Foreign investors setting up a business in Albania need to understand what taxes companies pay in Albania to plan their financial strategy and stay compliant. Albania’s tax system applies equally to local and foreign-owned companies, covering several mandatory tax categories.
Companies operating in Albania are required to pay:
– Corporate income tax
– Value added tax (VAT)
– Payroll taxes and social contributions
– Local municipal taxes
Each tax category comes with specific rates, thresholds, and reporting obligations, which are essential to follow from the start of operations.
Corporate Income Tax
Corporate income tax in Albania is levied at a flat rate of 15 percent on net taxable profits for companies with annual turnover up to 14 million Albanian Lek (approximately 130,000 euros) or higher. Taxable profit is calculated as gross income minus allowable business expenses, depreciation, and deductible costs.
Companies must file annual tax returns with the tax authorities and make advance tax payments during the fiscal year to comply with Albanian tax law.
Value Added Tax (VAT)
Businesses that meet the VAT registration threshold or engage in VAT-liable activities must register for value added tax. The standard VAT rate in Albania is 20 percent, applicable to most goods and services.
Companies are required to issue VAT invoices, collect VAT from customers, and submit monthly VAT returns. Businesses can claim input VAT on eligible purchases, offsetting it against VAT collected on sales.
Payroll Taxes and Social Contributions
Employers in Albania are obligated to withhold and contribute to payroll taxes on behalf of their employees. This includes mandatory social security, health insurance, and employment fund contributions.
The employer’s contribution totals approximately 16.7 percent of gross salary, while the employee’s contribution is about 11.2 percent, deducted from wages. Companies must file monthly payroll declarations and remit contributions to the tax authorities.
Local Taxes and Sector-Specific Obligations
In addition to national taxes, companies may be liable for local taxes imposed by the municipality where the business operates. These may include property tax, signage tax, and waste collection fees, with rates varying by location.
Certain industries may also face sector-specific fees, licenses, or regulatory taxes depending on the nature of their operations.
Staying Compliant
All companies in Albania must keep proper accounting records under Albanian standards, issue tax-compliant invoices, and submit timely reports. Non-compliance can result in fines, interest penalties, or restrictions on business activities.
Foreign investors are strongly advised to work with a qualified local accountant or tax consultant to manage tax registrations, filings, and ensure full compliance with changing regulations.
Understanding what taxes companies pay in Albania is key to running a compliant and financially sustainable business. Corporate income tax, VAT, payroll contributions, and local taxes form the core obligations for companies in the Albanian market.