The mission of Expatax is to make tax matters more digestible for expats and retirees. This article explores the essentials of Albanian tax for retirees. Feel free to use our TAX AI at the end of this article to ask further questions.
Albania is an increasingly attractive destination for retirees worldwide, primarily because income earned from pensions and retirement schemes is typically tax-free. Other income forms, such as dividends, interest, and capital gains, also enjoy favourable tax treatment in this Balkan hotspot.
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Exemption From Albanian Tax On Private Pensions
There are specific categories of income that enjoy tax-free status in Albania. This includes payments made from a voluntary (so-called “private pensions”) pension fund, including contributions made both by the employer and the employee. This means that, in addition to not charging tax on state pensions, disbursements from British SIPPs and private pension schemes, or French and Italian private pensions, or yet again US 401(k) and other retirement savings schemes – these all are taxed 0% in Albania.
Furthermore, returns on investment, including capital gains accrued from investments to the pension fund, are also tax-free.
How To Apply For Tax-Free Pensions In Albania
Income from pensions and similar forms of remuneration received by foreign citizens of Albanian origin or EU citizenship are tax-exempt. However, to qualify for this exemption, retirees must meet the following conditions:
- Be beneficiaries of pensions according to the law in their home countries
- Apply for a residence permit in Albania
- Have a clean criminal record
- Receive approval from the Albanian government branch which greenlights income tax exemption
- Produce a passport from their home country
All in all, a little paperwork will go a long way towards providing exemption from income taxes on retirement income received in Albania. Note, however, that the country disbursing the pension may still tax it at the origin – this is the case, for instance, of certain Italian state pensions that are taxed in Italy no matter if you move your tax residency abroad. In other cases – for instance, if you receive a UK state pension – your pension will stop increasing each year once you move to Albania (but it will return to the current rate if you move back to the UK).
If you pay tax twice, you can usually claim tax relief to get all or some of it back. If Albania has a so-called “double taxation agreement” with the country disbursing your pension, you’ll only pay tax on your pension once. It is best to check with one of our experts about your personal situation before you make the move.
Albanian Tax for Retirees: Other Noteworthy Exemptions
Certain income types are tax-exempt when determining taxable earnings for Personal Income Tax (PIT) purposes. These include benefits earned by employment relationships, income from social and health insurance schemes, and payments received from insurance in case of illnesses or accidents.
Also exempt is any income accorded such status by international agreements, with Albania having such treaties with over 40 countries.
Albania Offers Low Tax Rates on Capital Gains and Dividend Income
For retirees who need to enhance their pensions by selling shares, the capital gains on these sales are subject to a flat tax rate of 15% – calculated on the difference between the sale and acquisition prices of the stocks.
In regards to real estate transactions, a 15% tax applies on the capital gains realised from selling land or buildings. On the other hand, dividend income attracts an incredibly low tax rate of 8%.
Why is Albania Becoming a Favourite Among Retirees?
Located close to mainland Europe with a cost of living below 50% of the European median, Albania presents an attractive proposition for retirees. The country’s favourable tax laws offer retirees the opportunity for comprehensive tax relief on their pensions. And for those retirees that would like to remain active in their golden years by starting a business or working remotely, Albania also offers very attractive taxation setups.
At Expatax, we’re proud to offer services that simplify the tax relocation process for retirees seeking comprehensive tax relief on their pension funds in Albania.
