ארכיון Balkan Countries - Nimrod Yaron Albania

Comparing Withholding Taxes in the Western Balkan

BananaBlitz — Sun, 03 Nov 2024 17:42:30 +0000

Withholding taxes in the Balkans vary significantly by country, and they typically apply to payments made to non-residents on income types like dividends, interest, royalties, and service fees. This article aims to provide an overview of withholding taxes in several Western Balkan countries, specifically in Albania, North Macedonia, Kosovo, and Montenegro. It is designed to offer readers, including those considering relocation or investment, a comprehensive and insightful understanding of withholding taxes and benefits available in each of these countries.

Overview of Withholding Taxes

Albania

Dividends

Dividends paid by an Albanian company to non-residents are subject to an 8% withholding tax, though a lower rate may apply under an applicable tax treaty.

Interests

Interest payments from Albanian residents to non-residents are subject to a 15% withholding tax, which may be reduced if an applicable tax treaty provides a lower rate.

Royalties

Royalties paid by Albanian residents to non-residents are subject to a 15% withholding tax, with the possibility of a lower rate if an applicable tax treaty allows.

To read more about Albania click here.

North Macedonia

Dividends

In North Macedonia, dividends paid to non-residents are taxed at a 10% withholding rate. Dividend income includes any profit earned from shares or similar ownership rights in a company where the profit isn’t being used to cover debts. It also includes profit from other corporate rights that are treated similarly to share income for tax purposes in the country where the distributing company is based.

If the foreign recipient of the dividend is from a country that has a double tax treaty with North Macedonia, this withholding tax rate may be reduced.

Interests

In North Macedonia, interest payments to non-residents are subject to a 10% withholding tax. This tax applies to income earned from any debt claims, which means any funds owed, whether or not they are backed by a mortgage or linked to the debtor’s profits. It covers income from bonds or other securities (including bonuses attached to them) and income from loans.

However, if the recipient is from a country that has a double tax treaty with North Macedonia, this 10% withholding tax may be reduced.

Royalties

In North Macedonia, royalties paid to non-residents are subject to a 10% withholding tax. This tax applies to payments for the use of intellectual property rights, which include things like copyrights on literature, art, or scientific works, as well as cinematography, software, patents, trademarks, designs, models, plans, trade secrets, and “know-how” (specialized knowledge or expertise).

If the recipient of the royalties’ lives in a country that has a double tax treaty with North Macedonia, this withholding tax rate may be lowered.

To read more about North Macedonia click here

Kosovo

Dividends

Dividends are exempted from withholding tax.

Interests

Interest payments to non-resident corporations are subject to a 10% withholding tax. However, interest on loans from Central Bank of Kosovo-licensed financial institutions to their clients is exempt from withholding tax.

Royalties

Royalties paid to non-resident corporations are subject to a 10% withholding tax.

To read more about Kosovo click here.

Montenegro

Dividends

Payments of dividends and profit shares to non-resident legal entities are subject to a 15% withholding tax in Montenegro unless a double tax treaty specifies a lower rate or exempts the payment from withholding tax.

Interests

Interest payments to non-resident legal entities are subject to a 15% withholding tax in Montenegro unless a double tax treaty provides for a lower rate or exempts the payment from withholding tax.

Royalties

Payments of royalties and other intellectual property rights to non-resident legal entities are subject to a 15% withholding tax in Montenegro unless a double tax treaty specifies a lower rate or exempts the payment from withholding tax.

To read more about Montenegro click here.

Summarized Comparable Study on Withholding Taxes in Albania, North Macedonia, Kosovo and Montenegro

Albania

North Macedonia

Kosovo

Montenegro

Dividends

10%

N/A

15%

Interests

15%

10%

15%

Royalties

15%

10%

15%

To read more about the above Balkan Countries click here.

Why Consider Western Balkan Countries to Invest?

The withholding tax rates of dividends, interests, and royalties in Western Balkans countries are relatively low. These can be more favorable in their rates than those in other countries; hence, western Balkan countries are a good option for investors.

