Tax residency in Albania for digital nomads is something to consider if you fell in love with this unspoiled Balkan country or if you look for optimizing your tax planning.
Albania had the highest increase in stays in the entire continent last year (2022), shortly followed by Serbia (21.3%). The other top five entries are Denmark (12.3%), Iceland (5%), and Norway (2.5%). In total, 7.1 million foreigners visited Albania in 2022, surpassing the previous record year of 2019 by 17%.
Albania has a lot of untouched nature to offer which is ideal if you like hiking.
Also, if you just want to spend some time at the beach, there are plenty of great beaches to enjoy.
If you prefer to spend some time in a vibrant city, Tirana and Durres could be your pick (1).
Living in Albania
Albania is a country in South-eastern Europe and borders, amongst others, Greece. The country offers the same Adriatic coastline as Croatia, Montenegro and Greece.
In spite of being cornered on all sides by world-renowned tourist destinations it is shockingly cheap.
Albania is not part of the European Union but is a candidate to join. This means that if you plan to move to Albania, even if you’re a citizen of a EU-country, you will need a visa.
You could, for example, apply for the Albanian digital nomad visa.
Comparing the cost of living between the main capital cities in the Balkan region, consumer prices in Tirana, Albania are:
- 5.2% lower than Belgrade, Serbia
- 6.7% lower than Bucharest, Romania
- 11.7% lower than Sofia, Bulgaria
- 21.7% lower than Zagreb, Croatia
- 26.1% lower than Ljubljana, Slovenia
- 32.6% lower than Athens, Greece
In order to live comfortably as a digital nomad in Tirana, with some level of luxury, the average monthly income would need to be about €2.000 per month.
This includes renting a centrally located, fully furnished apartment, dining out in mid-range restaurants frequently, grocery hauls, and weekend escapades to the resort-packed coastline.
Albanian tax rules
Tax residency in Albania
You will become a tax resident of Albania if you spend more than 183 days there.
Yet, even if you spend less time there but you have your permanent home, you can become a tax resident of Albania.
Tax residency in Albania for digital nomads: tax rates
As from 2024 the general personal income tax rate for self-employed individuals amounts to 15% on the first 14 million ALL (around €138.000).
If you exceed this threshold, the rate jumps to 23% on the income above.
However, if your annual turnover doesn’t exceed 14 million ALL (around €138.000) you are currently considered a small business and are exempt from income taxes.
Unfortunately, the Albanian goverment approved laws that will abolish this exemption.
Nevertheless, a grandfathering period is foreseen. Therefore, you can still benefit from the exemption till 2030.
It’s also important to note that if you receive 80% of your income from one client or 90% of your income from two clients, this won’t be seen as freelancing.
Rather, you will be deemed an employee and taxed accordingly. This might also have a (tax) impact for your client(s) as they are deemed your employer.
Dividends are taxed at a rate of 8%. The tax rate for other investment income is 15%.
Tax residency in Albania for digital nomads: social contributions
Social contributions for self-employed individuals in Albania amount to 26,4%. Yet, this can be applied for the minimum legal wage in the country which currently since April 2023 is 40,000 ALL (about €400) if you have set up an entity in Albania.
In any case, the social contributions are only calculated on a maximum wage of around €1.600 per month. This means your maximum social contributions per month will amount to around €450.
Value Added Tax (VAT)
The standard VAT rate is 20%. Taxable transactions include goods and services supplied domestically as well as goods imported into Albania by a taxable person.
A taxable person is any person who independently carries out any economic activity. Irrespective of the place and the purpose or results of that activity.
The VAT registration threshold in Albania is set at an annual turnover of 10 million ALL (around €99.000).
In order to calculate your annual turnover, you only need to take into account invoices to local Albanian clients or when your service is offered locally. This means that most nomads won’t exceed this threshold.
Any person providing taxable supplies and whose annual turnover does not exceed €99.000 is not required to register. Nevertheless, voluntary registration is possible.
Setting up a company in Albania
Tax rates
Another option to benefit from Albania’s lower tax rates is to set up a company.
The corporate income tax rate is 15%.
However, just as like for an individual entrepreneur, if your revenue doesn’t exceed 14 million ALL (around €138.000) you are fully exempted from corporate tax.
Yet, just like for freelancers, this rate will disappear as from 2030.
Nevertheless, this provides you with the option to still enjoy from the exemption for as long as it lasts.
Furthermore, there are also lower tax rates that can apply for certain sectors.
For software development and agrotourism, for example, there is a separate tax rate of 5%.
Unfortunately, these special rates will be abolished in the coming years but you could still enjoy them for now.
The activities carried out by legal entities in the field of software production/development, for which the tax rate of 5% profit tax is applied, are as follows:
- Software design
- Development and maintenance of software systems
- Software testing
- Design and development of communication systems
- Design and development of security systems
- Development of migration systems
- Improvement/upgrade of IT systems
- Operation, management, user support and technical/informatics audit for software systems
You do also need to account for a local business tax which will vary depending on where your company is registered.
Once you pay out a dividend to yourself, you this dividend will be subject to a 8% withholding tax.
Process
The companies/entities acquire legal personality on the date of the registration with the National Registration Centre In the case of joint venture branches and representative offices, the registration is made for compliance and declaratory purposes.
The registration usually takes 24-48 hours to be completed and the registration fee is approximately €1. In practice it might need 2-3 weeks due to problems with NRC online registration process.
The NRC, being a one stop shop office, enables simultaneous registration of the new company with other relevant authorities, such as the competent tax authority, local tax authorities etc.
Albanian law does not impose any limitation regarding the nationality or local residency for the appointment of representatives, directors, or shareholders.
However, should the directors choose to perform their duties while being on the territory of the Republic of Albania they will need to obtain all the relevant work and residence permits required for legal residence in Albania.
Tax residency in Albania for digital nomads: conclusion
Income tax rates for small businesses are really interesting in Albania as you can benefit from an exemption up to around €138.000 in income.
However, in the future this will change.
In addition, you do need to account for social contributions as well. Luckily, social contributions are limited to maximum amount. Furthermore, you can bring them further down depending on your setup.
For all of these reasons, tax residency in Albania for digital nomads is an option you should definitely consider.
