Albania changes Law on Income Tax; introduces incentives for agro tourism

The Albanian Council of Ministers proposed a draft law to the Albanian Parliament, which introduces several changes to the income tax. The draft law was approved by the Albanian Parliament on the 9th of July 2018.

The Law affects the income tax of several sectors of the country’s economy: farmers involved in agricultural cooperation societies, businesses that operate in the agro tourism area, construction industries, small and medium enterprises as well as gambling companies.

Currently in Albania, the income tax is paid at three different tax rates based on three different income groups. For businesses with annual turnover up to ALL 5 million the income tax rate is zero. For businesses with turnover ranging from ALL 5 to 8 million per year, the income tax rate is 5%; and in cases when the turnover exceeds 8 million ALL, the income tax rate is 15%. These income brackets are one of the aspects which have been amended with the law.

Incentives for agro tourism enterprises

The Albanian economy is largely dependent on the agricultural sector. The Albanian government’s objective is to increase the cooperation of small land owners, by creating agricultural cooperatives. Increasing farmers’ co-operation requires stimulating incentives which is why the revised Law provides for a reduced income tax rate, reduced from 15% to 5%. The reduction of the income tax rate applies to agro tourism enterprises. The objective is the promotion of the creation and growth of this type of enterprises, which are expected to provide accommodation, food, recreation, entertainment and other activities related to the agricultural farm. It is necessary for this business category to be licensed in accordance with the legal criteria. This is a provisionary measure, because it will only be applied for 10 years.

Widened income tax bracket

As of April 2018, the decreased threshold for VAT registration has been applied. In order to alleviate the impact of this change, the Council of Ministers has proposed to increase of the threshold of the top income tax category (which pays 15% income tax) from the previous 8 million ALL to 14 million ALL (106,000 Euros). Effectively this widens the middle income tax bracket (which pays 5% income tax) to be applicable to entities with annual turnover between ALL 5 to 14 million.

Tax on gambling income

The revised Law has also introduced changes to the income tax on gambling. The 15% rate will be applied for all gambling categories, on the gross income which is equal to the organizer’s remainder of the total amount played by the gamers, after the deduction of the amount won by the gamers.

The corporate income tax amendments will be applicable from the 1st of January 2019. This law is part of several tax changes that the Albanian government and Parliament have provided during this fiscal year. The law provides for a considerable decrease of the income tax from 15 to 5% for a large number of companies, a fact which is expected to have a positive impact on the overall performance of the economy, and especially in the specific sectors which are amended by this law.

Dorina Asllani Ndreka 
T. + 355 (0) 42 248 548

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