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Is it worth investing in Albania?

2023-09-10 13:21:00, Ekonomi Domenico Posca

Looking at the rules on corporations and the level of taxes, there are many advantages for Italian companies that want to evaluate the possibility of investments in the "land of eagles", especially in the tourism sector.

In Albania, both physical and legal persons can create joint stock companies, while foreign shareholders are allowed.

In the corporate structure, we have models similar to the Italian ones: collective companies, limited liability companies and joint stock companies. The most common form of corporation in Albania is the limited liability company (sh.pk). To create a limited liability company (sh.pk), the minimum amount of share capital required by law is 100 Lek (about 0.91 euros). And it is worth noting that the procedures for operationalizing a limited liability company (establishment, registration and provision of fiscal number) are much simpler and faster than in Italy.

Meanwhile, the cost of registering a commercial company at the National Business Registration Center (NCRC) is 100 Lek (equal to approximately 0.91 euros). The legal representative of an Albanian company can also be an Italian citizen. The share capital can be held by a single shareholder, either Italian or Albanian.

Income from employment relationships is excluded up to the amount of 30,000 lek (about 273 euros). Beyond this limit, 13 to 23 percent are taxed. Each employer withholds personal income tax on the employee's salary and pays the withholding tax to the tax authorities by the 20th of the following month.

All income other than employment income is subject to a 15 percent tax. Regarding social security, employers must declare and pay social security and health contributions for each employee equal to 27.9 percent of the monthly salary, of which 16.7 percent (15 percent social security and 1.7 percent health) is paid by employers and 11.2 percent (9.5 percent social insurance and 1.7 percent health insurance) is paid by the employee.

Corporate income tax is determined by applying the usual rate of 15 percent to taxable income. Starting from 2021, in order to facilitate the economic recovery of the country and to reduce the tax burden, companies with turnover from 0 to 8 million lek (about 73 thousand euros) do not pay taxes.

Companies that carry out software development activities, as well as those that carry out agricultural activities certified as "agritourism", are subject to a reduced rate of 6 percent. The tax base is determined by the results of the annual financial statements, which must be submitted by March 31 of the following year.

Value added tax is at the usual rate of 20 percent, while for accommodation services, qualified services such as farm holidays, advertising services, construction projects for sports facilities and infrastructures, the applicable rate is reduced and is equal to 6 percent.

Meanwhile, all natural and legal persons who make taxable supplies and have an annual turnover of more than 10 million ALL (nearly 91 thousand euros) are subject to VAT. The taxable person can choose to follow the normal VAT regime, if the annual turnover is less than 10 million but greater than 5 million (about 46 thousand euros).

It is interesting to note that companies operating hotel business classified as 4 or 5 stars and resorts of equivalent standards are exempt for 10 years from corporate income tax . This subsidy is conditional upon the recognition of this status by December 2024.

In relation to the development of tourism, Albania offers various incentives for investors in the tourism sector, with the aim of improving quality and raising standards according to the value of the investment.

The government guarantees the financing of projects in the field of education, promotion and treatment, or models of tourist products presented by any subject, including foreign companies. Real estate tax applies to real estate, including agricultural land and buildings used for productive activities.

The tax, calculated on an annual basis, is determined by applying a rate to the value of the property that ranges from 0.05 percent for residential properties to 0.2 percent for commercial ones. And in Albania, electronic invoicing is applied, which provides for the real-time sending of all invoices issued by taxpayers to the General Directorate of Taxes in Albania (DPT).

There is a central invoicing platform (Central Information System-CIS), to which all invoices must be sent for validation. Accountants and labor consultants can assist Italian companies in evaluating the advantages derived from investment opportunities in Albania, both in terms of economic and tax returns./ Adapted from CNA