Personal income tax in the Republic of Albania, January 2022

Open Data Albania is listing the types of personal income tax, i.e of the individual citizen or resident in the country, based on the type of income he generates (earns and collects). The listing excludes taxes extracted from the salary income or business income, but other revenue the individual generates, such as: rent, bank interests or lending; Property Sale profit – the difference between the initial price and the sale price; donation; gambling; royalties from intellectual property and revenue from supervisory work or from services provided by the individual. These types of taxes are mainly taxes that are paid through self-declaration. In some cases, although the tax is applied on the individual, the obligation to withhold it and pay it to the Tax authorities is borne by the employer institution or entity.

The businessman, as an individual, is taxed on the Dividend at the 8% of the value of the distributed profit. This is income tax on an individual who owns a business in the country. This tax rate was 15% and became 8% in 2015, being applied with retroactive effects. The Dividend Income Tax rate (income of the individual businessman) is low, compared to other countries in the Region.

Source: https://taxsummaries.pwc.com/; Local Fiscal Policy
Comments and Analyses: Open Data Albania

Source: https://taxsummaries.pwc.com/; Local Fiscal Policy
Comments and Analyses: Open Data Albania

Kosovo and Bosnia and Herzegovina do not apply Dividend tax.

If we compare the tax on Dividend, ie on the individual businessman, with the tax on the ordinary citizen, who is taxed on income derived from fees, rents, expertise, sale of a property or donation, there is a 7% difference between them as these the latter are taxed at the 15% rate.

The same tax rate, 15%, is applied for Non-Residents, though agreements between countries aiming to avoid double taxation apply too in such cases, mainly on foreigners or Albanians with dual citizenship.

Other income for which the individual in Albania is required to pay a part of profit in the form of taxes, are:

• 15% of the profit from income from Bank or Debt Interests;
• 15% of the profit from copyright and intellectual property royalties;
• 15% of the profit from income from management, consulting, financial or technical services and insurance is collected, leaving the individual with 85% of the value earned;
• 15% of the revenue generated by rants: with every citizen who collects a rent having to complete a Withholding Tax Return by declaring and paying to the state 15% of the amount collected. The only exception being if the tenant is an economic entity. In this case, the declaration is made by the Entity, but the amount of 15% is kept from the value of the Declared Lease. For example, if an individual generates 1000 Euros of revenue from renting a property, 150 Euros are paid for Personal Income Taxes and 850 Euros are collected and spent by the individual. Prior to 2014 this was a flat tax, at 10% rate;
• Performance fees for actors, musicians or athletes and intermediaries: basically, a tax on artists participating in various entertainment and festive programs. The latter are also required to declare income, profits and pay 15% of the earnings to the Tax Authority;
• Income from gambling activities or casinos is taxed at 15% rate. In this case the tax is withheld from the amount earned, while the tax is paid by the licensed entity for this type of activity.
• Property Transfer Tax by Sale. In such a case, the difference in the initial price of construction, acquisition or legalization with the current sale price is considered a profit and is taxed at 15%. This tax has been dwindling for years, for the Real Estate Registry Authority has been reserved the right to restore the price by Revaluation.
• Transfer of Ownership by Donation is also taxable revenue. The recipient of the donation pays 15% of the donated value. There are some exceptions in cases of donation within the family tree, but even then, in the end, the recipient of the donation is taxed in case of further sale transfer of the property.

Source: https://taxsummaries.pwc.com/; Local Fiscal Policy
Comments and Analyses: Open Data Albania

Source: https://taxsummaries.pwc.com/; Local Fiscal Policy
Comments and Analyses: Open Data Albania

In all the above mentioned instances, the Albanian citizen and Non-residents (foreign citizen resident in Albania or individual with dual citizenship) pay 15% of the amount earned. Personal Income Tax is not collected in any significant amount and is characterized by non-declaration or informality of the market. Before 2014, it was applied at flat rate of 10%, 5% less than the current application.

Personal Income Tax from these types of activities is not to be confused with payroll taxes, where currently bands with 0%, 7.5%, 13% and 23% are extracted on the gross salary. The key difference is that payroll taxes are paid by employer and employee; income taxes are only paid by employers.

Our country does not apply tax on inherited income, a type of property that is generally not found in countries in the Region.

The data used for this article were collected from National Fiscal Legislation and the Tax Summaries PWC Database.

Details on Payroll Taxes can be found in our article Costs on Wages, Contributions and Mandatory Taxes on the Average Wage in Albania and Region, January 2022.

Likewise, on the Consumer Tax, Value Added Tax -VAT, Open Data Albania has published several comparative articles assessing reduced VAT rates by countries.

This article was drafted and published in the framework of the “Open Data, Access and Transparency over sectors exposed to Risk of Corruption” project. The latter is financially supported by SIDA – Sweden International Development Cooperation Agency

Download excel: Personal income tax in the Republic of Albania, January 2022
Comments and Analysis: Open Data Albania
Contributed and translated by: Rezarta Caushaj