Property tax in Albania may double

A draft property tax reform is being discussed in Albania, which envisages higher rates for residential and commercial properties, as well as a possible doubling of the tax burden on housing — up to 25%. The Ministry of Finance presented the initiative as part of a broader review of the current system, Monitor.al reports.

2024–2027 programme: tax changes in Albania

The draft follows an approach outlined earlier. In the Ministry of Finance’s 2024–2027 plans, it was noted that revenue growth should be achieved through a revision of the property taxation system, strengthening the role of the cadastre, and reducing exemptions. At that time, it was also highlighted that around one-third of the housing stock in Albania is vacant — more than 356,000 apartments. The reasons cited include emigration, an increase in second homes, and ownership of multiple properties.

The Ministry stated that over the first eight months of 2023, around €41 million was collected from property tax, rising to €55 million in 2024. This represents about 0.3% of GDP in Albania, compared to an average of approximately 0.8% in regional countries.

The initiative included raising the rate from 0.05% to a range of 0.1–0.2%. A deduction mechanism for the first home was also considered, reducing the taxable base for primary residences.

What is included in the new tax proposal

Property tax rates in Albania

The current tax on residential property remains 0.05% of its value. The new proposal suggests a range increase to 0.1–0.2%, effectively doubling it. For commercial property, the current rate is 0.2%. It may increase to 0.15–0.25% or up to 25%, as stated in the document. Final parameters will be approved by municipal councils.

Second homes taxation

In the revised draft, the classification system has been expanded to seven groups of municipalities, compared to four previously. This directly affects exemption thresholds and creates a more differentiated system depending on property prices across regions. Owners of second homes are placed in a stricter tax category, as no partial value exemption is provided, which increases the overall tax burden.

Tax-free thresholds

The tax is calculated based on property value, with a deduction applied for the first home. The non-taxable threshold has been increased. For a first home in Tirana, it rises from 4.5 million ALL ($54,500) in the previous draft to 8.4 million ALL ($102,000) in the new one. For other municipalities, lower thresholds apply — from 750,000 to 4.75 million ALL depending on the category ($9,000–$57,550).

Calculation example

The document notes that tax is calculated only on the difference between the market value of the property and the exemption threshold. For example, a property worth 10 million ALL ($122,000) in Tirana would be taxed only on 1.6 million ALL ($19,400) after deducting the maximum threshold.

Tax exemptions in Albania

The draft maintains a broad list of property tax exemptions, including state and religious properties and unfinished buildings constructed under valid permits.

Hotels in the 4- and 5-star category with special status and an internationally recognised brand will benefit from a 10-year exemption from the start of operations.

No tax will be levied on social and municipal housing, diplomatic properties under reciprocity conditions, linear infrastructure, and other categories defined by current legislation.

What this means for investors

Analysts at International Investment note that Albania is gradually moving from a system that encourages property ownership towards a more mature taxation model typical of many European countries. For investors, this means a need to more carefully assess future costs already at the purchase stage.

Higher taxation may reduce the attractiveness of strategies focused solely on buying multiple apartments for capital gains. However, the market is unlikely to face a sharp drop in demand, as tax rates remain relatively low compared to many European countries. At the same time, investment property yields, especially in the long-term rental segment, may turn out lower than expected.