The building tax is a local tax that is calculated, administered and collected by the local authorities. The new methodology, passed in November 2017 through Law 107, has been applicable since April 1 2018. Since the institutions and the public bodies envisioned by the law are not yet established, the tax instalment payments will begin later, once the local authorities are ready. This will not affect the payments, since this is an annual tax that can be paid at any time during the year.
The building tax is payable by individuals, physical or legal persons (either domestic or foreign), owners, users of the immovable property concerned, or persons that have applied for legalisation, in the territory of the Republic of Albania. The tax applies irrespective of the level of use of those buildings, unless otherwise provided by this law. The previous calculation of the tax was done on the basis of the building's surface area.
In order to apply the newly established methodology, several legal institutions and administrative bodies are being created. The 'fiscal cadastre' is the central registry of the real estate database that serves the purpose of administering the immovable property tax. The General Directorate of Property Tax is a budgetary public legal entity, subordinate to the Finance Ministry.
In cases where the taxpayer wants to appeal the level of the tax applied, he/she must address the appeal not to the mayor (which was the case in previous provisions), but rather to the local body in charge of tax appeals, whose decision may further be brought in front of the court.
The law provides for several exceptions from the tax on buildings:
- State and local government properties that are used for non-profit purposes;
- State-owned properties that, through a decision of the council of ministers, are transferred to the administration of state-owned public companies;
- Residential buildings used by a leasing tenant whose lease has not been liberalised since the communist regime;
- Social housing owned by municipalities;
- Buildings owned by legal or physical entities, which – under agreements with municipalities – are used by the latter for social housing;
- Buildings used by religious communities for their activities;
- Four or five-star accommodation structures, such as hotels/resorts, that have a special status as defined by the relevant tourism legislation, and whose brand names are registered trademarks that are internationally known;
- Residential buildings of persons who benefit from social or old age pensions, when the family consists only of pensioners;
- Residential buildings of persons who benefit from social aid; and
- Cultural buildings, which are under temporary or permanent protection, during the period of the protection, according to the legislation in force for cultural monuments and/or cultural heritage.
The buildings' tax base is the value of the building, calculated in accordance with the methodology and procedures established by the decision of the council of ministers.
The buildings' tax rate is applied as a percentage of the tax base:
- 0.05% for a building used for construction;
- 0.2% for a building used for economic activity; and
- 30% of the respective tax rate for the entire construction site, in cases where the developer has a construction permit but has failed to complete the construction according to the deadline set in the construction permit.
The local government units have started the process of tax calculation according to the new methodology, making the exemptions and deductions according to the provisions of the law. During the coming months, the administration of property tax by local government units and the respective registry will be consolidated, with the aim of having a full and automatic system of administering this tax by the following year.
The new calculation methodology for this tax provides flexibility for local government units in determining the value of buildings. We advise clients to seek assistance in determining the impact of the new tax legislation and to ensure their compliance with the new law.
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