Taxable Income Categories in Albania

• Employment Income
• Net Business Income (Self-Employment)

Employment Income Taxation

• Employment income includes salaries, bonuses, benefits, director’s fees, and termination compensation.
• Standard deductions apply based on income level:
  • Up to ALL 600,000: Deduction of ALL 600,000
  • ALL 600,000 – ALL 720,000: Deduction of ALL 420,000
  • Over ALL 720,000: Deduction of ALL 360,000
• Private pension fund contributions up to the minimum monthly salary (ALL 40,000) are deductible.
• Annual deduction of ALL 100,000 per dependent child (<18 years old) for educational expenses,applicable if the parent‘s annual income is up to ALL 1,200,000.

Business Income (Self-Employment Taxation)

• If 80% or more of income comes from a single client, it is classified as employment income and taxed at 13% or 23%.
•  If 90% or more of total income is derived from fewer than three clients, it is also considered employment income.
• Services provided only to non-resident entities without a permanent establishment (PE) in Albania are taxed as business income.
• Entrepreneurs with a turnover of up to ALL 10 million can opt for flat-rate deductible expenses (e.g., 30% based on industry standards). Once selected, this regime cannot be changed for three years.

The same standard deduction applied for employed, are also applied to self-employed.

Compliance Requirements

• Individuals earning over ALL 1,200,000 annually must file an annual tax return (previously ALL 2,000,000)
• New deadline: March 31 (previously April 30).

Corporate Tax Rates in Albania

• Standard CIT rate: 15%
• Reduced rates apply to specific industries until December 31, 2029:
  • Agrotourism: 5%
  • Agricultural cooperative societies: 5%
  • Automotive sector: 5%
  • Software development: 5% (valid until December 31, 2025)

More about corporate income taxes in Albania

Withholding Tax

• The new WHT tax return format from January 2025 and onwards.

DTT Application Changes

• Applications must be submitted within one year from the payment date (previously 2 years).
• Failure to comply results in penalties and loss of treaty benefits (penalty of ALL 10,000 for every month of delay, up to a period of 24 months. After 24 months, entities lose the right to benefit from the DTT provisions.

Depreciation & Amortization

• Unified based on straight line for all asset classes.