Corporate taxes in Albania is undergoing significant changes in 2024, with new legislation reshaping the way businesses are taxed. These changes aim to create a clearer framework for taxation while ensuring that all entities, regardless of their annual turnover, contribute their fair share.
At Expatax, we strive to simplify the intricacies of relocation and investment in Albania. Our mission is to streamline your transition with accurate and practical tax information.
Who is Subject to Corporate Income Tax (CIT)?
Previously, the determination of Corporate Income Tax was tied to annual turnover levels, with vague definitions causing ambiguity. However, the new Law on Income Tax, effective from January 1, 2024, provides clarity by categorizing all entities as taxpayers for CIT purposes. This includes various forms of businesses recognized by Albanian legislation, ensuring comprehensive tax coverage.
Under the new law, entities with an annual turnover exceeding ALL 8 million are subject to CIT. The tax rate varies:
- 0% for turnovers between ALL 8 million to ALL 14 million
- 15% for turnovers exceeding ALL 14 million
This shift towards a defined framework ensures equitable taxation across all business entities.
Taxable Profit and Calculation of CIT Liability
Determining taxable profit follows general rules similar to previous regulations. It encompasses income generated during the fiscal year minus allowable expenses. These figures are drawn from financial statements prepared according to accounting legislation and the new Law.
Notably, dividends received by a taxpayer holding at least 10% equity for a continuous period of 24 months are exempt from taxable income. CIT liability is then calculated by applying the 15% CIT rate to the taxable profit. Any foreign tax credits, withholding tax payments, or advance CIT installments reduce this liability. Excess taxes paid can be reimbursed or carried forward as advance payments for the following fiscal year.
Special Tax Rates for Some Businesses
The standard CIT rate stands at 15%. However, certain industries enjoy reduced rates or exemptions under the new law:
- Software development entities: 5% CIT until December 31, 2025.
- Automotive industry entities: 5% CIT until December 31, 2029.
- Agriculture cooperatives and agritourism entities: 5% CIT until December 31, 2029.
- 4 & 5 stars Hotel/Resort entities with special status: Exempt from CIT for 10 years, if holding an international brand name.
It may interest you: How to Register Branches or Subsidiaries in Albania
Long-Term Contracts
Another significant change introduced by the new Law relates to taxation rules for long-term contracts. These contracts, exceeding 12 months and involving production, installation, construction, or services provision, now require income recognition based on completed contract portions within the fiscal year. Expenses incurred are deductible in the corresponding tax year as per accounting standards, ensuring alignment between income and expenses for long-term projects.
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At Expatax, we strive to simplify the intricacies of relocation and investment in Albania. Our mission is to streamline your transition with accurate and practical tax information. For further professional guidance, read our resources or contact us.
