Some Answers About Doing Business in Albania

Reasons for Investing in Albania

The main reasons for a company to invest in Albania are:

• Open potential for regional, European, and global markets

A strategic location for access to European markets and the Balkan region. It is located in the middle of Europe's largest corridors.

• Market-oriented

The Albanian economy is completely open and characterized by a fully liberalized trade.

• Favorable environment and cost-effectiveness for doing business

Tax and incentive advantages in strategic investment sectors. Online system for registration and payment of taxes. The legal framework for Albanian trade is compliant with EU legislation.

• Various investment options

Beneficial investment opportunities through public-private partnerships. Beneficial opportunities for investments in sustainable development sectors: Renewable Energy, Mining Industry, Tourism, Agribusiness, Transport and Logistics, Industrial Production, ICT Services.

• Legal support

No prior government authorization is required, and all sectors are open to foreign investors. There are no restrictions for foreign companies. There is no limit on the percentage of foreign participation in a company - 100% foreign ownership is possible. Special state protection for foreign investors in case of legal-civil disputes with private third parties. Foreign investors have the right to send abroad any in-kind contribution of their investment. There are no foreign exchange controls.

• Qualified and creative workforce and cheap labor

Foreign language skills. (English, Italian, and Greek are widely spoken. French and German are also included in the education system). 57% of the population is under 35 years old. More than 1,071,948 young, well-educated, and motivated professionals. Approximately 116,292 students are enrolled per year. The minimum wage is 245 Euros. This creates a favorable environment for starting a business, as cheap labor and low costs are a good start for a business.

• Favorable tax system

Corporate Profit Tax Rate – 15%. Personal Income Tax Rate 0-23%. Favorable tax system for small businesses. Double Taxation Treaties with more than 30 countries. The tax system in Albania does not discriminate against foreign investors, and there is no difference between foreign and domestic investors.

What are the different types of businesses that can be established in Albania?

It is possible to register different legal entities in Albania. The Limited Liability Company (SH.PK) is the most common form of establishment for starting a business in Albania.

Other forms are also available in Albania, such as:

• Joint Stock Company (SH.A)
• General partnerships
• Limited partnership
• Branch
• Representative Office

The most suitable company types for doing business in Albania are: limited liability company, joint stock company, general partnership, limited partnership, holding company, branch, and representative office.

How much does it generally cost to open and maintain a company in Albania?

The cost of registering a limited liability company in Albania is ALL 0 (free). Also, the minimum capital requirement is 100 ALL. The maintenance cost depends on the type of business, and there is no state maintenance fee for registered businesses.

What are the procedures for opening a company in Albania?

For a person to register a limited liability company in Albania, they must register their activities with the Albanian Business Center. The person must prepare a company statute, either individually or in partnership with other persons (individuals) and/or as a single legal entity or in partnership with other legal entities, which includes the common economic goals and financial contributions of each. The registration process is done through the multi-functional state online portal E-Albania. As mentioned above, the cost of registering a limited liability company in Albania is ALL 0 (free).

World Company Setup provides services to clients in major industries, banks and financial institutions, as well as companies dealing with insurance, construction, energy and utilities, entertainment and media, mining, oil and gas, professional services, real estate, technology, tourism, transport, infrastructure and consumer goods, and telecommunications.

Which structure should I consider?

All have their advantages and disadvantages, and there is no single right answer; it all depends on your specific business circumstances and needs. Below is a brief overview of the main structures:

Establishment (a branch of your overseas business):

• Not a separate legal entity, but an extension of the overseas parent company.
• No limited liability or safety measure in (Country) operations.
• Must submit the branch balance sheet, prepared according to Albanian company law, to the Regional Tax Directorate, the National Business Center, and the Ministry of Finance and Economy.
• Must file periodic VAT returns and Profit tax returns in accordance with the Albanian Tax Procedure Law.

Limited liability company:

• Members (partners) have limited liability against their equity.
• Corporate tax must be paid on company earnings.
• Profits are distributed to members.
• Must file periodic VAT returns and Profit tax returns in accordance with the Albanian Tax Procedure Law.
• Only one person can establish an LLC.
• Must comply with Law No. 9901 of 2008 “On Entrepreneurs and companies,” as amended.

Joint Stock Company:

• The liability of shareholders is limited to the nominal value of their shares.
• The share capital of a publicly offered joint stock company cannot be less than 3,500,000 Albanian Lek.
• The share capital is divided into shares and subscribed by the founders.
• Corporate tax must be paid on company earnings.
• Profits are distributed to members who personally pay Income Tax on these profits.
• If applicable, must file periodic VAT returns and Profit tax returns in accordance with the Albanian Tax Procedure Law.
• Must comply with Law No. 9901 of 2008 “On Entrepreneurs and companies,” as amended.

