Albania: New tax incentives for operating in free zones in Albania

Drilona Likaj

The Government of Albania has approved some amendments to the Law on the Establishment and Functioning of Economic Zones. The amendments introduce new regulations and new tax incentives for companies operating in the free zones. According to the approved amendments, corporate income tax (CIT) will be reduced by 50% for the entities that operate in free zones for the first five years of their activity. Entities operating in free zones can calculate 20% of capital expenses incurred during the fiscal year as deductible expenses for CIT purposes within the same period, regardless of the depreciation rates approved as per the income tax law. The entities have the right to benefit from this incentive only during the first three years from the beginning of the activity and for a total of two years.

The supply of Albanian goods that are intended to be placed in the free zone is considered as export with 0% VAT rate in accordance with the provisions of the VAT law and customs law.

Development projects are exempted from the infrastructure tax levied in the country. This is a tax applied on new investments, at a rate of 2%-4% of the value of the investment in Tirana and 1%-3% of the value in other areas of the country.

Constructions carried out for development projects are exempted from property tax during the first five years.

Developers and operators in free zones are exempted from capital gains tax, which is levied at the rate of 15%.

Salary and insurance contribution expenses will be recognised at 150% of the value as deductible expenses for corporate income tax purposes during the first year of the activity. In subsequent years, only the additional expenses for wages compared to the previous year will be recognised for CIT purposes at 150% of the value.

Employee training costs will be recognised at 200% of the value as deductible expenses for corporate income tax purposes during the first 10 years of the activity.

Expenses for research and development (R&D) will be recognised for CIT purposes at 200% of the value.

The procedures of entry and exit of goods into, or out of, free zones will adhere to the regulations of the Albanian Customs Code.

The abovementioned tax incentives aim to encourage investments, create new jobs, increase incomes, introduce advanced technology, and accelerate regional development.

Drilona Likaj (drilona.likaj@eurofast.eu)

Eurofast Global, Tirana office

Tel: +355 42 248 548

Website: www.eurofast.eu