Investment Incentives

The Albanian Investment Development Agency (AIDA; www.aida.gov.al) is the best source to find incentives offered across a variety of sectors.  Aside from the incentives listed below, individual parties may negotiate additional incentives directly with AIDA, the Ministry of Finance and Economy, or other ministries, depending on the sector.

To boost investments in strategic sectors, the GOA approved a new law on strategic investments in May 2015 that outlines the criteria, rules, and procedures that state authorities employ when approving a strategic investment.  The GOA has extended by one year, to December 2019, the deadline to apply to qualify as a strategic investment. A strategic investment is defined as an investment of public interest, based on several criteria, including the size of the investment, implementation time, productivity and value added, creation of jobs, sectoral economic priorities, and regional and local economic development.  The law does not discriminate between foreign and domestic investors.

The following sectors are defined as strategic sectors: mining and energy, transport, electronic communication infrastructure, urban waste industry, tourism, agriculture (large farms) and fishing, economic zones, and development priority areas.  The law foresees that investments in strategic sectors may benefit the status of assisted procedure and special procedure, based on the level of investment, which varies from EUR 1 million to EUR 100 million, depending on the sector and other criteria stipulated in the law.

In the Assisted Procedure, the public administration coordinates, assists, and supervises the entire administrative process for the investment approval and makes available to the investor state-owned property needed for the investment.  Under the special procedure, the investor also enjoys state support for the expropriation of private property and the ratification of the contract by parliament.

The law and bylaws that entered into force on January 1, 2016, established the Strategic Investments Committee (SIC), a commission headed by the prime minister whose members include ministers covering the respective strategic sectors, the state advocate, and relevant ministers whose portfolios are impacted by the strategic investment.  The Albanian Investment Development Agency (AIDA) serves as the Secretariat of SIC and oversees providing administrative support to investors. The SIC grants the status of Assisted Procedure and Special Procedure for strategic investments/investors based on the size of investments and other criteria defined in the law.

Energy and Mining, Transport, Electronic Communication Infrastructure, and Urban Waste Industry: Investments greater than 30 million euros enjoy the status of assisted procedure, while investments of 50 million euros or more enjoy special procedure status.

Tourism and Economic Areas: Investments of 5 million euros or more enjoy the status of assisted procedure, while investments greater than 50 million euros enjoy the status of special procedure.  In 2018, the GOA introduced new incentives to promote the tourism sector. International hotel brands that invest at least USD 8 million for a four-star hotel and USD 15 million for a five-star hotel are exempt from property taxes for 10 years, pay no profit taxes, and pay a value-added tax (VAT) of just 6 percent for any service on their hotels or resorts.  For all other hotels and resorts, the GOA reduced the VAT on accommodation from 20 percent to 6 percent. In the information technology sector, the government has recently reduced the profit tax for software development companies from 15 percent to 5 percent.

Agriculture (large agricultural farms) and Fishing: Investments greater than 3 million euros that create at least 50 new jobs enjoy the status of assisted procedure, while investments greater than 50 million euros enjoy the status of special procedure.

In addition, the GOA offers a wide range of incentives and subsidies for investments in the agriculture and agro-tourism sectors.  The funds are a direct contribution from the state budget and the EU Instrument of Pre-Accession for Rural Development Fund (IPARD.)  IPARD funds allocated for the period 2018-2020 total 71 million euros.  The program is managed by the Agricultural and Rural Development Agency (http://azhbr.gov.al/  ).  Profit taxes for agrotourism ventures are now 5 percent, down from 15 percent previously, while the value-added tax (VAT) is now six percent, down from 20 percent previously.  Agricultural inputs, agricultural machinery, and veterinary services are exempt from VAT. The government offers other subsidies to agricultural farms and wholesale trade companies that export agricultural products.  

Development Priority Areas: Investments greater than one million euros that create at least 150 new jobs enjoy the status of assisted procedure.  Investments greater than 10 million euros that create at least 600 new jobs enjoy the status of special procedure.