Various Western Balkans countries have signed double taxation treaties with various countries. These can help reduce withholding tax rates on the payments made to foreign investors, and thus make it financially worth investing. Economies within the Western Balkans are growing, with tourism, energy, and agriculture being some of the sectors showing great potential for investment. It also boasts a favorable taxation environment, making prospects for returns quite good.

If you are considering Albania, North Macedonia, Kosovo, or Montenegro to live and/or conduct your business, it is advisable to consult with a professional on investment opportunities that best suit your needs. Our firm specializes in international taxation, and our team is ready to assist with any related matters. If needed, we can connect you with top professionals to support your business activities in Albania. Please feel free to contact us.

הפוסט Comparing Withholding Taxes in the Western Balkan הופיע לראשונה ב-Nimrod Yaron Albania.

Real Estate Taxation in Balkan Countries

BananaBlitz — Tue, 29 Oct 2024 10:11:34 +0000

Real Estate Taxation in Balkan Countries: Comparing Albania, North Macedonia and Montenegro

Real estate taxation across the Balkan countries is diverse, reflecting each nation’s unique economic strategies and fiscal needs. These taxes are a significant revenue source for local governments and play a critical role in regulating property markets. Typically, taxation frameworks include recurrent property taxes, which are paid annually based on the property’s value, size, or type.

This article aims to provide an overview of real estate taxation in several Western Balkan countries, specifically Albania, North Macedonia, and Montenegro. It is designed to offer readers, including those considering relocation or investment, a comprehensive and insightful understanding of the personal income taxation and benefits available in each of these countries.

Overview of the Real Estate Taxation

Albania

Property Tax

Real estate tax is levied on buildings according to the type of activity of the business that owns the building and, therefore on the value of the building. It is calculated annually and expressed as a percentage of its value, adjusted by the usage of the building:

Residential properties: 0.05% of the value of the property is taxed.
Commercial Property: 0.2% of the value of the property.
Incomplete building sites: when construction has not been completed on the due date appearing in the license. Taxed at 30% of the standard rate depending on whether the plot is to be considered residential or commercial.

This structure ensures that different uses of property are adequately taxed, incentivizing the timely completion of construction projects and ensuring property owners pay their fair share based on what function their asset serves.

To learn more about Albania click here.

Transfer Tax

The transfer of ownership of real estate in Albania, whether land or buildings, is taxed at 15% on the capital gain earned from the sale. This tax applies to the profit made by the seller, calculated as the difference between the property’s sale price and its original purchase price or acquisition cost.

North Macedonia

Property Tax

There is an annual property tax on owner-occupied properties that depends on their assessed value, including buildings and land. The standard tax rate is proportional, typically ranging between 0.1% and 0.2%. Various exemptions and reliefs are available, depending on the circumstances.

Starting January 1, 2022, the tax rate increases to three times the standard rate in two cases:

Properties left unused by the owner or unleased for more than six months in a year.

Agricultural land is not utilized for farming activities.

These increased rates are intended to discourage underutilization of property and promote more effective land and building use.

To learn more about North Macedonia click here.

Transfer Tax

A property transfer tax ranging from 2% to 4% is levied upon the transfer of real estate in North Macedonia. This is normally paid by the seller, whether a natural or juridical person. However, it could be that upon agreement by the parties, another arrangement, which could be the payment of such tax by the buyer, should be resorted to, or it could also be divided between both parties. This is so that flexibility in the process of transfer would answer to the needs of both parties.

Montenegro

Property Tax

In Montenegro, real property tax is applied to immovable property (such as land, houses, or commercial buildings) based on its market value. The standard tax rate ranges from 0.25% to 1%, but it can go as high as 5% for specific types of properties, according to the Law on Real Estate Tax.

To read more about Montenegro, click here.

Transfer Tax

The real estate transfer tax is paid by the buyer upon purchasing a property. The tax is based on the market value of the property at the time of transfer, with a fixed rate of 3%.

