The Republic of Albania uses a comprehensive approach to personal income tax, designed to address the tax obligations of both resident and non-resident individuals effectively. This article aims to clarify the details of tax responsibilities, rates, and exemptions, providing a clear understanding of the personal income tax system in Albania.
Classification of Taxpayers
According to the Albanian legislation, an individual taxpayer includes any person who, while not engaged in commercial activities, holds the responsibility to contribute to taxes, tariffs, or social security and healthcare contributions. This definition extends to both residents and non-residents who derive income within Albanian territory or, in the case of residents, on a global scale.
Residency for Tax Purposes
A resident taxpayer for personal income tax purposes in the Republic of Albania is defined as any individual who accomplish one of the following criteria:
- Has a permanent residence in the Republic of Albania during the tax year or stays in the Republic of Albania for a total of 183 days or more within the tax year. Both the day of entry and the day of exit will be counted as days of presence in the country;
- Is a citizen of the Republic of Albania who performs duties outside its territory as an employee or official functionary of the government of the Republic of Albania; or
- Has a habitual residence in the Republic of Albania, unless the individual has a permanent residence outside the Republic of Albania for the entire tax year and does not maintain a permanent residence in the Republic of Albania; or
- Has their center of vital interests in the Republic of Albania, which means maintaining significant personal or economic connections with the country.
Sources of Taxable Income
Resident individuals in the Republic of Albania are taxed on all income, regardless of where it is earned, both within and outside Albania. Non-resident individuals, however, are taxed only on income earned within Albania.
Taxable income in Albania includes a variety of sources, including, but not limited to, wages and labour-related compensations, profits from corporate shares or partnerships, earnings from bank interests or bonds, revenues from copyright or intellectual property, and incomes derived from leases, loans, or similar agreements. Additional sources include incomes from real estate sales, gambling and casinos, profits from share or stock sales.
Taxable income is equal to the difference between total gross income, deductible expenses, and employment income.
Personal Income tax rates for employment
Income from employment relationships is taxed at a progressive rate according to the following table:
Salary income in ALL/month | Taxable income in ALL/month | Tax rate in percentage/month | ||
From | Until | From | Until | |
0 | 40 000 | 0 | 40 000 | 0% |
40 001 | 50 000 | 0 | 30 000 | 0% |
30 001 | 50 000 | 50% * 13% of the amount above 30 000 ALL | ||
50 001 | More | 0 | 30 000 | 0% |
30 001 | 200 000 | 13% of the amount above 30 000 ALL | ||
200 001 | More | 22 100 ALL + 23% of the amount above 200 000 ALL | ||
Mandatory and Optional Tax Declarations
Resident individuals whose annual gross income surpasses 2 million ALL from all sources, both domestic and international, are obligated to submit an annual income tax declaration. Non-resident individuals are required to file an annual declaration if they earn more than 2 million ALL from sources within Albania. Optionally, individuals may submit an annual declaration to benefit from deductible expenses, provided that their annual gross income not exceeding 1,050,000 ALL.
Tax Payment and Deadlines
The tax rate on personal income, with the exception of employment income, is set at 15%. Employment income is subject to the specific tax brackets aforementioned. Taxpayers are required to submit their annual income tax declaration and settle any outstanding payments by April 30th of the subsequent year.
Exemptions and Special Provisions
In Albania, personal income tax exemptions cover a broad range of income types to support welfare, education, and financial stability. Key exemptions include revenues from social and health insurance, economic aid for low-income individuals, student scholarships, and payments during illness or accidents. Also exempt are compensations related to state expropriations, incomes under international treaties, financial compensations for former owners and political prisoners, and employer contributions to life and health insurance.
Furthermore, are also exempt legal awards, state rewards for contributions to various fields, transfers of agricultural land for farming, contributions to voluntary pension funds, and returns on investments from pension funds are also not taxed. These measures aim to help people financially and promote development safer and better across various aspects.
It is very important that individuals, before moving or engaging in investments in Albania, be informed about the legal, financial, and tax implications in the country. Our firm provides ongoing support, comprehensive knowledge, and the most qualified experience in the field of international taxation. Do not hesitate to contact us and we will be pleased to schedule an introductory meeting with you.
