Property tax will change and its value will increase. The government has already prepared the new draft law ‘On Immovable Property Tax’, which will switch to a property taxation system based on market prices. The more expensive the property, the higher the tax, and the more centrally located it is, the more it will be paid.
“The real estate tax based on market value is a fair tax. The tax regime currently implemented in Albania imposes in many cases the same tax burden on a person who has real estate in the city center, as well as a person who has real estate with the same characteristics, but on the outskirts of the city, with a lower market value,” the report states.
This method of property taxation, according to the Ministry of Finance, has strong potential for increasing revenues.
“The real estate tax should be strengthened and transformed into the primary pillar of local revenues in the future, guaranteeing a more sustainable, fairer and more predictable source of revenue for municipalities,” the report states.
In addition to taxation being based on the market value of the property, the fee will also change, from the current 0.05% to 0.1% -0.2% of its value.
“For all building units included in the category ‘residential buildings’, the tax rate may vary from 0.1% (zero point one percent) to 0.2% (zero point two percent),” states Article 12 letter D.
Even according to the arguments given for this taxation formula based on market value, the government aims to curb speculation in property prices.
“In this context, it could also discourage unjustified inflation of real estate prices. The new property tax would constitute a significant cost for owners and could make speculation at prices rarer,” the report continues.
Through this bill, the country is divided into 7 zones, which will be used to reduce the tax on first homes. This new tax reform will place a greater burden on second homes and more.
Article 8 explains how the differentiation in taxation from the first to the second residence will be made.
“An individual who owns or possesses 2 (two) or more dwellings has the right to a deduction for the first dwelling, for only 1 (one) of these dwellings, regardless of the fact that the dwellings may be located in different Municipalities,” states Article 8, point 4.
Also in Article 8, a deduction from the value of the first residence of all individuals is determined, in an amount equal to 50% of the value of the first residence, but in any case, no more than the maximum deduction threshold determined for the 7 categories of municipalities.
In Tirana, the maximum threshold for deduction from the value of the property will be 8.4 million lek. For the second group, which includes the municipalities of Durrës, Himarë, Vlorë, Sarandë, the maximum reduction will be 4.75 million lek, for the municipalities in the third category, Elbasan, Fier, Kamëz, Kavajë, Korçë, Lezhë, Pogradec, Shkodër and Vorë, the property value is reduced by 3.55 million lek before being taxed. For the municipalities in the fourth category, which includes Berat, Dibër, Divjakë, Gjirokastër, Gramsh, Krujë, Kukës, Librazhd, Lushnje, Malësi e Madhe, Mat, Mirditë, Përrenjas and Rrogozhinë, the deduction for the first apartment is 2.8 million lek.
For the municipalities in the fifth category Belsh, Bulqizë, Cërrik, Delvinë, Devoll, Dimal, Dropull, Finiq, Has, Këlcyrë, Klos, Konispol, Kuçovë, Kurbin, Libohovë, Maliq, Mallakastër, Patos, Peqin, Përmet, Pustec, Roskovec, Shijak, Tepelena and Tropoja, the discount is 2 million lek.
For municipalities in the sixth category, which include the municipalities of Kolonjë, Poliçan, Pukë, Selenicë, Skrapar and Vau i Dejës, the discount is 1.45 million lekë.
The last, seventh category, which includes Fushë-Arrëz and Memaliaj, has a maximum property value deduction of 750 thousand lekë.
After these deductions are made on the value of the property, tax is applied. For example, an individual with a first home in Tirana worth 10 million lek will only pay tax on the value of 5 million lek, i.e. 50% of its value.
When the value of the property is 20 million lek, the price can be reduced by a maximum of 8.4 million lek, and tax is paid on the value after the reduction of 11.6 million lek.
The real estate tax shall be imposed and collected in accordance with this law from 2029 for building units and from 2031 for plots.
“The municipality determines the taxable value of any immovable property subject to taxation in its territory, by December 31 of the year preceding the tax year,” states point 5 of Article 7.