Albania to Jump-Start Automotive Industry with Tax Incentives

TIRANA, February 25

The new fiscal package that came into force in January includes specific incentives for the automotive industry that define a corporate income tax rate of five percent instead of 15 percent.
However, a second verdict adopted by the government says that not all the subjects operating in the automotive sectors qualify as beneficiaries of the tax incentive. The criteria range from the type of activity to the number of employees.
The decision defines that the new tax will apply to companies that make parts used in automotive manufacturing. The automotive sector does not include auto maintenance and repair services. Thus, the excluded subjects do not qualify as beneficiaries.

Moreover, the decision ranks the eligibility criteria and application process for the legal subjects operating in the automotive industry.

The subject must specify the economic activities listed at point no. 1 of this decision at the scope of the entity’s activities
To achieve not less than 100percent of the annual turnover in the economic activities listed at point no. of the decision.
To offer jobs an annual average of at least 250 people.

The subject that meets the criteria applies for the tax-exempt at the regional tax office.
Moreover, the law defines that the subject must operate only in the automotive industry. In the case when the company operates services different from the automotive sector, it should register as a separate legal taxpayer.

Currently, several automotive manufacturers are operating in Albania. Yet the industry is new and in its first stages.
Therefore, it’s difficult to compete with the capacities and potential of the regional automotive sector.
Moreover, the report points out that countries like North Macedonia and Serbia have a well-established automotive industry and now they focus on strengthening their expertise and technical know-how.
The relation for the initial draft law on some changes to the law on Income Tax that was part of the Fiscal Package 2020 defined that fiscal incentives for the automotive industry aim not only at increasing Albania’s competitiveness in the region but also at attracting more investments in this sector. Meanwhile, tax cuts would help to create favorable conditions to further improve the business environment for the Albanian automotive sector.

The automotive and machinery industry has been expanding in Albania

PSZ Albania GmbH was founded in 2012. The company is part of German Group PSZElectronic GmbH. It specializes in cable assembly, leading elements, electronic and electromechanical components for or heating systems and medical engineering systems.
Moreover, Forschner Albania, part of Forschner GmbH a company that specializes in cabling systems, SCR systems, precision turned parts, electromechanical systems, and sustainable own developments are expected to open its third plant in Albania.
In the meantime, the French automotive supplier Delmon Group inaugurated its production plant, a $1.7 million investment, in Elbasan in March. The unit manufactures rubber parts for the automotive business, including exhaust hangers, stabilizer bar bushing, seals and dumpers.
Meanwhile, South Korea’s Yura signed a leasing contract with Albanian authorities in 2019 and it’s expected to start operations at its production unit in Fier during March.

Read also: Investment Incentives in Albania

Albania has Lowest Corporate Income Tax for ICT Companies among WB6

Source: monitor