An Investor’s Guide to Albania’s Income Tax Law

Introduction

Albania has undergone a major transformation in its tax system. With the implementation of Law No. 29/2023 “On Income Tax”, fully in force since January 1, 2024, the country has shifted from a fragmented legal landscape to a unified, internationally aligned tax framework.

But this law is more than a policy update—it’s a strategic pivot. It enhances Albania’s appeal as a foreign investment destination, simplifies compliance, and positions the country more closely with OECD and EU best practices.In this 2025 guide, we’ll highlight the law’s key features, the evolving economic and legal climate, and the most important factors international investors should consider when evaluating Albania.

Key Features

1.Corporate Income Tax (CIT)

Albania maintains a flat 15% corporate tax rate under Article 26, making it one of the more competitive jurisdictions in Europe. With the EU average hovering around 20–21%, this rate gives Albania a strategic edge, particularly for companies looking to establish operations in the Western Balkans.This low rate translates to higher retained earnings, an important incentive for reinvestment and growth.

2.Withholding Tax (WHT) on Dividends

Under Article 41, dividends distributed to both residents and non-residents are taxed at a flat 8% withholding rate. Compared to many jurisdictions, this is quite favorable.Even better, Albania’s network of Double Tax Treaties (DTTs) can reduce this rate depending on the investor’s country of residence, making profit repatriation more efficient.

3.Participation Exemption & Capital Gains Relief

Article 30 introduces important tax exemptions for dividends and capital gains derived from qualifying shareholdings. Typically, these apply when holding certain minimum ownership percentages for a specified time.This is especially beneficial for holding companies, investment funds, and cross-border structures aiming to avoid economic double taxation.

4.Transfer Pricing & Interest Deduction Rules

The law embraces global tax governance standards:

• Transfer Pricing (Article 34): All related-party transactions must follow the arm’s length principle, with compliance supported by comprehensive documentation (Master File, Local File, and CbCR when applicable).

• Interest Deduction Limits (Article 31): Limits interest deductions to 30% of tax EBITDA, a rule aligned with BEPS Action 4, to prevent base erosion through excessive debt structuring.

These measures increase fairness and ensure Albania stays in step with international tax norms.

5.Personal Income Tax (PIT) Reform

The new law also simplifies the taxation of individuals:

• Progressive tax rates from 13% to 23% apply to employment income.

• Investment income—such as interest, royalties, rents, and capital gains—is generally taxed at a flat 15%.

This creates a clearer, more predictable tax environment for both residents and foreign professionals operating in Albania.

6.Global Minimum Tax (Pillar Two)

Albania has not yet implemented the OECD’s Pillar Two rules, but its 15% CIT rate already aligns with the global minimum effective tax rate.This positions Albania well for multinationals subject to global anti-avoidance regimes, keeping the country relevant as international tax rules evolve.

7.Digital Tax Administration – Automation & E-Filing

One of the most impactful reforms is the move to mandatory electronic tax filing and digital compliance tools.While this shift required adaptation, it has streamlined taxpayer interaction, reduced bureaucracy, and continues to improve. In 2025, the General Tax Directorate has expanded these systems, with better user interfaces and real-time support for both businesses and individuals.

Albania in 2025

⚖️ Legal & Regulatory Landscape

• Official guidance has been issued to clarify how the law works in practice, especially regarding transfer pricing and documentation standards.

• Albania is actively harmonizing with EU directives, including the Anti-Tax Avoidance Directive (ATAD). More legislative updates, such as rules on hybrid mismatches and exit taxation, are expected between 2026–2027.

These efforts reflect a serious push toward legal certainty and investor protection.

📈 Economic Outlook

• Projected GDP growth for 2025 remains strong at 3.5%–4.0%, fueled by tourism, energy projects, and the digital economy.

• FDI inflows are steady and expanding, especially from Italy, Germany, Turkey, and Gulf countries, with a focus on energy, real estate, and infrastructure.

• The government prioritizes investment in renewables, logistics, and innovation, using tools like Public-Private Partnerships (PPPs) and Special Economic Zones (SEZs).

Strategic Investment Considerations in 2025

1.Judicial Reform, E-Justice & Commercial Dispute Resolution

While Albania does not yet have a standalone Commercial Court, it has established specialized commercial chambers within its Tirana District Court and Court of Appeals, where most business-related cases are handled.

These chambers are supported by trained judges and improved access through e-justice platforms such as Gjykata.gov.al and e-Albania, enabling businesses to:

• File and track court cases online

• Access judicial decisions

• Benefit from increased transparency and efficiency

The judiciary is steadily improving, but consistency in enforcement remains an area to monitor closely.

2.Talent & Labor Cost Advantage

Albania combines low labor costs with a young, multilingual, and increasingly skilled workforce—especially in IT, engineering, and customer service.Government-backed programs in digital skills and technical training aim to meet investor demands in high-growth sectors.

3.Double Tax Treaty Network

Albania currently holds Double Tax Treaties with over 40 countries, providing important tools to reduce or eliminate double taxation.Investors should review the specific treaty applicable to their country of residence for optimal tax planning and compliance.

4.EU Accession & Long-Term Reforms

Albania’s EU accession process is moving forward, with potential membership projected around 2030.This journey serves as a stabilizing anchor for legal and institutional reform, aligning the country closer to EU norms and increasing market integration.

Conclusion

A full year into its implementation, Law No. 29/2023 has cemented itself as a foundational pillar of Albania’s modernization strategy.With a competitive tax regime, increasing legal clarity, and a forward-thinking digital infrastructure, the country stands out as a promising destination for strategic investors.

However, successful market entry depends on proper due diligence and local expertise. Investors are advised to partner with qualified legal and tax professionals who understand both the law and its real-world application.For those prepared to engage with Albania’s evolving regulatory and economic landscape, the rewards can be substantial—both now and in the years to come.

Disclaimer

This article is intended for informational purposes only and does not constitute legal or tax advice. Laws and regulations may change. Always consult a qualified local advisor before making any business or investment decisions in Albania.