TIRANA, Feb. 27 – Albanians will pay more in property tax starting next April when a new value-based formula applying a 0.05 percent rate on homes and 0.2 percent on business facilities enters into effect.
The new value-based property tax is set to significantly increase fees for downtown apartment owners almost two-fold, especially in major cities, compared to current fixed rates depending on the size and location of the property.
A 100m2 apartment owner in Tirana currently pays a fixed annual amount of about €22 at a modest rate of 30 lek (€0.22)/m2 if the apartment was built after 1993 and half of that amount if built in the pre-1993 under communism or earlier, no matter what property’s market value is.
Starting April 2018, the same owner supposing the apartment’s market value is at about €100,000 would have to pay about €50 in annual property tax, more than double compared what the Tirana apartment owner currently pays in monthly installments along with tap water bills.
For apartments built before 1993, the tax rate will be calculated at a 0.05 coefficient but at a 30 percent discount compared to the market value, bringing the tax down to €35.
When it comes to business owners, the new 0.2 percent property tax rate is not going to make much difference.
The property tax levied on business facilities is already high, ranging from 200 lek (€1.46)/m2 in remote areas to 400 lek (€2.93)/m2 for the municipalities of Tirana and Durres, home to about half of the country’s population and businesses.
A 100m2 downtown Tirana business facility currently pays 40,000 lek (€300) annually in annual property tax. Supposing the facility’s market value is at €150,000, the same business will have to pay €300 under the new value-based formula.
Albania has an estimated 900,000 residence and business buildings, a majority of which built in the past 25 years of the country’s transition to democracy and market economy. Dozens of thousands of them were illegally built and legalized in the past few years.
Albania’s local government units currently collect only about 0.2 percent of the GDP in property tax, almost half of what regional countries do and far from meeting the normal level of 1 percent of the GDP.
Albania’s 61 municipalities collected only about €30 million in property tax in 2016, about 40 percent of which in the municipality of Tirana which has been collecting the tax along with the tap water bills since March 2016 to increase collection rates.
Albania has been developing a fiscal cadaster so that every building has its real surface area and value. The reform will also involve agricultural land and construction sites, apparently also providing a solution to the long-standing property issue, a key barrier for Albania to attract foreign direct investment.
