Tax incentives are one of the most important stimuli for increasing the inflow of capital in the form of domestic and foreign direct investment (FDI) into a host country. Besides investment promotion incentives are the element that boos the ability of a given economy to attract FDI.
The information below aims to provide potential investors with details on the environment in which they plan to conduct their business. However, if you plan to make a specific decision, please feel free to ask for more detailed information.
Based on the comparative matrix of incentives for investments in the Western Balkans, WB6 drafted and published by Albania Investment Council these are the tax incentives by sector:
Corporate profit tax: 15 percent
Income tax on interest: 15 percent
(Starting 1 January 2021 small businesses with an annual turnover that does not exceed Lek 14 million are exempt from simplified tax profit. The Corporate Income Tax rate applied to taxpayers with an annual income over Lek 14 million remains 15 percent on the taxable profit. The corporate income tax rate will remain unchanged for taxpayers, who are subject to a five percent rate tax (ICT/software developers, the automotive industry, and certified agritourism and agriculture units)
Personal income tax:
Lek 0 to 30,000 – 0 percent
Lek 30,001 to 150,000 – 13 percent of the amount over Lek 30,000
Over Lek 150,000 – 23 percent of the amount over Lek 150,000 + Lek 15,600
The social contribution of the employer: 16.7 percent
The social contribution of the employee: 11.2 percent
Value Added Tax (VAT): 20 percent, 6 percent in the tourism sector
Tax Loss Carry Forward: Carried forward for 3 consecutive years
VAT reimbursement: Immediate or from 30 – 60 days.
VAT exempt when imported:
1. Agricultural machinery and equipment, for inward processing regime and agribusiness;
2. Machinery for investment ≥ €360,000
Import of machinery and equipment:
a) To perform investment contracts of equal or greater value more than Lek 50 million;
b) To perform investment contracts in the active processing sector and agribusiness, whatever the value of the investment; and
c) The importation of production machinery by the subjects of the simplified profit tax.
Exempt from customs duties on imports of raw materials and semi-finished goods intended for export. (Suspension of import duty and VAT on goods imported under the inward-processing procedure)
Economic Zones (Technical and Economic Development Areas, TEDAS)
Two zones in the process but not active (Spitalla and Kopliku)
Fiscal incentives within Economic Zones
1. 50 percent reduction of profit tax for the first 5 years.
2. Entry and exit of goods according to the provisions of the Customs Code.
3. Deductible expenses 20 percent of the annual capital for the first three years.
4. The supply of Albanian goods in the zone is considered as export supply at zero VAT rate.
5. The developer is exempted from the tax on infrastructure effect
6. Buildings are exempted from immovable property tax for 5 years.
7. The developer and user are exempted from the property transfer tax
Non-fiscal incentives within Economic Zones
1. Expenses for salaries and social contributions of the employer are recognized at 150 percent of their value during the first fiscal year. Additional expenses for salaries in the following years are recognized as expenses at 150 percent of their value.
2. Training costs are considered as deductible expenses at twice their value for 10 years.
3. Research development costs are considered deductible expenses at twice their value for 10 years.
The assisted procedure by AIDA as per sectors and value of the investment:
1. Energy and mining, transport, infrastructure, electronic communications, urban waste, for investments ≥ € 30 million;
2. Tourism at least 80 new jobs, TEDA ≥ € 5 million;
3. Agriculture and fisheries ≥ € 3 million and at least 50 new jobs;
4. Priority Development Areas ≥ € 1 million at least 150 jobs.
Special approval procedure by the Government and expropriation for:
1. Investments ≥ € 50 million for the above sectors;
2. for investments ≥ € 10 million and 600 jobs in the PDAs.
3. for every investment ≥ € 100 million
Rental of state property with 1 Euro
Tax on profits 5 percent for Legal Entities – Agricultural Cooperation Companies
6 percent VAT on Accommodation Structures (Bed + Breakfast);
6 percent VAT on Any Supply Within “Hotel/Resort 5*, Special Status”
Structures (Brand Name)
Exemption from Building Tax and Impact Tax on Infrastructure
Hotel/Resort 5*, Special Status” (Brand Name)
Exemption from Profit Tax, for 10 years for those Structures, “Hotel / Resort 4 * and 5*, Special Status” Eligible for Special Status until December 2024.
6 percent VAT for Certified Entities in agrotourism (Sleeping + Restaurant (Non-Drinking))
Infrastructure Impact Tax Exemption for Agro-Tour Operators Who Will Invest in this area.
From January 1, 2018, For Certified Entities In agro-tourism Profit Tax decreased from 15 percent to 5 percent.
5 percent tax on profit on software production/development
Source: Albania Investment Council
Last updated: January 21, 2021