What are the Albanian Payroll and tax requirements?

• Employers and employees are also required to pay Albanian social and health insurance contributions. Social security and health insurance contributions are mandatory payments for all economically active persons, including the self-employed. The payment of social security and health insurance contributions makes it possible to benefit from payments under the amended Law on Social Insurance No. 7703 of 11.05.1993 and the amended Law on Health Insurance No. 7870 of 13.10.1994. Contributions are collected by the tax authorities on behalf of the Social Insurance Institute and the Health Insurance Institute.
• In Albania, the Social Insurance Contribution is 24.5%, while the Health Insurance Contribution is 3.4%. The employer pays 16.7% of the contributions, and the employee pays 11.2%.
• The minimum wage taken into account for the calculation of social security contributions in an employment relationship is 30,000 Albanian Lek, and the maximum is 132,312 Albanian Lek, which the employer is obliged to apply as a minimum wage on a monthly basis.

Current Personal Income Tax on wage rates in Albania:

Income band (ALL) Tax rate (%)
0 – 30,000 ALL 0
30,001 – 150,000 ALL 13
Over 150,001 ALL 23

• Social security contributions are taxed on employment income.
  • SSC and health contributions are calculated, withheld, and paid by the employer.
  • The monthly payroll is considered a tax return and is declared electronically in the tax authorities' system within 20 days of the following month.
  • Albania has a very comprehensive range of compensation and benefits options that companies can offer to their employees.
  • Pensions, private health insurance, life and disability insurance have now become common benefits provided by many businesses in Albania to their workforce.
  • Flexible benefit packages, which offer employees choices on how they want to "spend" their benefit allowances, ranging from "buying" additional holiday entitlement to receiving full family health insurance, are also gaining popularity.
• There is a 15% corporate tax in Albania for the threshold up to 14,000,000 Albanian Lek.
  • According to new regulations related to the tourism law, accommodation facilities with “four-star and five-star special status” are exempt from this tax, which is effectively rated at 15%. The corporate tax exemption provided for in this paragraph is applied for a period of 10 years until December 2024 for structures benefiting from the special status. The effects of the exemption begin on the date the accommodation facility starts its economic activity.
• The corporate tax for legal entities engaged in software production/development activities is 5%. The activities that fall within the field of software production/development and the procedures for the implementation of this paragraph are determined by the Council of Ministers.
  • VAT is a tax on the consumption of goods and services with a standard rate of 20%. A business MUST REGISTER for VAT if it makes taxable supplies of more than 10,000,000 ALL (Albanian Lek) in any 12-month period.
  • A reduced VAT rate of 6% is applied to services provided in the hotel sector or sectors with a similar function, such as holiday camps or sites developed for use as campsites. The categories within the accommodation sector are included in the tourism law.
  • In Albania, there is also a withholding tax on dividends and profit distribution of 8%, and on interest, rents, and royalties. The tax rate is 15%.
  • If the group achieves a revenue of 50 million Albanian Lek or more or Gross Assets of 100 million Albanian Lek or more, the accounts must be audited.
  • The tax residency of the member and where the earnings in the LLP and Joint Stock Company originate from will determine the jurisdiction and how these earnings will be taxed.
  • All sectors are open to foreign investors.
  • There are no limitations or restrictions for foreign companies – 100% foreign ownership is possible.
  • Albania is the gateway to the Balkans.
  • Free trade zone.
  • Total labor costs are lower than in comparable countries.
  • Comprehensive language skills, most of the younger generation are university graduates.

Also, in Albania:

• Online tax system
  • Commercial legal framework compliant with EU legislation
  • Tax advantages and incentives in strategic investment sectors
  • Favorable tax system
  • 15% corporate tax rate
  • Personal tax rate up to 23%
  • Double taxation treaties with over 40 countries

Investment opportunities:

Renewable energy, tourism, agriculture, manufacturing, transport and logistics, mining sector, ICT services, etc.

Tips for Success When Doing Business in Albania

1. Albanian greetings at initial meetings tend to be conservative and measured. A handshake and direct eye contact are expected. Generally, business people will be referred to by their surnames unless they ask to be addressed by their first names;
2. Business meetings are often held in unusual places, with cafes, private residences, and taxi rides being frequently used;
3. Meeting schedules are often loosely followed in Albania. Time is generally not a factor during meetings, so long meetings can be expected;
4. Gift-giving is a big part of Albanian business culture. When a gift is given, you are expected to give a gift in return. Money is not welcome as a gift; instead, some small souvenirs from your own country are usually a good choice. If your potential business partner has children, it is a good idea to bring them a small gift;
5. When starting a new business, it is important to find out which Albanian registrations and licenses apply to your company. This can be a complex area as local, state, regional, and federal governments handle registration and licensing for various aspects of your business.