TIRANA, May.28- Beginning July 1, with the implementation of the new ten percent flat tax, real estate sales will also become taxed. The amendment in the law that made real estate sales subject to this taxation scheme was drafted by DP deputies Aleksand철Biberaj and Blerim ȥla and applies to the law nr. 8438,”on revenue taxes.” The tax payment will be made by the seller as a tax upon the revenues received from the sale of real estate assets. In the case of a double transaction, the tax will apply to the difference between the purchase and the final sale price. This new law was approved as part of the new flat tax implementation and is expected to impose a heavy fiscal burden on the real estate market, as previously it was subject to a low tax rate of one to three percent, depending on the real estate sale price.
High prices in the construction industry
The tax law is expected to affect other industries besides real estate dealers and individuals, such as the construction industry which will now calculates different prices for the sale of apartments. Until now, contracts between builders and land owners have been carried out through barter. In exchange for land ownership, the owners used to get three to four floors of a building and hence the construction company was not taxed on the revenues of these apartments, as it did not get payment for them. The cost of the building was an expense incurred by the company and exempted from taxes. The same applied to land owners, who did not get taxed on the sale of the land, given that they did not receive payment but, rather, a real estate asset. The new law will require that all apartments returned to owners will be taxed at ten percent of the minimum fiscal profit level established by law. For Tirana, this is an average of 300 euro/m2, fluctuating depending on the location of the property. A potential complication that might arise from this new law is a different relationship between builders and land owners, who will now be compensated with fewer apartments in order to offset losses incurred from the tax (around 25 euro for meter square). This is a new development that will be severely contested by land owners, creating potential conflicts. Previously, construction companies had to pay one percent tax on sales up to $ 30.000, two percent for $ 30.000-$ 60.000 and three percent for higher sale prices. An immediate result of the new tax will be a spike in apartment prices, which are already very high given the low number of construction licenses issued.
