TIRANA, Nov. 16 – With tourism on top of the agenda as one of the emerging key drivers of Albania’s growth, the Albanian government is offering a series incentives for current and new investments in a bid to also promote luxury travel in the country in addition to the rapidly growing mass tourism.
Earlier this year, the Albanian government cut VAT on hotel accommodation to 6 percent, from a previous 20 percent and has now introduced in its 2018 fiscal package incentives to extend the 6 percent VAT on all services offered by new chained-brand luxury hotels and resorts which will also be stripped of the corporate income tax for a 10-year period.
In some amendments to the tourism law, the ruling Socialist government proposes that new luxury accommodation units built by internationally renowned companies will benefit tax incentives for a ten-year period for building and operating four-star hotels and resorts with an investment value of at least €8 million.
In case of five-star accommodation, the minimum investment value to obtain the special investor status is €15 million. Investments will have to be carried out by internationally renowned chained-brand hotels or under management or franchise contracts with them.
The criteria, procedures and documentation that operators have to meet in order to obtain the special status investor will be determined under another government decision.
The government says the incentives are similar to regional countries with a longer tradition in tourism and aimed at making the country’s tourism industry more competitive by offering quality accommodation units and services in a bid to attract a new segment of high-income tourists.
“The rapidity that the number of foreign tourists is growing at in the country is unfortunately not being accompanied yet with the same pace as far as improvement in the quality of accommodation infrastructure is concerned. Although the number of hotels and accommodation units is increasing, the service standards and the general quality they offer still leaves a lot to be desired when compared to the constantly growing number of tourists or their requests or expectations,” says an explanatory report to the proposed changes.
“In addition, the few accommodation units of relatively high quality Albania currently offers are concentrated mainly in Tirana and their number in the Albanian coastline or mountain areas is quite limited,” it adds.
The government says the new ‘elite’ tourism investments will contribute to new jobs, increase the number of high-income tourists and boost the ‘country’s image.
However, the main opposition Democratic Party is worried the new tax-free investments could serve as money-laundering schemes for drugs proceeds, especially cannabis money following a hike in cultivation in the past couple of years.
In a tense parliamentary session on Thursday debating the 2018 draft budget, Prime Minister Edi Rama said some of the country’s richest men have already expressed interest to invest in such facilities, denying money-laundering accusations.
The long-standing issue of unclear property titles, a key concern for foreign investors, also remains a barrier to the incentives and it is unclear yet whether the government will provide the land in return for investment. Big investors have previously quit their projects over land disputes following prolonged legal battles with local residents.
Due to property disputes, several investors have opted to build resorts on development contracts rather than purchasing the land.
Some 4.2 million foreign tourists visited Albania during the first three quarters of this year, up 5.7 percent compared to the same period last year, making tourism a key driver of Albania’s expected 4 percent growth rate for this year at a time when the economy has been mainly fueled by some large energy-related projects such as the Trans Adriatic Pipeline (TAP) bringing Caspian gas to Europe through Albania, Greece and Italy.
The contribution of the tourism industry in the first half of this year was at €722 million, making it one of the key drivers of growth at a time when the long-ailing construction sector has only revived thanks to TAP and some major hydropower plants.
Prospects remain positive as some big resorts are under construction, further improving Albania’s tourism standards and appealing European tourists.
Albania’s emerging travel and tourism industry registered a strong recovery last year when a record 4.7 million foreign tourists were reported to have visited the country, bringing more than €1.5 billion in travel income, according to central bank and INSTAT data.
The industry which directly employs 85,000 people is emerging as a key driver of the Albanian economy already accounting for about 13 percent of the country’s GDP and with optimistic mid and long-term growth prospects as the country’s attracts more and more tourists.
Albania’s emerging tourism industry is set to register one of the region’s highest growth in the next decade in terms of its contribution to GDP, employment, investment and exports, according to a report by London-based World Travel & Tourism Council, WTTC.
In its latest Economic Impact Research report, the WTTC ranks Albania 26th out of 185 countries for its travel and tourism long-term growth prospects from 2017 to 2027, leaving behind almost all regional competitors.
