The Albanian Parliament on July 9 2018 approved a draft law
submitted by the Council of Ministers that proposed several
changes to income tax.
The law affects income tax in several sectors of the
country's economy: farmers involved in agricultural cooperation
societies, agro-tourism businesses, the construction industry,
small and medium-sized enterprises, and gambling companies.
Albania currently has three income tax brackets: for
businesses with an annual turnover up to ALL 5 million
($46,000), the rate is zero; for those with a turnover from ALL
5 to 8 million per year, it is 5%; and when the annual turnover
exceeds ALL 8 million, it is 15%. These income brackets are one
of the aspects that the law amends.
Incentives for agro-tourism enterprises
The Albanian economy is largely dependent on the
agricultural sector. The government's objective is to increase
the cooperation of small land owners by creating agricultural
cooperatives. This requires incentives, which is why the
revised law reduces the income tax rate for agro-tourism
enterprises from 15% to 5%. The objective is to promote the
creation and growth of this type of enterprise, which is
expected to provide accommodation, food, recreation,
entertainment, and other activities related to the farm. This
business category is required to be licensed in accordance with
the legal criteria. This is a provisionary measure, which will
remain in force for 10 years.
Income tax bracket widened
The reduced threshold for VAT registration was applied in
April 2018. To alleviate the impact of this change, the Council
of Ministers has proposed increasing the threshold of the top
income tax category (15% income tax) from the previous ALL 8
million to ALL 14 million. This effectively widens the middle
income tax bracket (5% income tax) to apply to entities with
annual turnovers between ALL 5 and 14 million.
Tax on gambling income
The revised law also introduces changes to income tax on
gambling. A 15% rate will be applied to all gambling categories
on gross income which equals the amount played by gamers after
winnings have been paid out.
The corporate income tax amendments will be applicable from
January 1 2019, and are part of several tax changes that the
government and parliament have made this fiscal year. The
revised law provides for a considerable decrease in the income
tax rate, from 15% to 5%, for a large number of companies. This
is expected to have a positive impact on the overall economy,
and especially on sectors to which the amendments apply.