TIRANA, May 21 – The Albanian government has postponed the implementation of a newly adopted value-based property tax for next year, giving local government units another 10 months to prepare for its collection.
The value based property tax was supposed to enter into force in April 2018, applying a 0.05 percent rate on homes and 0.2 percent on business facilities under a new formula that is set to 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.
“The 2018 period will be a transitory period that allows local government units to prepare better so that by January 1, 2019 all local government units apply the value-based property tax,” Finance Minister Arben Ahmetaj told reporters on Monday.
The finance minister later clarified the transition period will be in place only for those municipalities that are not ready yet to apply the new value added tax.
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.
When it comes to business owners, the new 0.2 percent property tax rate is not going to make much difference compared to current tariffs.
Albania’s 61 municipalities, which are going to collect the new fees either through the state-run water company or the OSHEE electricity distribution, can reduce or increase the rate by 30 percent.
The new tax is expected to considerably increase local and central government revenue, currently at only about 0.2 percent of the GDP 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 4.1 billion lek (€32 mln) in property tax in 2017, 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, according to a local government finances portal.
The delay in the tax implementation is also to ongoing development of a fiscal cadaster under which every building will have 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.
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.
