AlbaniaTax Obligations Detailed

In Albania, employers face several key tax obligations related to payroll, corporate income, and social security.

Payroll Taxes

• Employment Income Tax: Withholding and remitting employment income tax is a primary employer responsibility. As of January 1, 2024, the tax rate is 13% for annual income up to ALL 2,040,000 and 23% for income exceeding this threshold. The tax is withheld monthly and remitted by the 20th of the following month.
• Annual Income Tax Return: Employers are generally not responsible for filing annual income tax returns for their employees. However, employees must file a return if their annual gross income from all sources exceeds ALL 1,200,000, if they have multiple employers, or if they have other untaxed income exceeding ALL 50,000.

Corporate Income Tax (CIT)

• CIT Return and Payment: The CIT return and final payment are due by March 31st of the following year.
• Estimated Payments: Estimated CIT payments are due on the 15th of each month or at the end of each quarter.

Social Security Contributions

• Employer Contributions: Employers contribute 16.7% of the employee's gross salary for social security, split into 15% for social insurance and 1.7% for health insurance.
• Employee Contributions: Employees contribute 11.2% of their gross salary, with 9.5% going towards social insurance and 1.7% to health insurance.
• Payment Deadline: Both employer and employee social security contributions are withheld by the employer and remitted by the 20th of the following month.
• New Hire/Termination Reporting: Employers must electronically notify the tax authorities within 24 hours before a new employee starts and within ten days after an employee leaves. They must also submit an electronic list of current employees.

Value Added Tax (VAT)

• VAT Declaration and Payment: If applicable, the VAT declaration and payment are due by the 14th of the month following each quarter.

Other Employer Obligations

• Payroll Cycle: The payroll cycle is monthly, with salaries paid by the last working day of the month. Hourly, daily, or weekly employees are paid every two weeks.
• Minimum Wage: The current (as of 2024) national monthly minimum wage in Albania is ALL 30,000.
• Work Hours and Weekdays: The standard working week is 40 hours, typically spread across Monday to Friday, with an 8-hour workday.
• Sick Leave: Employers pay 80% of the employee's salary for the first 14 days of sick leave. Employees can take sick leave for the entire duration of their illness, certified by a doctor.
• Public Holidays: As an employer, it's essential to stay updated on the official public holidays in Albania to ensure accurate payroll calculations and compliance. There are numerous public holidays throughout the year, some of which include New Year's Day, Summer Day, Nevruz Day, Easter (both Catholic and Orthodox), Labor Day, Eid al-Fitr, Eid al-Adha, Saint Teresa Sanctification Day, Flag and Independence Day, Liberation Day, National Youth Day, and Christmas Day. Some holidays have additional days off attached.

This information is current as of February 5, 2025, and may be subject to change. Always consult with local authorities or a tax professional for the most up-to-date information.

In Albania, employee tax deductions encompass various areas, including social security contributions, income tax, and specific allowances for children and education.

Social Security and Healthcare Contributions

• Employee Contributions: Employees contribute 11.2% of their salary for social security, split into 9.5% for social insurance and 1.7% for health insurance.
• Employer Contributions: Employers contribute an additional 16.7% of the employee's salary, divided into 15% for social insurance and 1.7% for health insurance.

Income Tax

• Progressive Rates: A progressive income tax system is in place with two tax brackets. As of January 1, 2025:
  • 13% for annual income up to ALL 2,040,000
  • 23% for annual income exceeding ALL 2,040,000.

Deductions and Allowances

• Standard Deductions: Annual standard deductions are applied based on income levels:
  • ALL 600,000 for annual income up to ALL 600,000
  • ALL 420,000 for annual income between ALL 600,001 and ALL 720,000
  • ALL 360,000 for annual income exceeding ALL 720,000.
• Education Expenses: An annual deduction of ALL 100,000 is available for children's education expenses if the family's annual income is less than ALL 1,200,000.
• Child Allowance: An annual deduction of ALL 48,000 is available for each dependent child under 18.
• Voluntary Pension Contributions: Deductible up to limits defined by the Law 'On Voluntary Pension Funds'.

Additional Considerations for Employers

• Tax Withholding: Employers are responsible for withholding employee income tax and social security contributions.
• Payroll Reporting and Payment: Employers must declare and remit payroll taxes by the 20th of the following month.
• Multiple Employers: If an individual has multiple employers, only the primary employer applies deductions. Other employers calculate tax without deductions.

Income Declaration

• Threshold and Deadline: Individuals with annual gross income exceeding ALL 1,200,000 must file an annual income declaration by March 31st of the following year (e.g., March 31, 2026, for the 2025 tax year).
• Penalties: Late filing penalties apply.

