Discover Everything About Taxes in Albania: A Complete Guide for Companies and Individuals 2024
Albania is becoming an increasingly interesting destination for investors and workers, thanks to its competitive tax system and growing economy. This article provides a comprehensive overview of the taxes applicable to individuals and companies, including social and health insurance contributions.
Taxation for individuals
1. Personal income tax
Personal income tax in Albania applies to both employees and self-employed individuals, with different rules for each category:
Employees:
- Income up to 50,000 ALL per month: 0%
- Income from 50,001 ALL to 60,000 ALL per month:
- Up to 35,000 ALL: 0%
- From 35,001 ALL to 60,000 ALL: 13% on the portion exceeding 35,000 ALL
- Income exceeding 60,000 ALL per month:
- Up to 30,000 ALL: 0%
- From 30,001 ALL to 200,000 ALL: 13% on the portion exceeding 30,000 ALL
- Over 200,000 ALL: 22,100 ALL fixed, plus 23% on the portion exceeding 200,000 ALL
Setting Up a Company in Albania: Complete Guide
Legislative reference: Article 24 of Law No. 29/2023
- Self-employed individuals: According to Udhëzim Nr. 26, datë 8.9.2023, the tax for self-employed individuals is calculated based on the following income brackets:
- Up to 14,000,000 ALL annually: 0%
- Over 14,000,000 ALL annually: 15%
Legislative reference: Article 24 of Law No. 29/2023, integrated with Udhëzim Nr. 26, datë 8.9.2023
2. Social and health insurance contributions
Self-employed individuals (“vetëpunësuar”) are required to declare a minimum monthly salary as a tax base for the calculation of contributions. The same rates as those for employees apply:
- Social insurance contributions:
- 15% usually paid by the employer (for self-employed individuals, entirely borne by them).
- 9.5% usually paid by the employee.
- Health insurance contributions:
- 1.7% usually paid by the employer (for self-employed individuals, entirely borne by them).
- 1.7% usually paid by the employee.
These contributions are calculated on the minimum salary declared by the self-employed individual, which serves as the tax base for the contribution system.
Legislative reference: Relevant articles of Udhëzim Nr. 26, datë 8.9.2023, in relation to Law No. 29/2023.
3. Capital gains tax:
In Albania, some forms of income, such as interest and capital gains, are subject to a withholding tax of 15%. For dividends distributed to shareholders, a reduced rate of 8% applies, in line with recent tax reforms aimed at encouraging investments. The withholding tax is deducted directly by the entity distributing the income and represents the final tax on such income.
Legislative reference: Article 24 of Law No. 29/2023
Taxation for companies
1. Corporate income tax
Companies in Albania are subject to income tax based on annual turnover:
- Turnover up to 14 million ALL: 0% This exemption applies to small businesses, making the system particularly favorable for startups and micro-businesses.
- Turnover exceeding 14 million ALL: 15% This rate applies to the taxable income of medium and large companies.
Legislative reference: Article 24 of Law No. 29/2023
2. Social and health insurance contributions for employees
Companies must pay contributions for their employees as indicated in the previous section. This represents an additional cost that companies must consider in personnel management.
Legislative reference: Relevant articles of Law No. 7703/1993, updated with Law No. 29/2023.
3. Value-added tax (VAT)
The standard VAT rate in Albania is 20%, applied to most goods and services. However, reduced rates are provided for certain categories:
- 6%: Applied to tourism services and certain categories of specific goods and services.
- 0%: For exports and certain specific transactions, such as:
- Export of goods to countries outside Albania;
- International transport services for people or goods;
- Supply of gold to the Bank of Albania;
- Supply of goods in the personal baggage of travelers, according to applicable regulations.
Legislative reference: Articles 17 and 18 of Law No. 92/2014
4. Other corporate taxes
- Corporate property tax: Calculated on the cadastral value of the property, with different rates compared to residential properties.
- Dividend tax: Dividends distributed to shareholders are taxed at 8%, as previously mentioned.
Legislative references: Articles 15 and 24 of Law No. 29/2023 and Law No. 9632/2006.
Conclusions
The Albanian tax system is designed to encourage investment and economic growth. The favorable rates for small businesses and the simplicity of the system represent a competitive advantage compared to other countries. However, it is important to consider not only direct taxes but also social and health insurance contributions, which affect both personal income and corporate costs.
