New tax incentives for operating in free zones in Albania

Albania/September 2015

The Government of Albania has approved some amendments to the Law on the Establishment and Functioning of Economic Zones. The amendments introduce new regulations and new tax incentives for operating in the Free Zones.

According to the approved amendments, the Corporate Income Tax is reduced by 50% for the entities that operate in Free Zones for the first 5 years of their activity.

Entities operating in Free Zones can calculate 20% of capital expenses incurred during the fiscal year as deductible expenses for Corporate Income Tax purposes within the same period, regardless of the depreciation rates approved as per the Law on Income Tax. The entities have the right to benefit from this incentive only during the first 3 years from the beginning of the activity and for a total of 2 years.

The supply of Albanian goods that are intended to be placed in the Free Zone is considered as export with 0% VAT rate in accordance with the provisions of the Law on VAT and Law on Customs Procedures.

Development Projects are exempted from the Tax on Impact on the Infrastructure. This is a tax applied on new investments, at a rate of 2-4% of the value of the investment in Tirana and 1-3% of the value in other areas of the country.

Constructions carried out for development projects are exempted from Tax on Property during the first 5 years.

Developers and operators in Free Zones are exempted from capital gains tax, which currently is levied at the rate of 15%.

Salary and insurance contributions’ expenses will be recognized at 150% of the value as deductible expenses for corporate income tax purposes during the first year of the activity. In the consecutive years, only the additional expenses for wages compared to the previous year will be recognized for CIT purposes at 150% of the value.

Employee training costs will be recognized at 200% of the value as deductible expenses for corporate income tax purposes during the first 10 years of the activity.

The expenses for Research and Development will be recognized for Corporate Income Tax purposes at 200% of the value.

The procedures of entry and exit of goods to Free Zones will adhere to the regulations of the Albanian Customs Code.

The abovementioned tax incentives aim to encourage investments, create new jobs, increase incomes, introduce advanced technology, and accelerate regional development.

Drilona Likaj
Tirana office, Albania