In November 2017, with Law no.107, the Albanian Parliament changed the methodology on which the payment of the tax on buildings was based, introducing fundamental amendments.
The building tax is a local tax which is calculated, administered and collected by the local authorities. The new methodology has been applicable since the 1st of April 2018. Since the institutions and the public bodies envisioned by the law are not yet established, the tax installment payment will begin later, once the local authorities are ready. This is not going to affect the payment, since it is an annual tax, and it could be paid at any time during the year.
The building tax is payable by individuals, physical or legal persons (either domestic or foreign), owners, users of the immovable properties, or persons that have applied for legalization, on the territory of the Republic of Albania, irrespective of the level of use of these buildings, unless otherwise provided by this law. The previous calculation of the tax was done on the basis of the building's surface area.
In order to apply the newly established methodology, several legal institutions and administrative bodies are being created. The "fiscal cadastre" is the central registry of the real estate database that serves for purposes of administering the immovable property tax. The General Directorate of Property Tax is a budgetary public legal entity, subordinate to the finance ministry.
In case the taxpayer wants to appeal the level of the tax
applied, he/she must address it not to the mayor (which was the
case in previous provisions), but rather to the local body in
charge of tax appeals, whose decision may further be brought in
front of the court.
The law provides for several exceptions from the tax on buildings:
- state and local government properties which are used for non-profit purposes;
- state-owned properties which through a Decision of the Council of Ministers are transferred in the administration of state-owned public companies;
- residential buildings used by the leased tenant, that have a lease not yet liberalized since the communist regime;
- social housing owned by municipalities;
- buildings, owned by legal or physical entities, which - under agreements with municipalities - are used by the latter for social housing;
- buildings used by religious communities for their activities;
- accommodation structures, such as hotels / resorts, with four or five stars, that have a special status as defined by the relevant tourism legislation, which are a registered trademark internationally known under a "brand name ";
- residential buildings of persons who benefit from social or old age pension, when the family consists only of pensioners;
- Residential buildings of persons who benefit from social aid;
- cultural buildings, which are under temporary or permanent protection, during the duration of the protection, according to the legislation in force for cultural monuments and / or cultural heritage.
The buildings' tax base is the value of the building,
calculated in accordance with the methodology and procedures
established by the decision of the Council of Ministers.
The buildings' tax rate is applied as a percentage of the tax base:
- 0.05% for a building used for construction;
- 0.2% for a building used for economic activity;
- 30% of the respective tax rate for the entire construction site, for which the developer is equipped with a construction permit and failed to complete it according to the deadline set in the construction permit.
The local government units have started the process of tax calculation according to the new methodology, making the exemptions and deductions according to the provisions of the law. During the following months, the administration of property tax by local government units will be consolidate, coupled with the consolidation of the respective registry, aiming to have a full and automatic system of administering this tax in the following year.
The new calculation methodology of this tax provides flexibility for local government units in determining the value of buildings. We advise clients to seek assistance in determining the impact of the new tax legislation and to ensure their compliance with the new law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.