Albania Tax & Buisness Guide - Deloitte

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Basic facts
Population 3.1m Inflation 2.8% (2006)*
Main languages Albanian GDP per head US$5,608 (PPP)
Currency Lek (ALL) GDP growth 5.0% (2006)*
Economic communities WTO
GDP sources 23.2% agriculture, 18.8% industry, 57.9% services
*Economist Intelligence Unit estimates.
Political environment

A coalition government, led by the Democratic Party of Albania (DPA), took office in September 2005. The president, Alfred Moisiu, is head of state. He was elected by parliament in June 2002 and sworn in for a five-year term on July 24th 2002. The prime minister is Sali Berisha of the DPA. The next elections will be held in 2007 (presidential) and 2009 (parliamentary).
Foreign trade and investment
Exports US$763.0m (2006)* Imports US$2,901.0m (2006)*
*Economist Intelligence Unit estimates.

Major exports: Textiles, footwear and building materials.

Leading export markets: Italy and Greece.

There are no non-tariff barriers in Albanian legislation. However, administrative bureaucracy can cause delays.
Business and financing
Business forms Sole proprietorship, partnership, limited liability company, joint stock company

The limited liability company is the most common form of business organisation in Albania. Partners are only liable up to the value of their contribution to the company. Sole proprietorships are the simplest form of business organisation.

The law treats foreign and domestic firms equally and guarantees them from expropriation or nationalisation. Most sectors of the economy are open to foreign investment.
Labour environment
Unemployment rate 14.0% (2006)* Minimum wage ALL 12,054 (monthly)
*Economist Intelligence Unit estimate.

Social security contributions are payable by the employer and employee on the employeeÌs salary. Employers contribute 29% of gross salary for pension and disability insurance; employees contribute 9.5%. Employers and employees each contribute 1.7% of gross salary for health insurance.

A minimum wage applies to all workers over 16 years of age. The legal minimum wage for government workers over the age of 18 is ALL 12,054 per month.
Taxation
Corporate tax
Main rate 20%

Resident companies are taxed on their worldwide income; non-resident companies pay tax only on Albanian-source income. Companies generally are treated as resident if they are registered under Albanian law. A flat rate of 20% applies. Income from dividends is considered as taxable income.

The tax rate for companies with foreign participation engaged in exploration and exploitation activities relating to oil and gas is 50%.
Individual tax
Progressive rates up to 20%

Resident individuals are taxable on worldwide income; non-residents pay tax only on Albanian-source income. An individual is deemed to be resident if permanently domiciled in Albania or if present in the country for more than 183 days in any 365-day period. Income tax rates rise progressively to a top rate of 20%.
Capital gains
Generally taxed as income

Capital gains are taxed as income. Capital gains on the sale of a companyÌs fixed assets are taxed as part of the companyÌs business income.
Indirect tax
Standard rate 20%

Value-added tax (VAT) applies to most transactions. The export of goods and services is zero-rated. Exemptions include postal services, non-profit organisation supplies, supplies of drug and medicinal equipment, supplies of electronic and written media for advertising, supplies of services on casinos, hippodromes, hydrocarbons operation, diplomats, etc.

Registration is compulsory for businesses whose taxable turnover is over LEK 8m in any previous period not exceeding 12 months. A non-resident company making supplies in Albania must register for VAT through an accredited representative.

Excise tax is levied on ÏspecialÓ goods and various kinds of oil, cigarettes and coffee.
Tax administration and compliance
Tax year Calendar year

Companies must make monthly advance payments of tax, based generally on the adjusted taxable profits of the previous year. A final payment of tax is due on March 31st following the tax year. Any balance of tax due shown on the annual tax return must be paid when the tax return is filed.
Additional tax information
Withholding taxes Dividends 10%, Interest and Royalties 10%. Rates may be reduced by tax treaty.
Tax treaties Albania has concluded 16 treaties and is in negotiation with several countries.
Dividends Dividends paid between resident companies are exempt provided certain conditions are satisfied.
Revenue protection There are transfer-pricing and thin-capitalisation rules.
Groups There is no provision for group taxation.
Incentives Research and development credits.
Other taxes Payroll tax, Real property tax, Customs duties.