Disclaimer: This information is current as of February 5, 2025, and is subject to change. Consult with a tax professional for personalized advice.

In Albania, Value Added Tax (VAT), known as Tatimi mbi Vleren e Shtuar (TVSH), is levied on most goods and services.

VAT Rates

• Standard Rate: 20% (Applies to most goods and services)
• Reduced Rate: 6% (Applies to specific goods and services, including accommodation services, advertising services by audiovisual media, public passenger transport, and books)
• Zero Rate: 0% (Applies to exports, certain supplies to non-profits and international organizations, and specific international transactions)

VAT Registration

• Threshold: Businesses with an annual turnover exceeding ALL 10 million are required to register for VAT.
• Voluntary Registration: Businesses with annual turnover between ALL 5 million and ALL 10 million can register voluntarily but must remain registered for at least two years.
• Time Limit for Registration: Businesses must register within 15 days of exceeding the threshold.

VAT Filing and Payment

• Filing Frequency: Monthly
• Sales and Purchase Ledgers Deadline: 10th day of the following month
• VAT Return Deadline: 14th day of the following month
• Payment Deadline: 14th day of the following month
• Method: Electronic filing is mandatory. Returns are pre-filled based on sales and purchase data but can be amended.

Exempt Goods and Services

Certain goods and services are exempt from VAT, including:

• Postal services
• Medical care
• Human organs, blood, and milk.

VAT on Digital Services

Non-resident providers of electronic services to Albanian consumers are subject to VAT, with no registration threshold.

Reverse Charge Mechanism:

The reverse charge mechanism applies to certain B2B services where the recipient is liable for reporting and paying VAT.

Penalties:

Penalties are imposed for non-compliance with VAT regulations, including late filing and payment.

Albania offers several tax incentives to attract investment and stimulate economic growth. These incentives target various sectors, including tourism, technology, and agriculture.

Tax Incentives for Businesses

• Reduced Corporate Income Tax Rate for Specific Industries:
  • Software Companies: A reduced corporate income tax rate of 5% applies until December 31, 2025, for software production/development companies registered before January 1, 2024.
  • Automotive Companies: A reduced corporate income tax rate of 5% applies until December 31, 2029.
  • Agricultural Cooperative Companies: A reduced corporate income tax rate of 5% applies.
  • Certified Agrotourism Entities: A reduced corporate income tax rate of 5% applies until December 31, 2029.
• Tax Incentives for Technological Industrial Development Zones: Companies operating within designated zones benefit from a 50% reduction in profit tax for the first five years of operation. Additionally, they can deduct 20% of annual capital expenses for the first two years.
• Tax Exemption for "Four and Five Star Hotels with Special Status": Hotels with this status and an internationally recognized trademark are exempt from corporate income tax for ten years, starting from the commencement of activity (but no later than three years from obtaining the special status). This exemption has been extended to the end of 2026. These resorts also benefit from exemptions from property and infrastructure taxes and a reduced 6% VAT rate.
• Tax Exemption on Dividends Reinvested: Dividends and profit shares paid to resident taxpayers are exempt from corporate income tax when designated for reinvestment.
• Loss Carry Forward: Taxpayers investing more than ALL 1 billion in qualifying projects can carry forward losses for five consecutive years.
• Participation Exemption: Domestic and foreign-source dividends received by resident entities are tax-exempt if the recipient holds at least 10% of the payer company's shares or voting rights.
• VAT Exemptions and Credits: Specific VAT exemptions are applicable to certain industries, such as machinery imports for investment contracts exceeding ALL 50 million and materials used in oil and gas platform drilling, solar panels producing hot water, or specific animal products and equipment. VAT credit for fuel is also available in some sectors.

Tax Incentives for Individuals

• Foreign Tax Credit/Relief: Relief is granted for foreign tax paid on foreign-source income, calculated on a per-country basis and credited against Albanian tax.
• Tax Exemption for Foreign Pensioners: Foreign citizens of Albanian origin, EU citizens with residency, or naturalized Albanian citizens who are residents are exempt from income tax on foreign pensions.

Application Procedures

Specific application procedures vary depending on the incentive. Consult official government resources, such as the Ministry of Finance and Economy or the Albanian Investment Development Agency (AIDA), for detailed information on eligibility criteria and application requirements for each incentive.

General Information

As of February 5, 2025, these are the known tax incentives. Be aware that tax laws and regulations can be subject to change. Always confirm current regulations with official sources. It's recommended to consult with tax professionals for personalized guidance on navigating Albanian tax incentives.