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Albania: Albania changes income tax law, introduces incentives for agro-tourism

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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.

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