In Albania, employers have several tax responsibilities related to their employees' salaries. These include mandatory contributions to social security and health insurance.

Social Security Contributions

These contributions fund public pension plans and other social welfare programs. The employer contribution rate is 15% of the employee's gross salary.

Health Insurance Contributions

These contributions go towards public healthcare coverage. The employer contribution rate is 1.7% of the employee's gross salary.

Contribution Base

Albania has minimum and maximum salary levels for social security and health insurance contributions. The monthly minimum is ALL 34,000, and the maximum is ALL 149,953.

Withholding and Remittance

Employers must withhold employees' contributions and remit both the employee and employer portions to the Albanian tax authorities. The payment deadline is the 20th of the month following the month in which the salary was paid.

Additional Employer Obligations

Employers in Albania are required to maintain comprehensive payroll records in accordance with instructions from the Ministry of Finance. They are also responsible for withholding Personal Income Tax (PIT) from employee salaries and remitting this to the tax authorities.

Important Notes

Albanian labor and tax laws may change, so it's important to remain updated on the latest regulations. Consulting a tax expert or payroll specialist in Albania is recommended.

In Albania, employees have mandatory contributions deducted from their salaries. These include Social Security Contributions, which fund the country's public pension plans and other social welfare programs. The employee contribution rate for this is 9.5% of the gross salary.

Another mandatory deduction is the Health Insurance Contributions, which fund public healthcare access in Albania. The employee contribution rate for this is 1.7% of the gross salary.

Personal Income Tax (PIT)

Employees are also subject to Personal Income Tax (PIT), which employers must withhold from salaries. Albania uses a progressive tax system, meaning the more an employee earns, the higher the tax rate they pay. The current PIT structure in Albania is as follows:

• 0%: Monthly income up to 50,000 ALL
• 13%: Monthly income from 50,001 ALL to 60,000 ALL (on the portion above 35,000 ALL)
• 23%: Monthly income above 60,000 ALL is broken down as follows:
  • First 30,000 ALL is tax-free
  • Income from 30,001 ALL to 200,000 ALL is taxed at 13%
  • Income above 200,001 ALL is taxed at 23%, plus an additional fixed tax of 22,100 ALL

Calculation and Payment

The Social Security and Health Insurance contribution amounts are calculated based on the employee's gross salary. Albania sets monthly minimum and maximum salary levels for social security and health insurance contributions: the minimum is ALL 34,000, and the maximum is ALL 149,953.

Employers are responsible for withholding the employee's share of social security contributions, health insurance contributions, and PIT. These amounts are all remitted to the Albanian tax authorities by the employer. The payment deadline is the 20th of the month following the month in which the salary was paid.

In Albania, the standard VAT rate is 20%, which applies to most supplies of goods and services within the country.

Reduced VAT Rate

A reduced VAT rate of 6% applies in certain cases, including accommodation services, services certified as "agritourism", advertising services by audio-visual media, supply of books, and supply of electric engine buses licensed for public transportation with a capacity of nine or more people.

Zero-rated VAT

A 0% VAT rate applies to specific services such as export of services, services directly linked to import or export of goods, some operations linked to international transport of goods and passengers, and services for international organizations and their members.

VAT Registration

Businesses providing taxable services in Albania must generally register for VAT if their annual turnover exceeds a certain threshold (currently ALL 3,000,000). Voluntary VAT registration is also an option.

Taxable Transactions

VAT applies to service-related transactions including services supplied within Albania for a fee, services imported into Albania, services supplied for no fee by a taxable person (if the conditions apply), services supplied with consideration less than market value (if the involved parties are related), and business use of taxable services for private purposes ("self-supply").

VAT Invoicing

Taxable persons supplying services within Albania must issue VAT invoices that meet specific requirements detailed by the Albanian tax authorities.

VAT Returns and Payments

Businesses registered for VAT are required to file periodic VAT returns (usually monthly or quarterly). Payments for VAT due are generally made with the return.

Companies engaged in software production and development, agriculture-related activities, and automotive manufacturing enjoy a reduced Corporate Income Tax (CIT) rate of 5%.

Reduced CIT Rates

• Software Development: Companies in this sector enjoy a reduced CIT rate of 5%.
• Agricultural Businesses: Taxpayers engaged in agriculture and "agrotourism" businesses benefit from a reduced 5% CIT rate.
• Automotive Manufacturing: Companies in this sector are eligible for a reduced CIT rate of 5%.

Exemptions

• New Businesses: Newly established businesses may be completely exempt from CIT for their first few years of operation. The specific conditions and duration of this exemption can vary.
• Accommodation Structures: Accommodation facilities certified as "four and five-star hotels with special status" are granted a ten-year exemption from income tax, provided they receive the special status before December 2024.
• Technological and Scientific Parks: Businesses operating within these parks benefit from tax incentives, including a 0% CIT rate for 15 consecutive years and exemption from taxes for research and development (R&D) personnel.

Investment Incentives

• Large Investments: Investors who invest over ALL 1 billion in eligible business projects may benefit from the ability to carry forward tax losses for up to five consecutive years.
• Strategic Investments: Certain strategic investments may qualify for special tax treatment, including customs duty exemptions, profit tax exemptions, and other benefits.

Additional Incentives

• Participation Exemption: Domestic and foreign-source dividends and similar profit distributions that are received by resident entities are exempt from income tax.