Albania is an upper-middle income country that has made enormous strides in establishing a credible multi-party democracy and market economy over the last two decades. Following the graduation from the International Development Association to the International Bank for Reconstruction and Development in 2008, Albania has generally been able to maintain positive growth rates and financial stability, despite the financial crisis.
Albania is a parliamentary republic. Integration into the EU has been the ultimate goal of all post-communist governments in Albania. The major priorities of the current government are thorough reform of the legal system, fast and stable growth of the economy and ensuring national prosperity and EU membership.
The head of state in Albania is the President of the Republic. The President is elected to a 5 year term by the Albanian Assembly by secret ballot, requiring more than 60% of the votes of all deputies. The President has the power to guarantee observation of the constitution and all laws, act as commander in chief of the armed forces, and exercise the duties of the Assembly of the Republic of Albania when the Assembly is not in session, and appoint the prime minister.
Executive power rests with the Council of Ministers (the Government). The prime minister is appointed by the president; ministers are nominated by the President on the basis of the prime minister’s proposal. The Assembly must give final approval of the composition of the government. The government is responsible for carrying out both foreign and domestic policies. It directs and controls the activities of the ministries and other state organs.
Regarding the legislative branch, it is the Albanian Assembly (Kuvendi i Shqipërisë) that is the lawmaking body of the country. It is composed of 140 deputies, who are elected through a proportional system. Parliamentary elections are held at least every four years.
The Assembly has the power to decide the direction of domestic and foreign policy; approve or amend the constitution; declare war on another state; ratify or annual international treaties; elect the President of the Republic, Attorney General and his or her deputies, provide consent to the election of members of the Supreme Court by the President; and control the activity of state radio and television, state news agency and other official information media.
*source: Doing Business in Albania- EY Report
According to experts, Albania could be an option for those seeking to reduce their tax burden. With high-tax OECD nations dead-set on putting tax havens out of business, Albania is quietly playing up its tax stance (generally a flat 10% on personal, corporate and capital gains earned within its borders). And the government is actively seeking to attract foreign investment while becoming even more taxpayer-friendly
Personal Taxable Income — Tax
0- 30,000 ALL (approx. € 214) — 0%
30,000- 130, 000 ALL (approx. € 924) — 13% of the amount over 30,000 ALL
130,001 ALL –unlimited — 23% of the amount over 130,000 ALL
Annual turnover of 2 million ALL or less (€ 0 – € 14,000) — 5 000 ALL (approx. € 178)
Annual turnover between 2 and 8 million All (€ 14,000 – € 57,000) — 7,5%
Corporate — 15%
Consider the table below for other type of taxes in Albania:
Category — Tax rate
Property –Buying Tax — 1%
Property- Selling Tax — 0%
Withholding Tax — 15%
VAT — 0% or 20%
Customs/ Import Tax — 0%, 2%, 5%, 6%, 10% or 15%
Trade Agreements and Treaties
After the year 2000 Albanian trade underwent substantial progress. On September 8, 2000 Albania joined the World Trade Organization (WTO). Albanian commitments under World Trade Organization include three main areas; trade in goods (GATT), trade in services (GATS) and intellectual property (TRIPS). The country has reduced the tariffs and other trade barriers on goods, especially on products coming from agriculture and industry sector.
On December 19 of 2006, Albania, Bosnia Herzegovina, Croatia, Macedonia, Moldova, Montenegro, Serbia and Kosovo signed an agreement to amend and enlarge the Central European Free Trade (CEFTA). CEFTA aims to expand the trade in goods and services and foster investments between member countries.
On May 1, 2008 Albania signed a free trade agreement with Turkey to increase and enhance the economic cooperation between two countries. The nature of this agreement is asymmetric, meaning that the degree of liberalization is different for different products.
On April of 2009, Albania achieved an important goal towards European Union (EU) integration, when the Stabilization Association Agreement (SAA) with EU entered into force. The overall requirements of SAA regarding the trade liberalization include the establishment of a free trade and area with countries in EU region, complying with WTO standards and requirements and adopting internal acquits related to free movement of goods, capital and people
On 2009, Albania signed another free trade agreement (FTA) with the European Free Trade Association (EFTA), composed by Liechtenstein, Norway, Iceland and Switzerland. The FTA provides for both EFTA countries and Albania to abolish all tariffs on industrial products, including marine products, like fish.
Albania has bilateral agreements on the promotion and protection of reciprocal investments with the following countries:
Austria, Belgium, Bulgaria, China, Croatia, Czech Republic, Denmark, Egypt, Finland, France, Macedonia, Germany, Greece, Hungary, Israel, Italy, Luxembourg, Malaysia, Netherlands, Poland, Portugal, Romania, Sweden, Slovenia, Switzerland, Tunisia, Turkey, United Kingdom, United States
Accounting and Audit
All entities located in Albania whose purpose is to make a profit (and certain non-profit entities) are subject to the provisions of the Albanian legislation on accounting and financial statements. Annual financial statements must generally include the balance sheet, statement of income and expenditure, statement of changes in equity, statement of cash flows, and annexes to the financial statements containing a summary of the accounting methods used and other explanatory material.
Financial statements must generally be prepared in accordance with the Albanian National Accounting Standards. Certain entities are required to prepare their financial statements in accordance with the International Financial Reporting Standards (IFRS), including listed companies and their subsidiaries, banks and other financial institutions, insurance and reinsurance companies, and entities whose annual revenue and number of employees exceed set limits.
The following entities are required to have a statutory audit of their financial statements:
- Businesses that use IFRS
- Joint stock companies that use the Albanian National Accounting Standards
- Limited liability companies that use the Albanian National Accounting Standards if two of the following three criteria are met at the end of the accounting period:
– Balance sheet total – ALL40m or more
– Revenue – ALL30m or more
– Average number of employees during the accounting period – 30 or more
Accounting records must be kept in the Albanian language and currency. In general, records containing foreign currency values must be converted into the Albanian currency in accordance with the relevant accounting standard. Accounting records and supporting documentation must be kept for a period of 10 years after the financial year end unless a longer retention period has been established by law.
During 2016 the value of exports was 243 billion ALL, increasing by 0, 1% compared with the previous year. “Minerals, fuels, electricity” and “Construction materials and metals” were the main influential groups, followed immediately by “Textile and footwear”. Even though Albania is primarily an importing country, exports have expanded in the last years.
The EU-with Italy, Greece and Spain at top- continues to remain the biggest trading partner of Albania, accounting for 66, 3% of total trade. Mainly they constitute also the top import origins followed by Germany and Netherlands as well. The primary imports include machinery and equipment, foodstuffs, textiles and chemicals.
New trading partners find their way as Albania’s economy expands. In 2014 Netherlands initiated a project regarding the agricultural sector in Albania within the scope to improve the enabling environment for local economic development and for enhancing bilateral commercial relations. In 2016, Netherlands was the 2nd biggest investor in Albania, with highest presence in the ICT industry, finance and insurance, electricity, gas, mining and quarrying.