The tax system in the Republic of Albania consists of a package of laws, instructions, regulations, tax agreements with other countries, which reflect the types of taxes and fees applied in Albania, their levels, procedures for establishing, amending and removing taxes, procedures for assessment and collection of tax liabilities, as well as forms and methods of tax control.
Albanian legislation provides for the main taxes and duties as follows:
- Corporate Income Tax, Simplified Tax on Small Business, Personal Income Tax, Value Added Tax, Withholding Tax, Excise Tax, Local Taxes, National Taxes.
- The entrepreneur, as a taxpayer, is obliged by law to pay taxes, fees or social and health insurance contributions, as well as to withhold tax.
- A tax regime is independent of the form of organization or legal personality of a person with the status of trader. Determinant is the turnover (turnover) realized during a tax period (calendar year).
According to the tax regime to which they belong, as well as the tax responsibilities they have for each regime, entrepreneurs are divided into the following categories:
- Taxpayers of profit tax and value added tax
- Taxpayers of simplified profit tax and value added tax (VAT)
- Simplified profit taxpayers.
The following are subject to the income tax:
- Legal entities and partnerships that are registered for VAT
- Legal entities, as well as other partnerships of persons established or organized on the basis of a foreign law and operating in the territory of the Republic of Albania
- Any other person, regardless of status or legal form of registration or recognition, when he is subject to value added tax, unless this person is subject to simplified income tax for small business.
Obligation to pay income tax
- Resident taxpayers are subject to income tax, on profits realized from all sources inside and outside the territory of the Republic of Albania.
- Non-resident taxpayers are subject to income tax, on profits realized from all income, with source in the Republic of Albania
Income tax rates are:
- 0% for small businesses with annual turnover up to 5 million ALL
- 5% for taxpayers with annual turnover from 5 million to 14 million ALL
- 15% for taxpayers with annual turnover over ALL 14 million
- For legal entities, which exercise activity for the production/development of software, the income tax is 5%.
- Income tax is 5% for taxpayers whose activity is certified as agrotourism.
- Income tax is 5% for taxpayers whose activity is in the field of automotive industry.
- Accommodation structures "Hotel / Resort with four and five stars, special status", as defined in the legislation in the field of tourism and which are holders of an internationally registered trademark "brand name", Excluded from profit tax, for a 10-year period for those structures, which receive special status until December 2024. The effects of the exemption start at the moment of starting the economic activity of the accommodation structure, but not later than 3 years from receiving the special status.
The dividend tax rate is 8%.
Every taxpayer who conducts a business, through which a turnover of less than or equal to ALL 8 (eight) million is realized during the fiscal year, is subject to the obligation to pay a simplified income tax for small business.
- The tax rate applicable on taxable profit, for taxpayers who are subject to the simplified tax on small business profit, with an annual turnover of 5 (five) to 8 (eight) million ALL, is 5%.
- Simplified income tax, for taxpayers with an annual turnover from 0 to 5 million ALL, is 0 ALL per year.
Personal income tax rates are:
- up to 30,000 ALL - 0%
- from 30,001-150,000 ALL - 13%
- over 150,000 ALL - 23%
Social security and health insurance contributions
For the purposes of calculating social security contributions, the minimum monthly wage is 26,000 Lekë (approximately 210 euros) and the maximum monthly wage is 114,670 Lekë (approximately 940 euros).
Under current legislation, the employer must pay monthly for each employee (except small firms that pay quarterly) to the Social Insurance Institute, a total contribution equal to 27.9% of salary income received by the employee.
The overall contribution rate is split between the employer at 16.7% and the employee at 11.2%. An employee's contributions are deducted from their salary and paid by the employer.
Value Added Tax (VAT) is a general tax on the consumption of goods and services.
Value Added Tax (VAT) is subject to every resident in Albania, whose annual turnover of economic activity is above the value of 2 (two) million ALL, which is the minimum registration limit for VAT.
Value added tax rate
The standard rate of value added tax on supplies of goods and services, which is applied as a percentage of the taxable value, is 20%.
The following cases are excluded:
- The minimum VAT registration limit is 0 (zero) and all are taxable persons registered for VAT, taxable persons who provide services in economic activities by professions such as lawyer, notary, doctor, dentist, pharmacist, nurse, veterinarian, architect, engineer, doctor, designer, economist, agronomist, registered accounting expert, asset appraiser, regardless of annual turnover.
- The minimum VAT registration limit for agricultural producers that is subject to a special regime, the compensation scheme for agricultural producers, is the turnover of 5 (five) million ALL in a calendar year.
Value added tax is subject to:
- all supplies of goods and services made against payment, within the territory of the Republic of Albania, by a taxable person;
- all imports of goods in the territory of the Republic of Albania.
The tax rate of 0% VAT is applicable to:
- export of goods outside the territory of Albania
- international transport;
The tax rate of 6% VAT is applicable to:
- supply and service provided within the accommodation structures "5-star Hotel / Resort, with special status", as defined in the legislation of the field of tourism and which are holders of an internationally registered trademark "brand name". All other Hotels that are not "5 stars or hold a special status" will be subject to VAT at the rate of 20% for all their services, except accommodation services for which VAT is 6%
- supply of advertising service from audiovisual media
- the supply of licensed public passenger transport vehicles by bus with nine (9) plus one (1) seats or more, with electric motor only, is 6% until 31 December 2021. From 1 January 2022 the rate of reduced value added tax applicable to this supply is 10%
Residents in Albania, central government bodies and local authorities, non-profit organizations and any other entity recognized by the legislation in force, will declare and withhold tax at the rate of 15% of the gross amount of payments coming from a source in the Republic of Albania.
The excise tax applies to a limited number of products for mass consumption, in particular to tobacco and its by-products, oil, alcoholic beverages, soft drinks and coffee, as well as perfumes and deodorants. If the goods are imported, the excise tax is calculated at the customs value plus customs duties.