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Albania

Lorena Kurti & Christos Massos
Eurofast Global
Nicosia

Lorena Kurti & Christos Massos of Eurofast Global explain how Albania has developed its tax system in recent years, with particular reference to real estate

Albania has taken giant strides since its transition from a communist regime towards a market-based economy continually sustaining strong economic growth since 1997.

A country rich in natural resources

Albania's best kept secret is that it is one of the wealthiest lands in natural resources per square mile in the world. Rich in oil, natural gas, gold, platinum, copper, with the largest chrome reserves in Europe, the country's other minerals include bauxite, nickel, cobalt, magnesium, ores, marble, and granite. Albania is rapidly building its infrastructure with the aim of being the only country in the world to produce all of its energy from hydropower, wind power and Solar power (Doing Business in Albania).

Albania has benefited from greatly improving media connections to all Albanian cities and throughout its business centres. GSM mobile communications networks in Albania now offer almost complete coverage for the whole country. These improvements and other incentives discussed below are attracting foreign investment from all over the world.

Investment reforms and tax incentives

• Corporate income tax reduced from 20% to 10% from January 1 2008.
• Increased protections for investors;
• Expanding domestic economy and exports;
• Relative low inflation rate (2.2%, Bank of Albania website as of July 2009) and low labour costs,
• Investment opportunities though privatisation.
• Albania now ranked 86 out of 181 jurisdictions on a scale relating to ease of doing business within the territory (estimated rank of 2009 - Doing Business in Albania)
• Improved infrastructure – major road developments in 2008. It is estimated that at some point in 2009 the €600 million ($860 million) highway project connecting the Albanian port of Durrës with Kosovo will be completed.
• Corporate income tax relief may be granted for certain public projects, to be decided on individual circumstances of each project.
• Improved energy provision – Power cooperation agreements were signed by the Italian and Albanian governments last year for the construction of re-gasification plants and wind farms to produce cheaper electricity for the Albanian, Balkan and Italian people.(data from Albania – European Business 2009)

Business registration (ALBINVEST Govt.)

A major initiative introduced by the Ministry of Economy Trade and Energy (METE) is the reform of business registration procedures, reducing both the cost and time required to register a new business in Albania.

The law on business registration reform enacted on May 3 2007 created the National Registration Center (NRC) with the following advantages for foreign and domestic businesses;

• Reduced cost in registering a new business
• Combined tax, social insurance, health insurance and labour registration in one simultaneous application.
• District NRC offices enabling local business to apply within their locality.
• Free public access via internet to the national Commercial Registry for information purposes.

The NRC was established with the sole purpose of providing a one-stop-shop business registration solution serving as a single portal for all types of businesses throughout Albania (ALBINVEST Govt.).

Real estate taxation

Every physical person, juridical person, Albanian or foreign, owner of real estate created in the Albanian territory is subject to real estate taxation, independently of their exploitation rate. The only exclusion is when the law provides this.

Real estate taxation includes these taxes:

• Taxes on buildings
• Taxes on agricultural land

Real estate tax basis

The tax basis on buildings is the building surface or part of building surface in square metres on and under the ground level and for each floor. The surface under a taxpayer's property is predefined according to the relevant documents approving this ownership.

The tax basis on agricultural land is the agricultural land surface, in hectares, under a taxpayer's property. The surface under a taxpayer's property is predefined according to the relevant documents approving this ownership.

Excluded from the tax on buildings:

• State properties, and local administration units used for non-profit purposes.
• Dwellings used by the leasee through unliberalised lease
• Buildings used by religious communities

Exluded from the tax on agricultural land:

• All the agricultural land seeded with orchards or vineyard for the first five years from when the plant was first put into the ground.

Tax on buildings

The tax on building covers square metres. The tax duty is calculated by multiplying the tax level to the taxable basis:

For the taxable basis effect, the minimal level of the tax in square metres, is given in the following table. For each minimal category of tax in square metres, the Municipal Council or the Commune Council may approve subcategories for the buildings within the territory under its administration.

Tax on agricultural land

The tax level is measured in hectares. The tax duty is calculated by multiplying the tax level with its basis. For each minimal category of agricultural land, the Municipality Council or the Commune Council may approve subcategories.

The indicative levels of tax, for each tax basis category are shown in the following table:

Lorena Kurti (Lorena.kurti@eurofast.net) in Eurofast Global in Tirana,Eurofast Global Albania; and Christos Massos (christos.massos@eurofast.net) of Eurofast Taxand in Nicosia, Cyprus