24-04-2013

Taxation Of Individuals

Authors

  • Vojo Malo, Attorney at Law
    Managing Partner at Malo & Partners Law Firm
    Albana Tushe, Attorney at Law,
    Associate at Malo & Partners Law Firm

Taxation in the Republic of Albania is applied in national and local level. The tax obligation rises when the person generates incomes, becomes owner of a property or executes payments, which are subject to taxation by law. The personal identification number of the individual serves as the identification number for taxation purposes.

National taxes

Individual national taxes include the income tax, specific national taxes according to law no. 9975, dated 28.07.2008 “On national taxes”, and other taxes imposed by law. Individual income tax in the Republic of Albania is governed by law no. 8438, dated 28.12.1998 “On income tax”, as amended (hereinafter called “the Law”), and includes all types of individual incomes which are listed under the Law.

The general principle is that residents are subject to income tax for all income sources (inside or outside the Republic of Albania), while non residents are subject to income tax for income sources within the Republic of Albania, only.

Residency definition

Individuals having their inhabitation residence in the Republic of Albania or staying in the Republic of Albania for more than 183 days in a year, those being consecutive or not are considered tax residents.

Taxable incomes

The taxable incomes are categorized as follows:

  • salaries and other remunerations related to employment relationships
  • shareholders’ profits/dividends from the activity exercised in commercial companies
  • bank interests and interests gained from securities
  • incomes generated from copyright and intellectual property
  • incomes generated from emphyteusis, loans and leasing (excluding the case where such incomes are generated through a commercial activity)
  • incomes generated from transfer of ownership of an immovable property
  • incomes generated from gambling and casinos
  • incomes generated from the difference between the sale and purchase price of shares owned from a shareholder and transferred to another person
  • cash contributions for capital increase, which are generated from sources outside of the company which are not taxed before even though have been subject to taxation, and which are not accompanied from official documents showing their origin
  • incomes realized from subjects of small business which annual turnover amounts higher than 2 million ALL up to 8 million ALL, calculated as the difference between total incomes and deductible expenses.
  • other incomes which are not classified in the forms presented in Article 8 of the Law No. 8438 “On income tax”, as amended, which have been obtained by residents or non – residents, but which have originated in the Republic of Albania

Incomes exempted from taxation

The following categories of incomes are exempted from taxation:

  • incomes gained from the obligatory scheme of social and health insurance
  • allowances for individuals without incomes or with low incomes
  • students scholarships
  • compensations received in case of illness, misfortunes
  • compensations received in case of expropriation made by the state for public interests
  • financial compensations for the former owners and former politically convicted individuals
  • contributions paid by the employer for the life and health insurance of the employees
  • incomes exempted by the international agreements ratified from the Republic of Albania.

Tax rate

Salaries and other remuneration related to employment relations are taxed as per the tariffs shown in the following table:

Monthly taxable income Percentage  
Over Up to  
0 10,000  
10,001 30,000 +10% of the amount over 10,000 ALL
30,001 Higher +10% of the amount over 0 ALL

Dividends, interests from loans, deposits, or similar contracts, copyright and intellectual property incomes, gambling incomes, and all other remunerations or incomes are subject to a flat tax rate of 10%.

Incomes deriving from transfer of ownership title on immovable property are taxed with 10%, which is calculated on the taxable basis resulting as profit (difference between the sale price and purchase price).

Annual personal income declaration

Individual taxpayers, residents in the Republic of Albania who realize taxable income in the territory of the Republic Albania and abroad are obliged to submit the annual incomes’ declaration with the central tax administration. Same regulation is applied for non residents who generate taxable incomes from a source in the Republic of Albania. Individuals who realize gross income, from all sources, amounting less than 2,000,000 ALL (two million) are exempted from the obligation of filling and filing the annual incomes’ declaration.

The table here below shows the summary of gross taxable incomes and deductible expenses:

Type of income Type of deductible expense
Gross income from salary or remuneration Voluntary contributions with the voluntary pension fund and voluntary contributions of individual for the life and health, paid by the individual himself
Profit from small business activity Banking credit interest for purposes of education of the individual his children or other persons in care
Gross income from the dividend deriving from participation in commercial companies or business activities Medical expenses of the individual, his children or other persons in care, that are not covered from the securities scheme. Such expenses are covered for a limit of 8,532 ALL per person per year and cannot exceed the limit of 32,000 ALL for the whole family.
Gross income from lease and capital profits from sale of immovable properties under ownership of the individual  
Gross income from banking interests  
Net capital profit generated from investments in securities or real estate  
Gross amounts gained through gambling  
Gross income generated from intellectual property and other intangible properties  
Incomes from donations  
Gross incomes realised outside the Republic of Albania  
Other incomes  

The annual incomes’ declaration is filed with the regional tax directorate closest to the residence of the individual. It must be filled and filed within April 30 each year for the incomes generated during the previous year.

