Support to Invest in Albania
General Country Overview
Albania is an upper middle-income country with a gross domestic product (GDP) per capita of USD 5,373 (2019 IMF estimate) and a population of approximately 2.9 million people. An estimated 45% of the population lives in rural areas.
Registering a Business in Albania
Foreign and domestic investors have numerous options available for organizing business operations in Albania. The 2008 Law on Entrepreneurs and Commercial Companies sets guidelines on the activities of companies and the legal structure under which they may operate. On the other side, the Law on the National Registration Center (NRC) allows for the following legal types of business entities to be established through the NRC: sole proprietorship; unlimited partnership; limited partnership; limited liability company; joint stock company; branches and representative offices; and joint ventures.
The National Business Center (NBC) serves as a one-stop shop for business registration. All required procedures and documents are published online (http://www.qkb.gov.al/information-on-procedure/business-registration/). Registration may be done in person or online via the e-Albania portal. When a business registers in the NBC it is also automatically registered with the Tax Office, Labor Inspectorate, Customs, and the respective municipality. According to the 2020 World Bank Doing Business Report, it takes 4.5 days and five procedures to register a business in Albania.
The Law on Public Private Partnerships and Concessions establishes the framework for promoting and facilitating the implementation of privately financed concessionary projects. According to the law, concession projects may be identified by central or local governments or through third party unsolicited proposals.
Taxation
Income Taxes
Albania applies a flat tax of 15% on any kind of revenue generated in its territory (personal income tax, corporate income tax, withholding tax, dividend etc.). Except for the labor taxes with follow a progressive regime with tree lines: 0%, 13% and 23%.
Corporate Income Tax Exemption
Film studios and cinematographic productions, licensed and funded by the National Cinematographic Center, are exempt from corporate income tax.
Value Added Tax
Albania applies a flat tax of 20% for every kind of sales on the consumtion.
Foreign Tax Credit
Albania applies foreign tax credit rights even in cases where no double taxation treaty exists with the country in which the tax is paid. If a double taxation treaty is in force, double taxation is avoided either through an exemption or by granting tax credits up to the amount of the applicable Albanian corporate income tax rate (currently 15%).
Loss Carry Forward for Corporate Income Tax Purposes
Fiscal losses can be carried forward for three consecutive years (the first losses are used first). However, the losses may not be carried forward if more than 50% of direct or indirect ownership of the share capital or voting rights of the taxpayer is transferred (changed) during the tax year.
Foreign Investments
FDIs in Albania
Albania has been able to attract increasing levels of foreign direct investment (FDI) in the last decade. According to the Bank of Albania data, flow of FDI has averaged USD 1.1 billion in the last six years, and stock FDI reached USD 9.5 billion at the end of 2019. Investments are concentrated in the energy sector, extractive industries, banking and insurance, telecommunications, and real estate. Switzerland, The Netherlands, Canada, Turkey, Austria, and Greece are the largest sources of FDI.
Legal Framework
The Law on Foreign Investment outlines specific protections for foreign investors and allows 100% foreign ownership of companies in all but a few sectors.
To attract FDI and promote domestic investment, Albania approved a Law on Strategic Investments in 2015. The law outlines investment incentives and offers fast-track administrative procedures to strategic foreign and domestic investors through December 31, 2020, depending on the size of the investment and number of jobs created.
Limits on Foreign Control and Right to Private Ownership
Foreign and domestic investors have equal rights of ownership of local companies, based on the principle of “national treatment.” According to the World Bank’s “Investing across Borders” indicator, just three of 33 sectors have restrictions against full foreign ownership, or in the case of the agriculture sector, against foreign land ownership.
Commercial property may be purchased, but only if the proposed investment is worth three times the price of the land. There are no restrictions on the purchase of private residential property. Foreigners can acquire concession rights on natural resources and resources of the common interest, as defined by the Law on Concessions and Public Private Partnerships.
Incentives to Strategic Investment Sector
The following sectors are defined as strategic sectors: mining and energy, transport, electronic communication infrastructure, urban waste industry, tourism, agriculture (large farms) and fishing, economic zones, and development priority areas.
Investments in strategic sectors may obtain assisted procedure and special procedure, based on the level of investment, which varies from EUR one million to EUR 100 million, depending on the sector and other criteria stipulated in the law.
In the assisted procedure, public administration agencies coordinate, assist, and supervise the entire administrative process for investment approval and makes state-owned property needed for the investment available to the investor.
Tourism and Agritourism
Investments of EUR 5 million or more enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure.
In 2018, the Government of Albania (GoA) introduced new incentives to promote the tourism sector. International hotel brands that invest at least USD 8 million for a four-star hotel and USD 15 million for a five-star hotel are exempt from property taxes for 10 years, pay no profit taxes, and pay a VAT of 6% for any service on their hotels or resorts. For all other hotels and resorts, the GoA reduced the VAT on accommodation from 20% to 6%.
Profit taxes for agritourism ventures were reduced to 5% from 15 % previously, while VAT for accommodation is now 6 %, down from 20 %. Agritourism facilities are exempt from the infrastructure impact tax.
Agriculture (Large Agricultural Farms) and Fishing
Investments greater than EUR 3 million that create at least 50 new jobs enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure.
Development Priority Areas
Investments greater than EUR 1 million that create at least 150 new jobs enjoy the status of assisted procedure. Investments greater than EUR 10 million that create at least 600 new jobs enjoy the status of special procedure.
Manufacturing Sector
The GoA reduced the profit tax from 15% to 5% for software development companies and the automotive industry.
Manufacturing activities are exempt from 20% VAT on imports of machinery and equipment. GoA offers a one-euro symbolic rent for government-owned property (land and buildings) for investments exceeding USD 2.7 million that create a minimum of 50 jobs. No VAT is charged for products processed for re-exports. Employers are exempt from paying social security tax for one year for all new employees.
The GOA pays the first four months of salaries for new employees and offers various financing incentives for job training.
The manufacturing sector obtains VAT refunds immediately in the case of zero risk exporters, within 30 days if the taxpayer is an exporter, and within 60 days in the case of other taxpayers.
Lease of Public Property
The GoA can lease public property of more than 500 square meters or grant a concession for the symbolic price of one euro if the properties will be used for manufacturing activities with an investment exceeding EUR 10 million, or for inward processing activities. The GoA can also lease public property or grant a concession for the symbolic price of one euro for investments of more than EUR two million for activities that address certain social and economic issues, as well as activities related to sports, culture, tourism, and cultural heritage. Criteria and terms are decided on an individual basis by the Council of Ministers.
Digitalization
The government made significant advancements in its Digital Revolution Agenda during 2019. As of January 2020, 61% of all public services to citizens and businesses were available online through the E-Albania Portal, up from 15% in 2019.
The reform is ongoing, and the government states that by December 2020, 91% of all public services will be available online. This should help curb corruption by limiting direct contacts with public administration officials.
Visa and Working Permit in Albania
Visa requirements to obtain residence or work permits are straightforward and do not pose an undue burden on potential investors. The government amended the Law on Foreigners in February 2020. The amendments remove restrictions on foreign employees and streamline the visa and work permit processes for foreigners and foreign workers by introducing online visa application process, simplifying and accelerating the working permit process, and providing the same access to the labor market for citizens of Western Balkan countries as the United States, EU, and Schengen-country citizens have.
To work in Albania, foreigners must apply for a work permit or work registration certificate, except for U.S. citizens and citizens from EU member countries, the Schengen area, and the Western Balkans, who are exempted from such requirement and enjoy the same employment rights and benefits as Albanian citizens.