Changes to the tax base

On 26 July 2023, the Albanian Council of Ministers approved amendments to the Decision no.132 dated 7 March 2018 on "Methodology for valuation of the taxable value of real estate (buildings) used for residential or commercial purposes". According to the amended decision, new reference market prices shall apply for Tirana district based on which the real estate tax on buildings used for residential or commercial purposes has to be calculated. Since 2018 to date the original decision of the Council of Ministers has passed several changes, reflecting the fluctuations of the market prices of the real estate properties in Albania. 

As per the provisions of the Law no. 9632 on Local Taxes dated 30.010.2006, as amended, the tax on real estate is calculated on an annual basis as a percentage of the tax base, which is the value of the building or units estimated as per the methodology laid down in the Decision of the Council of Ministers. The annual tax on buildings is payable on monthly installments or a longer interval depending on the classification of the taxpayers subject to this tax. The method of tax calculation remains unchanged and will continue to be calculated annually as per the following categories of the real estate: 

• 0.05% of the tax base for buildings used for residential purposes
• 0.2% of the tax base for buildings used for commercial purposes
• 30% of the tax rate applicable depending on the categorization of the building applied to constructions non-completed within the term approve in the construction permit. 

The Municipalities have the right to decrease or increase the tax rate up to 30% for the properties located in the subdivisions under their jurisdiction. In addition, Municipalities may also apply once a year a reduction of 35% on the average reference price of the buildings located in the territory which became part of the local governance unit as per the Law no. 115/2014 on Administrative Territorial Reform in Albania. 

The calculation of the tax base of the real estate is based on the market value, which is used as the tax base in the conditions where the tax base cannot be estimated either on the self-declaration of the owners or users or on the data held in the Register of Immovable properties. 

Self-declaration

The calculation of the tax base for real estate property is principally based on self-declaration of the owners or users of the property. Any taxpayer, i.e. individual, sole entrepreneur or legal entity has the obligation to declare the details of the property (building/property unit) owned or used. If the taxable value cannot be determined based on the information declared by the taxpayer, other methods specified in the Decision of the Council of Ministers need to be used. When differences are noted between value declared by the taxpayer and the value estimated based on the methodology defined in the Decision of the Council of Ministers, then the tax will be calculated based on the highest value. 

Determination of tax base as per the Register of Immovable Property 

The value of the real estate registered with the Register of Immovable Property is used as reference when determining the tax base of the real estate. For the revaluated real estates, the tax base is be calculated on the revaluated price which is registered in the Register of Immovable Property held by the Regional Offices where the property is located. In case real estate has been subject of a sale/purchase transaction in the recent 3 years, then the tax base is considered the highest between the transaction value and the value registered in the Register of Immovable Property. 

Determination of tax base as per the market value 

In case the determination of tax base as per the above-mentioned methodology is not possible then the tax base is calculated as per the average reference market prices of real estate used for residential purposes. For subcategories of the real estate not used for residential purposes, the tax base will be counted based on the average price per square meter of the constructed area. 

Based on the recent amendment of the Decision no.132 dated 7 March 2018, the reference market prices vary from 81,700 ALL/m² to 228,400 ALL/m² (previously from 60,000 ALL/m² to 190,000 ALL/m²) for residential buildings in the city of Tirana and from 23,000 ALL/m² to 115,200 ALL/m² (previously 23,000 ALL/m² to 66,500 ALL/m²) for other surrounding areas of Tirana.

The reference market prices for other districts in Albania vary from 7,500 ALL/m² to 67,500 ALL/m² and this interval is the same as per the previous prices approved in 2019. 

The reference market prices are multiplied by the coefficient 2 in Tirana and 1.5 in other districts if the real estate is used for business purposes i.e. supply of goods or services. As an exception from the above estimation, the reference market price reduces for properties used as basements and indoor parking places by 70%; outdoor pools, parking sports places, racing tracks, ports and airports by 30%; industrial constructions used for warehousing, production, non-public schools and indoor sportive places by 50%; and places used for agriculture and livestock farming by 30%. 

Decision of Council of Ministers no. 457 dated 26 July 2023 on "Methodology for calculation of the taxable value of real estate (buildings) used for residential or commercial purposes" (amending the Decision no.132 dated 7 March 2018) is published in the Official Gazette no. 112 dated 28 July 2023 and has entered into force upon its publication. 

Alba Paparisto, ACCA
Managing Director, Tax
Tel: +355 (4) 2274 524

Sonila Selmani
Senior Manager, Tax
Tel: +355 (4) 2274 524