Other national taxes

According to law no. 9975, dated 28.07.2008 “On national taxes” following taxes are applied:

Description Amount in ALL
Issuing of certificates for internal use 50
Issuing of certificate for marriage execution in foreign language 200
Issuing of certificate of birth in foreign language 200
Issuing of marriage certificate in foreign language 200
Registration of foreign citizens after gaining the Albanian citizenship 2,000
Procedure of changing the name/last name 1,000
Holding the act of marriage 1,000
Procedure for separation/conjunction of families 1,000
  • Circulation tax on petroleum and gasoline is fixed 7 ALL per liter and applies to domestic production and import as well
  • Annual tax of used vehicles is calculated according to the formula: cylinder in cm3 x fixed coefficient as per the usage x fixed tax for the type of fuel. The latter is 25 ALL for the oil and 20 ALL for the petroleum. Vehicles with usage from 0 – 3 years are not subject to this tax.
  • Acts and stamps taxes are as follows:
  • Tax of carbon is 1,5 ALL per liter for the petroleum, 3 LL per liter for the gasoline, 3 ALL per kilogram for the cobles, 3 ALL per liter for the solar, 3 ALL per liter for the coal-oil, and 3 ALL per kilogram for the oil coke.

Exemptions

The following are exempted from the payment of the annual tax of used vehicles:

  • Vehicles under the ownership of embassies and international organizations which have the diplomatic status, accredited in the Republic of Albania, upon the reciprocity principle
  • Persons who declare within January of a current year that will not circulate with the vehicles during the calendar year or that will definitively stop the circulation and deliver the plate and circulation license of the vehicle
  • Payments of taxes of blocked vehicles upon decision of the court, public prosecutor etc. for the period during which the vehicle has been blocked
  • Cars of type 4+1 and cylinder not more than 2500 cubic, when these vehicle are transferred to the invalids or war veterans, work invalids, blind persons, that gain such status according to the law and use the vehicles for their personal needs only
  • Agricultural machineries.

Local taxes

Tax on immovable property

All individuals owning immovable property/ies in the territory of the Republic of Albania are subject to tax on immovable property. The tax is calculated as an annual obligation of the taxpayer and includes the tax on buildings and tax on agricultural terrain. The building tax basis is the construction surface (meters square) of the building or a part of it, including underground levels and each floor. The level of tax is fixed in ALL per meter square. Taxpayers owning or using buildings located within the territories which are approved as touristic villages are subject to this tax as well. The following are exempted from building tax obligation:

  • Central and local state properties used non for profit purposes
  • Inhabitation buildings used from the lessee at non liberalized lease
  • Buildings used from religious communities.

The agricultural terrain tax basis is the terrain’s surface (in hectare). The level of tax is fixed in ALL per hectare. Agricultural terrains planted with fruit trees and vinicultures are exempted from this tax during the first five years starting from planting. Minimal taxes levels are shown in table 1 and table 2 here below.

Hotel occupancy tax

A tax is imposed for an individual who pays for a room or space in a hotel, per night. The tax level is up to 5 % of the hotel price. The municipal or communal council is competent to approve the tax level within the above mentioned limit.

Temporary local taxes

The municipal or communal council, when deemed necessary, approves taxes of temporary nature in the common interest of the community within its territory.

Table 1 INDICATIVE LEVELS OF TAX ON BUILDINGS

  Municipality
  Area 1 Area 2 Area 3
Minimum categories of buildings Tirana
Durres
Vlora
Fier
Saranda
Pogradec
Korca
Elbasan
Berat
Lushnja
Gjirokastra
Shkodra
Kavaja
Lezha
All other
municipalities
ALL/m2 per year
I. Inhabitation buildings      
- built before 1993 15 10 5
- built during and after 1993 30 12 6
II. Other buildings      
- for trade and services 200 150 100
- others 50 30 20
III. Owned buildings or buildings in use,
in territories approved as tourist villages
200 200 200

Note: In communes, the tax level (except the category III) is 1/2 of the level for the municipality within which the commune is located.

Table 2 MINIMUM CATEGORIES AND INDICATIVE LEVELS OF TAX ON AGRICULTURAL TERRAIN

  Classification by districts
1 2 3 4
Tirana
Durres
Kavaja
Kruja
Lezha
Lushnja
Fier
Vlora
Saranda
Shkodra
Elbasan
Berat
Korca
Delvina
Kurbin
Peqin
Kucova
Gjirokastra
Permet
Pogradec
Librazhd
Dibra
Mat
Skrapar
Mallakastra
Devoll
Tepelena
Bulqiza
Has
Kukes
Tropoja
Puka
Mirdita
Malesi e Madhe
Gramsh
Erseka

Tax value in ALL/hectares/year (numbers 1,2,3,4 below correspond to same numbers above)

Land
classification by
category
1 2 3 4
I 5600 4200 2800 1400
II 4900 3500 2100 1200
III 4200 2800 1400 1100
IV 3600 2300 1350 1000
V 3000 1900 1250 900
VI 2400 1600 100 800
VII-X 1800 1400 1100 700

Note: Classification of terrain into categories is done from the departments of Ministry of Agriculture and Food.

GREEK LAW DIGEST REPUBLIC OF ALBANIA MINISTRY OF INTEGRATION Union of Chambers of Commerce and Industry of Albania
Nomiki Bibliothiki ALBANIA INVESTMENT DEVELOPMENT AGENCY Foreign Investors Association of Albania
     

 

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