Table: Real Estate Tax Rates

Albania

North Macedonia

Montenegro

Property Tax

0.05%

A building used for residential purposes

0.2%

A building used for Business purposes

Between 0.1% and 0.2%.

From 0.25% to 1%

Transfer Tax

15%

From 2% to 4%

Why Consider Western Balkan Countries to Invest in Real Estate?

Albania

Foreign individuals or companies that invest in Albania can purchase land after completing their investment according to the construction permit. The investment must be worth at least three times the value of the land, or they should have bought or built properties worth more than three times the land’s price.

State properties larger than 500 m² can be leased to third parties for a symbolic fee of 1 euro per contract. This is done by the Council of Ministers when the winning bidder from a competition proposes activities on the property from a list of approved activities deemed strategic for the country’s development.

North Macedonia

In the Republic of North Macedonia, land within free zones can be leased long-term for up to 99 years at discounted rates. Investors enjoy exemptions from local municipal utility taxes and fees associated with land building permits. Additionally, there is free access to the natural gas, water, and sewage networks. The government also offers potential support for capital investments by providing a 10% return on investment costs for new machinery, equipment, or investments in buildings and land.

Montenegro

Montenegro’s tourism sector is growing, driven by its beautiful landscapes and historical sites, as well as its emerging status as a luxury travel destination. This creates investment opportunities in hospitality and real estate development. The real estate market is also growing, offering chances to invest in properties and development projects.

If you want to read more about investment opportunities in Montenegro, click here.

If you are considering Albania, North Macedonia, or Montenegro to live and/or conduct your business, it is advisable to consult with a professional on investment opportunities that best suit your needs. Our firm specializes in international taxation, and our team is ready to assist with any related matters. If needed, we can connect you with top professionals to support your business activities in Albania. Please feel free to contact us.

הפוסט Real Estate Taxation in Balkan Countries הופיע לראשונה ב-Nimrod Yaron Albania.

Corporate Income Tax in the Western Balkans

BananaBlitz — Sun, 27 Oct 2024 13:11:58 +0000

Corporate Income Tax in the Western Balkans: Comparing Albania, Kosovo and Montenegro Tax Policies

Corporate Income Tax (hereinafter referred to as CIT) is a tax on the profits that businesses earn. It’s based on a company’s taxable income, calculated by subtracting expenses (like salaries, rent, and other operating costs) from total revenue. This profit is then taxed at rates set by each country or region. Tax rates and rules vary widely, with some countries offering different rates or incentives for certain industries or locations. Corporate income tax helps fund government services and ensures that businesses contribute to public revenue, similar to how individuals pay income tax.

This article aims to provide an overview of corporate income taxation in the Western Balkan region, specifically comparing Albania, Kosovo, and Montenegro. It is designed to offer readers, including those considering investing, a comprehensive and insightful understanding of the corporate income taxation and benefits available in each of these countries.

Overview of the Corporate Income Taxation

Albania

Albania’s corporate income tax system, with a base rate of 15% on profits after allowable expense deductions, makes it a competitive investment destination in Europe. The tax applies to various entities, including collective societies, limited partnerships, limited liability companies, joint stock companies, and other entities, including non-residents. A company is tax-resident if established or managed in Albania, especially if board meetings are held there or specific local criteria are met, such as local ownership or resident board members. A Permanent Establishment includes any fixed business location or service provision in Albania for six months or more.

To learn more about taxation in Albania, click here.

Kosovo

Kosovo’s corporate tax framework, characterized by low tax rates, is designed to attract investment. Corporate tax residency applies to entities with their main office or effective management in Kosovo, with a 10% corporate income tax rate. A Permanent Establishment is created if a business has a fixed location in Kosovo for more than six months within a 12-month period, including offices, factories, or natural resource sites. Kosovo follows worldwide taxation, taxing residents on both foreign and domestic income, while non-residents are taxed only on income generated within Kosovo. Taxable entities include corporations, public/state-owned businesses, and non-residents with a Permanent Establishment in Kosovo.

