Income Tax in Albania
Taxes on personal income:
Individual taxpayers, both residents and non-residents, are subject to personal income tax (PIT). Albanian law applies the principle of worldwide taxation. Resident individuals are taxed on all sources of income in and outside the territory of Albania, while non-resident individuals are taxed on income generated only in the territory of Albania.
Personal income tax rates:
The minimum monthly salary in Albania for PIT is ALL 24,000.
The following tax rates apply to income generated from employment:
Taxable Income (ALL)
0 to 30,000
30,001 to 130,000
13% of the gross amount
ALL 13,000 + 23% over ALL 130,000
For the purposes of taxation on personal income tax, the following shall be considered as taxable income:
a. salaries and other compensations with respect to actual employment relations; it is tax exempt the income generated from salaries and compensations for labor relationships of consular, diplomatic or similar officials of other countries and international organizations who, during performance of their official functions in the Republic of Albania, according to international conventions or agreements signed or accepted by the Republic of Albania or the Albanian Government, enjoy the diplomatic status, is tax exempt income. Individuals, Albanian or foreign, who do not enjoy the diplomatic status, recognized by international conventions or agreements for this purpose, are not subject to this exemption;
b. income resulting from profits of a partner or a shareholder in a commercial company;
c. income from bank interests or interests from valuable bonds, excluding interest received from Government’s treasury bills or other valuable bonds of the Government issued before the effective date this law enters into force, income derived from copyright and intellectual property;
d. income from emphiteosis, loans and leases, excluding cases when income is generated from conducting commercial activity, in the meaning of commercial legislation, income from transferring immovable property rights;
e. income of individuals from games of gambling and casinos.
Capital gains on the sale of shares are taxable at rate of 15%. The taxable base is the difference between the sale price and the purchase price of the shares (or the nominal value).
The transfer of ownership of real estate, either land or buildings, is subject to 15% tax on the capital gain realised from the sale transaction.
Partnerships are treated as separate taxable persons, which mean that an individual participating in more than one partnership should report separately for each of the partnerships they participate in.
The following incomes are exempt when determining taxable income for PIT purposes:
· Benefits in kind earned by employment relationships (which are taxed via payroll).
· Lump-sum allowances for business travel, according to the amounts determined by the fiscal legislation.
· Income received from social and health insurance schemes.
· Student scholarships.
· Remunerations received in case of diseases or misfortunes.
· Compensation received as a result of expropriation.
· Income exempted according to international agreements.
· Compensation received from ex-proprietors or political prisoners.
The following persons are considered residents in the Republic of Albania If:
· he/she has a stable accommodation in the territory of the Republic of Albania, in the meaning of Article 12 of the Civil Code;
· he/she is an Albanian citizen and a consul, diplomat, or similar officer of the Republic of Albania, outside its territory.
· The individual who resides in Albania more than 183 days of a taxable period, whether consecutively or not.
Albania’s tax year is the calendar year (i.e. 1 January to 31 December).
For declaration purposes, a tax return is filed by employers with the tax authorities. This tax return is a summary of all individual taxes withheld from each employee of the entity according to payroll calculations.
Individuals resident in Albania who generate income sourced not only in that territory but also from other countries, and non-residents who generate income sourced in Albania, are required to submit an annual income declaration to the central tax administration.
Only individuals who generate annual gross taxable income (of all types) of under ALL 2 million are exempted from the requirement to submit an annual income declaration.
Individuals exempted from the annual income declaration requirement who generate annual gross taxable income (of all types) of ALL 1.05 million or less can opt to submit the declaration in order to benefit from deductible expenses.
Individuals are required to submit an annual income declaration at the central tax administration not later than 30 April of the year following the tax period for which the declaration is made.
Payment of tax:
Employers are required to withhold PIT for salaries and other compensations related to current employment.
Whereas the declaration is made on an annual basis, the taxpayer has the obligation to pay the respective tax to the tax authorities by the 20th day of the month following the month when the income was received.
The tax paid during the year will be deducted from the amount of tax calculated. In the event that the individual declaration results in tax liability, the individual should make the payment of the tax due not later than 30 April of the year following the tax period for which the declaration is made.
Corporate - Taxes on corporate income:
Albanian law applies the principle of worldwide taxation. Resident entities are taxed on all sources of income in and outside the territory of Albania, while non-resident entities are taxed on income generated only in the territory of Albania.
The corporate income tax (CIT) rate in Albania is 15%. CIT is assessed on the taxable profits calculated as taxable income less deductible expenses.
Taxpayers with annual turnover up to ALL 5 million are exempt from CIT, whereas those with annual turnover between ALL 5 million and ALL 8 million are subject to a reduced CIT rate of 5%.
Inventory is valued at the end of each tax period using the methods stipulated in the Accounting Law, which should be applied systematically. The methods stipulated in the National Accounting Standards for the valuation of inventory at year-end are the average cost and first in first out (FIFO) methods.
Capital gains are taxed at the rate of 15%.
Dividends and other profit distributions received by a resident entity from another resident entity or from a non-resident entity are not subject to CIT for the resident beneficiary of such income. This applies despite the participation quote (in amounts or number of shares) of the entity distributing profits in the shareholder capital, voting rights, or its participation in initial capital of the beneficiary.
Interest income is taxed at the rate of 15%.
Royalty income is taxed as ordinary income, at the rate of 15%.
Albanian resident corporations are taxed on their worldwide income. If a DTT is in force, double taxation is avoided either through an exemption or by granting a tax credit up to the amount of the applicable Albanian CIT rate.
Albanian legislation does not contain any provisions under which income earned abroad may be tax deferred.
The tax year is the calendar year.
The final CIT return is due by 31 March of the year following the tax year.
Payment of tax:
Predetermined advance payments of CIT are due either by the 15th day of each month or by the end of each quarter.
According to the tax laws, CIT is paid during the year on a prepayment basis. The amount of monthly CIT prepayments is determined as follows:
· For each of the following months: January, February, and March of the following fiscal period, the income tax amount of the fiscal period two years prior to the current period, divided by 12.
· For each of the next nine months of the following fiscal period, the income tax amount of the previous fiscal period divided by 12.
The final due date for the payment of the final CIT for a fiscal year is 31 March of the following year. Note that this payment is calculated as the total amount of CIT self-assessed from the taxpayer for that particular fiscal year less total CIT instalments paid related to that year.
Penalties for non-compliance with CIT prepayment deadlines are 10% of the unpaid liability.
Companies have the obligation to pay the non-resident WHT on dividends to the tax authorities no later than 20 August of the year the financial results are approved, regardless of the fact of whether the dividend has been distributed or not to the shareholders.
Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.