exempted from the Schengen visa requirement as a result of the liberalization of the visa regime

• Holders of a valid multi-entry Schengen, UK or US visa to the extent that such visa has been previously used in one of these jurisdictions

• Holders of a valid residence permit in one of the Schengen Member States

• Citizens of countries with which Albania has entered into international agreements, such as citizens of Armenia, Azerbaijan, Belarus (citizens of Belarus may enter Albania without a visa and stay up to 90 days within a calendar year), China Mainland, Kazakhstan, Kosovo, Serbia, Türkiye and Ukraine

• Citizens of certain jurisdictions, such as Bahrain, Oman, Qatar, Saudi Arabia and Thailand, for the period of 6 March 2024 through 31 December 2024 and citizens of India for the period of 1 April 2024 through 31 December 2024

• Citizens who have a 10-year residence permit, issued by the competent authority of the United Arab Emirates, valid not less than one year from the moment of entry

• Other persons, based on the principle of reciprocity as enacted by a Council of Ministers’ decision

G. Combined work and residence permits (single permit)

Law 79/2021 on Foreigners, which entered in force in 2021, provides for a combined work permit and residence permit for foreign citizens intending to work and reside in the country. The Albanian authorities started the full implementation of the law in March 2023. The foreigners are no longer required to submit two separate applications for employment declaration (EU/Western

Balkan [WB]/Schengen countries’ citizens) or work permit (nonEU/WB/Schengen countries’ citizens) and residence permit. The single permit is available to employment seekers who have an employment agreement or a service agreement, to digital nomads and to individuals residing in the country for other purposes (voluntary services, athletes or investment purposes).

Such application is submitted online through the e-governmental portal (e-Albania) together with proof of payment of the administrative fee. The maximum timeline for the processing of the combined permit is 12 weeks.

For EU/WB/Schengen countries’ citizens, the online application for the single permit should be performed at least one calendar day prior to the start date of the work. Employees should be registered with the local payroll from the moment of application and may start working the day after.

For non-EU/WB/Schengen countries’ citizens, prior to applying for the single permit, a job vacancy should be published with the Labour Office for seven days. On receiving the confirmation from the latter, the online application for single permit should be filed at least 10 calendar days (a longer period [for example, 14 days] is recommended) prior to the planned start date of the work as indicated in the employment contract. The above-mentioned citizens should be registered with the local payroll only after the receipt of the approval from the Labour Office and then they may start working. If a visa is required, the non-EU/WB/Schengen countries’ citizens may start working one calendar day after the registration with the local payroll, but in any case, after the visa issuance.

The following are the main types of the single permit:

• Single permit as an employee: such permit should be obtained by foreigners who are locally hired in the country. This permit is issued with a validity of three months, six months or one year.

• Single permit for intra-corporate transferee: such permit should be obtained in the cases of assignment of foreign employees to a related party or group company in the country. In such case, the home-country employer must be established outside Albania and should have been in an employment relationship with the assignee for at least the last six months.

• Single permit for specific categories: such permit should be obtained in cases in which an individual plans to visit Albania for a short-term period (that is, up to 60 days within one year) and provide certain services such as consultancy, audit, entertainment, installation of machinery or constructions related to equipment delivered by a foreign entity and repair services related to such equipment and machinery (in this case, registration with the local payroll is not required).

As part of the Open Balkan initiative, Albania, North Macedonia and Serbia signed an agreement aiming to simplify the procedures for entry, employment and residency for the citizens of each country within the territories of the others. Although the agreement was signed in 2021, the launch of the online portal in Albania did not occur until mid-September 2024. Eligible nationals of North Macedonia and Serbia may submit a request through

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