To learn more about taxation in Kosovo, click here.

Montenegro

Montenegro, an attractive investment hub with a low corporate income tax rate of 9-15%, has streamlined its tax framework to meet EU standards, including recent amendments aligning with the EU’s Directive 2009/133/EC. Corporate tax residency is based on business establishment and profit generation within the country, with taxes filed annually by March. Taxable income includes profits from regular operations, property transfers, dividends, interest, and royalties. New changes affect CIT base calculations, capital gains valuation, and withholding tax expansion. Non-residents may benefit from reduced withholding tax on dividends, interest, and royalties through double-taxation treaties.

To learn more about taxation in Montenegro, click here.

The following table provides a summarized comparable study on income taxation in Albania, Kosovo and Montenegro:

	Albania	Kosovo	Montenegro
*Tax Base for Residents*	A resident company pays tax on their worldwide income.	A resident company in Kosovo is subject to corporate income tax on Kosovo-source and foreign-source income.	A resident company is taxed on its worldwide income.
*Tax Base for* *Non-Residents*	The income tax base for nonresident corporations is Albanian-sourced income.	A non-resident company in Kosovo is subject to corporate income tax on Kosovo-source income.	Nonresident companies are taxed on their Montenegrin source income.
*Taxable Profit*	Taxable profit for Albanian corporate tax purposes is based on income as reported in the corporation’s financial statements (prepared in accordance with accounting regulations), taking into account deductions and corrections required by the tax laws.	In Kosovo, corporate income tax is generally measured by net profit, which is the difference between the gross income received or generated and allowable deducted expenses.	The taxable base is determined from the company’s profit and loss statement, and generally, business expenses are deductible if they are aimed at earning or maintaining taxable income, directly related to the business activity, are incurred or accrued during the taxable period, and are properly documented. Deductible operating expenses typically include the normal day-to-day costs of running the business.

Taxation Rates

While the three countries share similarities in the regulation of corporate taxation, they differ in certain aspects, such as tax rates. In Albania, business income is taxed at 15%, in Kosovo at 10%, and in Montenegro CIT is levied progressively, ranging from 9 percent to 15 percent.

In the following graphic, a comparative view of taxation is presented for each of the countries:

Incentives and Exemptions

Albanian Legislator exempts certain entities from corporate income tax, including government bodies, financial institutions like the Bank of Albania, and foundations or non-banking financial institutions that support government policies through loans. Additionally, organizations engaged in religious, humanitarian, charitable, scientific, or educational activities, as well as labor organizations and chambers of commerce, are exempt. Tax periods align with calendar years, requiring corporate income tax returns to be filed by March 31 of the following year. Corporations with annual turnover under 14 million Albanian lek (ALL) are exempt, while software production and agro-tourism companies benefit from a reduced tax rate of 5%.

To learn more about tax incentives in Albania, click here.

Kosovo Legislator offers a range of tax incentives and credits to stimulate economic activity and investment. Dividends for both residents and non-residents are exempt from taxation, allowing investors to keep more earnings. Companies investing in new heavy machinery receive a 10% deduction on corporate income tax for these assets, although this benefit does not apply to those already utilizing other tax incentives. The country promotes social development by providing corporate income tax credits of up to 30% for sports sponsorships and 20% for contributions to youth and culture. Additionally, Kosovo offers a foreign tax credit to mitigate double taxation on income earned abroad.

To learn more about tax incentives in Kosovo, click here.

Montenegro Legislator offers various corporate tax deductions, including tax depreciation, business-related interest, and bad debts over 365 days with legal action. Charitable donations are deductible up to 3.5% of revenue, and salary and termination bonuses are also deductible, though entertainment and membership fees have limitations. Tax losses can be carried forward for up to five years. Corporate tax incentives include an eight-year exemption for new production businesses in underdeveloped areas, with exceptions for certain sectors. NGOs can reduce their tax base by €4,000 if profits support their objectives. The country’s strategic location and Euro currency enhance its appeal for foreign investments.

