Albania operates a progressive tax system that includes obligations for both employers and employees related to income and social contributions. Employers play a crucial role in this system by calculating, withholding, and remitting various taxes and contributions on behalf of their employees to the relevant authorities. Understanding these requirements is essential for compliance and smooth operations when employing staff in the country.
The tax framework encompasses personal income tax, social security contributions, and health insurance contributions. These are primarily based on an employee's gross salary, with specific rates and thresholds determining the final amounts due from both the employer and the employee. Adhering to the established deadlines and reporting procedures is mandatory for all employers operating within Albania.
Employer Social Security and Payroll Tax Obligations
Employers in Albania are responsible for contributing to both social security and health insurance funds based on their employees' gross salaries. These contributions are calculated monthly. There is a minimum and maximum threshold for the calculation base. For 2025, the minimum monthly gross salary base for contributions is expected to be ALL 45,000, and the maximum monthly gross salary base is expected to be ALL 310,000. Contributions are calculated on the gross salary amount falling within this range.
The employer's contribution rates for 2025 are as follows:
| Contribution Type | Employer Rate |
|---|---|
| Social Security | 11.2% |
| Health Insurance | 1.7% |
| Total | 12.9% |
These rates are applied to the employee's gross salary, capped at the maximum contribution base.
Income Tax Withholding Requirements
Employers are required to withhold personal income tax (PIT) from their employees' gross monthly salaries. Albania utilizes a progressive tax rate system for employment income. The tax is calculated on the employee's gross salary after deducting their portion of social security and health insurance contributions.
For 2025, the personal income tax rates on employment income are structured as follows:
| Monthly Taxable Income (ALL) | Tax Rate |
|---|---|
| Up to 50,000 | 0% |
| From 50,001 to 200,000 | 13% |
| Above 200,000 | 23% |
The employer calculates the monthly PIT based on the employee's taxable income and withholds this amount from the net salary paid to the employee.
Employee Tax Deductions and Allowances
Employees in Albania are subject to deductions for their share of social security and health insurance contributions, which are withheld by the employer. For 2025, the employee contribution rates are:
| Contribution Type | Employee Rate |
|---|---|
| Social Security | 9.5% |
| Health Insurance | 2.3% |
| Total | 11.8% |
These rates are applied to the gross salary base, subject to the same minimum and maximum thresholds as the employer contributions (ALL 45,000 to ALL 310,000 per month for 2025).
The total employee contributions (11.8%) are deducted from the gross salary before calculating the personal income tax. There are generally limited personal allowances or standard deductions available to employees that would further reduce their taxable income from employment, beyond the mandatory social and health contributions.
Tax Compliance and Reporting Deadlines
Employers must comply with monthly reporting and payment obligations. The key deadlines for payroll taxes and contributions are typically the 20th of the month following the payroll period. By this date, employers must:
- Submit the monthly payroll declaration (Declarata e Pagave) electronically to the tax authorities.
- Pay the withheld personal income tax.
- Pay both the employer's and employee's social security and health insurance contributions.
Annual reporting requirements also exist, consolidating the monthly information. Accurate and timely submission of declarations and payments is critical to avoid penalties and interest.
Special Tax Considerations for Foreign Workers and Companies
Foreign individuals working in Albania are generally subject to the same income tax and social security rules as Albanian citizens if they are considered tax residents. Tax residency is typically determined by physical presence in the country for more than 183 days within a calendar year. Non-residents are taxed only on their income sourced in Albania.
Foreign companies employing individuals in Albania may need to register as an employer for tax and social security purposes, even if they do not have a permanent establishment. This is particularly relevant when engaging employees directly. Utilizing an Employer of Record service can help foreign companies navigate these complexities, ensuring compliance with local registration, payroll, tax withholding, and contribution obligations without needing to establish a local entity. Double Tax Treaties may offer relief from double taxation for foreign workers from treaty countries, but the employer's withholding obligations generally remain unless specific exemptions apply and are properly documented.
