Israel – Albania Tax Treaty

The Tax System in Albania

Albania Tax Authority is called The General Directorate of Taxation.

Income Taxation: 13%, 23%

Taxation of Companies and Branches: 15%

VAT: 20%

Capital Gains Tax: 15%

Withholding Tax

Inheritance Tax and Estate Tax in Albania

The tax rate for inheritances and gifts income is 15%, with no deductions for any costs.

Tax Exemptions:

1. Donations and inheritances between legal heirs of the first and second degree, as well as between siblings.
2. Donations and inheritances up to 5,000,000 ALL for immovable assets and up to 1,000,000 ALL for movable assets are not covered in point (a).
3. The transfer of ownership rights to legal heirs through gifts or relinquishment applies to property acquired as compulsory co-ownership under Law No. 7501, dated 19 July 1991, “On Land,” as amended.

Relocation to Albania

Albania offers a strategic opportunity for business expansion or relocation due to its unique geographical position in Southeast Europe, dynamic young population, and rich natural resources, highlighting its significant economic potential. The country demonstrates positive economic growth trends with fiscal consolidation, reduction in budget deficit and public debt, and stable economic conditions. Furthermore, it benefits from a regional market approach within the CEFTA countries, targeting full European market integration.

The Albanian business environment is increasingly favorable, marked by growing confidence and a consolidating production structure that enhances export value. The government’s reforms aim to improve the business climate, productivity, and competitiveness, and attract domestic and foreign investments.

Albania ranks favorably in investor protection and trade facilitation, reflecting its commitment to international standards. Albania’s strategic location, economic potential, favorable business environment, and comprehensive reforms make it an attractive destination for businesses aiming for relocation or expansion, positioning Albania as a prime market destination within regional and European contexts.

Real Estate Taxation in Albania

The property tax rates in Albania for buildings are determined by their use and value, applying specific percentages to calculate the due tax annually. For residential properties, the tax rate is 0.05% of the property’s value. Commercial properties are taxed at a higher rate of 0.2% of their value. Unfinished construction projects that exceed the completion deadline specified in their construction permit are subject to a significantly higher tax rate of 30% of the property’s value.

In addition, a transfer tax, charged by local authorities, is applicable on the transfer by business entities of title to buildings or other real estate. This tax is levied at higher rates in cities such as Tirana and Durres, while the rates are lower in other areas of the country. All other real property is taxed at a rate of 2 percent of the sale price.

Transfer of Funds from Israel to Albania

According to section 170(a) of the Israeli Income Tax Ordinance, all payments transferred to non-Israeli residents are subject to a 25% withholding tax. However, this tax can be reduced or even waived if certain conditions are met. Our firm handles withholding tax matters with the Israeli Tax Authority.

As mentioned above, the countries have signed a tax treaty, that allows taxpayers to submit a 2513/2 form – Statement regarding a payment to a foreign resident that is exempt from withholding tax, to potentially transfer the payments without paying the withholding tax. 

In addition to assisting with withholding tax matters, our firm also helps with other issues related to transferring funds abroad. This includes providing an accountant’s approval regarding the payment of taxes, reviewing additional actions required under the CRS standard, and more. 

Moreover, banks often raise many difficulties and charge high fees for converting shekels into other currencies. Therefore, consulting with a specialist before transferring the funds is highly recommended, click here to contact us. 

For more information on money transfers abroad, click here. 

Types of Business Entities in Albania

In Albania, business activities can be conducted through various types of entities:

• General Partnership – A business entity with at least two partners sharing unlimited liability for the company’s debts. Assets and profits are distributed as per the partnership agreement.
• Limited Partnership – Consists of limited and general partners. Limited partners contribute financially and have limited liability at their investment, whereas general partners hold unlimited liability and manage the business.
• Limited Liability Company (LLC) – The most common form in Albania, where shareholders invest capital and their liability is restricted to their investment, shielding personal assets from company debts.
• Joint Stock Companies (Sha) – This type of business form is designed for large enterprises, raising funds by offering shares to the public. Their capital is divided into shares subscribed by founders, who are not personally liable beyond their contributions. A Sha is established through a Founding Shareholders’ Meeting to subscribe shares and adopt the Statute, becoming operational after registration in the Commercial Register. The minimum capital is ALL 3,500,000 for private offerings and ALL 10,000,000 for public offerings, with at least 25% of cash contributions paid before registration. Sha is the only Albanian legal entity permitted to issue bonds.
• A Joint Venture – Joint ventures are unlimited partnerships formed by individuals or entities to undertake economic activities or projects, sharing costs and profits. They have no capital requirements, and partners are jointly liable for obligations defined by their agreement and law. Registration in the commercial registry is declaratory and does not grant legal personality.

Incentive Laws in Albania

In Albania, investment incentives include a range of fiscal, financial, and other benefits designed to stimulate domestic and foreign investments in various sectors, including technology, agriculture, tourism, and renewable energy. Here’s a detailed overview of specific incentives available:

Fiscal Incentives

1. Loss Carry Forward: Corporate income tax losses can be carried forward for three consecutive years.
2. VAT Exemption: There are exemptions for solar panel systems, agricultural machinery, books, and large electric vehicles. VAT for agritourism activities and audio-visual media services is reduced to 6%.
3. Tax Exemption on Dividends: Dividends designated for investments are exempt from corporate income tax.
4. Guaranteed Feed-in Tariff: For renewable energy generation, ensuring a fixed purchase price for generated electricity.

Financial Incentives

• Subsidized Land Concession: Public property of more than 500 square meters can be leased or granted for a symbolic price of 1 euro for manufacturing or inward processing activities exceeding an investment of 10 million euros.
• Technological and Economic Development Area (TEDA) Incentives: Include VAT and customs duty exemptions, capital expenditure deductions, personal income tax exemption, and real estate/infrastructure tax exemptions among others.

Sector-Specific Incentives

• Reduced Profit Tax: For software producers, agricultural producers, and agritourism activities, the applied income tax rate is 5%.
• Exemption from Carbon Tax: Exported petrol and gasoline are exempt.
• Import Duties Exemption: For machinery used in renewable energy production and various other sector-specific machinery and equipment.

These incentives are part of Albania’s broader strategy to attract investment, stimulate economic growth, and align with European Union standards. To read more on the tax incentives in Albania, click here.

Albania: Double Tax Treaties