To learn more about tax incentives in Montenegro, click here.

Why Consider Western Balkan Countries?

Investors can consider Albania, Kosovo, and Montenegro for establishing a business due to their favorable tax regimes and investment incentives. Albania offers a corporate income tax rate of 15% and exemptions for small businesses and certain sectors, along with tax-deductible operating expenses. Kosovo stands out with its zero taxation on dividends and a 10% deduction on new heavy machinery investments, alongside credits for cultural contributions, making it attractive for socially responsible investors. Montenegro features one of Europe’s lowest tax rates at 9%, with additional incentives for new production businesses in underdeveloped areas and reduced rates for agriculture and software companies. Each country has unique exemptions and credits that support different sectors, making the region appealing for diverse investment strategies. The strategic locations of these countries, coupled with their efforts toward EU integration, enhance their potential as business hubs in Southeast Europe.

If you are considering Albania, Kosovo, or Montenegro to live and/or conduct your business, it is advisable to consult with a professional on investment opportunities that best suit your needs. Our firm specializes in international taxation, and our team is ready to assist with any related matters. If needed, we can connect you with top professionals to support your business activities in Albania. Please feel free to contact us.

הפוסט Corporate Income Tax in the Western Balkans הופיע לראשונה ב-Nimrod Yaron Albania.

Personal Income Tax in the Western Balkans

BananaBlitz — Sun, 06 Oct 2024 14:47:15 +0000

Personal Income Tax in the Western Balkans: Comparing Albania, Kosovo and Montenegro Tax Policies

Personal Income Tax (hereinafter referred to as PIT) is a tax that governments impose on individuals’ incomes, which include wages, salaries, and all other types of income generated from investments and other sources. Tax rates vary by country and reflect each nation’s unique economic and financial policies.

This article aims to provide an overview of personal income taxation in several Western Balkan countries, specifically Albania, Kosovo, and Montenegro. It is designed to offer readers, including those considering relocation or investment, a comprehensive and insightful understanding of the personal income taxation and benefits available in each of these countries.

Overview of the Personal Income Taxation

Albania

The country uses a comprehensive approach to personal income tax, designed to address the tax obligations of both resident and non-resident individuals effectively. 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 labor-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 income from real estate sales, gambling, and casinos, and profits from share or stock sales.

To learn more about taxation in Albania, click here.

Kosovo

The tax system in Kosovo is designed to be straightforward, aiming to cover a broad tax base and offer low taxes that attract foreign investors seeking tax advantages. Personal income taxation applies to several types of income, such as wages, rental income, earnings from intangible assets, specific interest types (like loans, savings accounts, and bonds), replacement income, capital gains, lottery winnings, and pensions. Employment income includes not just wages but also bonuses, per-diems, insurance premiums, debt forgiveness, payment of personal expenses by the employer, and benefits in kind over a certain threshold.

To learn more about taxation in Kosovo, click here.

Montenegro

The taxation of individual income in Montenegro depends on residency status. Residents are responsible for taxes on their global income from any source, while non-residents are taxed on income linked to a fixed base/permanent establishment in Montenegro. In Montenegro, there is an additional tax called a local surtax that you pay on top of your regular income tax. This surtax goes to the municipality where you live in Montenegro. Most municipalities charge a 13% surtax rate, but in Podgorica and Cetinje, it is set at 15%. The surtax amount is calculated based on your income tax.

To learn more about taxation in Montenegro, click here.