Energy sector: Certain machinery and equipment imported for the construction of hydropower plants are VAT exempt.  The government supports the construction of small wind and photovoltaic parks with an installed capacity of less than three megawatts and two megawatts, respectively, by offering feed-in-premium tariffs for 15 years.  The Energy Regulatory Authority (ERE; http://www.ere.gov.al/  ) conducts an annual review of the feed-in-premium tariffs for wind and photovoltaic parks.  The ERE also conducts an annual review of the feed–in-tariffs for small hydroelectric plants with an installed capacity of fewer than 15 megawatts.  Imports of machinery and equipment for investments of greater than 400,000 euros for mall wind and solar parks with an installed capacity of fewer than three megawatts and two megawatts, respectively, enjoy a VAT exemption.  Imports of hot water solar panels for household and industrial use are also VAT exempt.

Foreign tax credit: Albania applies foreign tax credit rights even in cases where no double taxation treaty exists with the country in which the tax is paid.  If a double taxation treaty is in force, double taxation is avoided either through an exemption or by granting tax credits up to the amount of the applicable Albanian corporate income tax rate (currently 15 percent).

In 2019, the GOA reduced the dividend tax from 15 percent to 8 percent.

Corporate income tax exemption: Film studios and cinematographic productions, licensed and funded by the National Cinematographic Center, are exempt from corporate income tax.

Loss carry forward for corporate income tax purposes: Fiscal losses can be carried forward for three consecutive years (the first losses are used first).  However, the losses may not be carried forward if more than 50 percent of direct or indirect ownership of the share capital or voting rights of the taxpayer is transferred (changed) during the tax year.

Incentives for manufacturing sector

Lease of public property: The GOA can lease public property of more than 500 square meters or grant a concession for the symbolic price of one euro if the properties will be used for manufacturing activities with an investment exceeding 10 million euros, or for inward processing activities.  The GOA can also lease public property or grant a concession for the symbolic price of one euro for investments of more than two million euros for activities that address certain social and economic issues, as well as activities related to sports, culture, tourism, and cultural heritage. Criteria and terms are decided on an individual basis by the Council of Ministers.

Manufacturing activities are exempt from VAT on machinery and equipment.

The employer is exempt from the social security tax payment for one year for all new employees.

The state pays the salaries for four months for the new employees and offers various financing incentives for job training.

VAT credit for fuel: Taxpayers whose main business activity is production of bricks and tiles and the transport of goods with technological means can credit VAT on the purchase of fuel used wholly and exclusively for their business activities, up to the limit of a certain percentage of the taxpayer’s total annual turnover.

Manufacturing sector obtains VAT refunds immediately in the case of zero risk exporters, within 30 days if the taxpayer is an exporter, and within 60 days in the case of other taxpayers.

Apparel and footwear producers are exempt from 20 percent VAT on raw materials so long as the finished product is exported.  In 2011, the GOA also removed customs tariffs for imported apparel and raw materials in the textile and shoe industries (e.g. leather used for clothes, cotton, viscose, velvet, sewing accessories, and similar items).

Technological and Development Areas (TEDA): The Law on the Economic Development Areas provides fiscal and administrative incentives for companies that invest in this sector, and for firms that establish a presence in these areas.  A full list of incentives can be found at: http://www.teda.gov.al/?page_id=687  .

Foreign Trade Zones/Free Ports/Trade Facilitation

Albania has no functional duty-free import zones, although legislation exists for the creation of such.  The May 2015 amendments to the Law on the Establishment and Operation of TEDAs created the legal framework to establish TEDAs (a.k.a. free trade zones), defining the incentives for developers investing in the development of these zones and companies operating within the zones.  The Ministry of Finance and Economy has announced two investment opportunities that seek private sector developers to obtain, develop, and operate fully serviced areas located in Koplik (61 hectares) and Spitalle (100 hectares). Interested investors and developers can find more information for the development of TEDAs at the following link: http://aida.gov.al/faqe/zonat-me-zhvillim-teknik-dhe-ekonomik  .  

Performance and Data Localization Requirements

Although visa, residence, and work permit requirements are straightforward and do not pose an undue burden on potential investors, the Law on Foreigners requires foreign investors to prove that foreign employees constitute less than 10 percent of the investor’s total workforce before a work permit is granted.  There is no minimum requirement for domestic content in goods or technology.

According to current legislation in force, companies with sensitive data (primarily in telecommunications, banking, and energy) are not authorized to transfer data abroad.  To do so, they must receive approval and fulfill certain security criteria. As such, many companies operating in Albania are returning their data to Albania. The two largest private datacenters in Albania belong to telecom operator Albtelekom and the Albanian Telecommunication Union (ATU).