The following table provides a summarized comparable study on income taxation in Albania, Kosovo and Montenegro:

	Albania	Kosovo	Montenegro
*Tax Base for Residents*	Residents pay tax on their worldwide income.	A resident individual is subject to tax on his or her Kosovo-source and foreign-source taxable income.	Residents are subject to tax on their worldwide income.
*Tax Base for* *Non-Residents*	Nonresidents pay tax only on Albanian-sourced income.	A nonresident individual is subject to tax on his or her Kosovo-source taxable income.	Non-residents are subject to Montenegrin tax on income sourced in Montenegro.
*Income Sources*	Income derived from employment is subject to a progressive rate structure, while other income is subject to tax at a flat rate (either by self-assessment or through withholding).	Taxable income for a tax period is the difference between *(a)* gross income received or accrued during the tax period; and *(b)* the deductions allowable under the LPIT with respect to such gross income.	Resident individuals are subject to tax on their worldwide income, including capital gain.
*Tax Rates*	Click here to learn more about how PIT is levied in Albania.	Click here to learn more about how PIT is levied in Kosovo.	Click here to learn more about how PIT is levied in Montenegro.

Personal Income Tax Rates

While the three countries share similarities in the regulation of personal taxation, they differ in certain aspects, such as tax rates. In Albania, personal income is taxed up to 23%, in Kosovo up to 10%, and in Montenegro up to 15%.

In the following graphic, a comparative view of taxation is presented for each of the countries:

Incentives and Exemptions

Albanian Legislator provides several tax exemption policies for the subjects. The following are some of the main exemption policies provided in Albania:

Donations and inheritances received between legal heirs in the first and second degrees, as well as donations and inheritances between siblings.
Donations and inheritances not covered under point (a) are exempt up to 5,000,000 ALL per taxpayer for immovable property and up to 1,000,000 ALL for movable property.
The transfer of ownership rights to legal heirs, whether through donation or relinquishment, is exempt when the property originates from co-ownership.

To learn more about tax incentives in Albania, click here.

Kosovo Legislator provides several tax exemption policies for the subjects. The following are some of the main exemption policies provided in Kosovo:

Wages of foreign diplomats, consular representatives, and embassy staff; wages of employees in international governmental and non-governmental organizations registered in Kosovo; wages of foreign workers in donor agencies, humanitarian aid providers, KFOR, and EULEX;
Compensation for property damage;
Life insurance payouts after death; wages of individuals with special needs as per relevant laws;
Rewards for achievements in science, sports, and culture; and income from grants, subsidies, and donations earned under specific conditions.

To learn more about tax incentives in Kosovo, click here.

Montenegro Legislator provides several tax exemption policies for the subjects. The following are some of the main exemption policies provided in Montenegro:

A self-employed individual starting a business in an underdeveloped region is exempt from taxes for eight years from the date of establishment. However, this tax exemption is limited to EUR 200,000 over the eight years.
Certain compensation receipts are not subject to taxation, such as daily allowances, severance payments, scholarships, compensations for damages, jubilee awards, etc.

To learn more about tax incentives in Montenegro, click here.

Why Consider Western Balkan Countries?

Each of these Balkan countries has its own distinct economic and financial system, contributing to a growing business environment. To attract investments, they offer different investment incentives, benefits, and regulatory advantages for both local and foreign investors. Kosovo has relatively lower personal income tax rates compared to neighboring countries, making it a more attractive destination for individuals and businesses seeking favorable tax conditions.

On the other hand, Albania’s strategic location and legal and administrative reforms have been key factors driving significant transformations in its business in recent years. Its proximity to major European markets, coupled with economic reforms, has attracted a growing number of foreign investors and expatriates. Many are choosing Albania not only for its advantageous geographic position but also for its favorable business environment conditions, including a low tax rate, diverse investment opportunities across various sectors, and a streamlined process for obtaining residence permits. These factors have made Albania an increasingly appealing destination for those looking to live and invest in a dynamic, evolving market.

Montenegro offers low personal income tax rates, as highlighted above. Similar to Kosovo and Albania, Montenegro is actively working towards improving its investment climate and encouraging a favorable environment for business growth. The country is making steady progress in enhancing its economic policies and infrastructure, aiming to attract foreign investments and drive sustainable development.

הפוסט Personal Income Tax in the Western Balkans הופיע לראשונה ב-Nimrod Yaron Albania.