Strategic investments and tax and economic benefits in Albania, 2024

The legislation on strategic investments includes the law on strategic investments, as well as several decisions of the Council of Ministers approved from 2015 to 2023[1], and this set of legal and bylaws constitutes the regulatory framework for attracting foreign investments.

The legislation defines the sectors and sub-sectors of the economy, determined as strategic, also defining the dedicated administrative procedures to encourage, facilitate or accelerate the support to strategic investors.

But the legislation also provides for the procedures and rules to be implemented by the public agencies and institutions for the review, approval and support of strategic investments in Albania, as well as services to the relevant investor.

Specifically, strategic investments set out some sectors and subsectors inside them, identified as strategic and that go in line with the political program of socialist government.

Strategic sectors, according to the political model, are considered:

– the extractive industry sector, as well as the component, energy, hydrocarbon or mining sub-sectors;
– the tourism sector, including tourist structures;
– the agriculture and fishing sector, with the sub-sectors of agricultural production, livestock, forest economy and fishing;
– the sector of transport, electronic communications infrastructure and urban waste, with the sub-sectors of sea, air, rail transport, electronic communications, urban waste, water supply and sewage;
– the technology and economic development sector, which includes industrial/technology parks.

The main criteria for defining an investment, in the aforementioned sectors/subsectors, as strategic are only two:

– Public interest that is essentially an investment, as well
– the financial criterion, that shows the power and potential for the realization of the investment.

First, the public interest in the selection of a strategic investment is evaluated, according to the value of the investment, the time of realization, regional and local economic development, the opening of new jobs, productivity and its added value, the introduction of technology and innovation for increasing competition and investment effectiveness, environmental and consumer protection.

Second, the financial criterion, is evaluated according to the strategic sector where it will be invested, its status, including an investment value equal to or greater than 1 million euros to 50 million euros.

Note! For interested investors to invest in sectors other than those mentioned above, the investment capital of the relevant project must be equal to, or greater than 100m euros in order to be considered a strategic investment/investor.

The responsible institutions for evaluating, approving and assisting strategic investments is:

– Strategic Investment Committee and

– Albanian Investment Development Agency.

Various public institutions, such as: the Ministry responsible for the economy, the ministry according to the strategic sector where the investment is requested, the Competition Authority, the municipalities where the investment will be implemented, as well as other institutions are involved in different stages in the evaluation or monitoring of the project – strategic investment proposals.

From the procedural approach, initially the procedure directs the investor to apply for the benefit of status of Strategic Potential Status. This is classified as such from the moment of the initiative to design it and is valid until the status of the status of strategic investment/investment, assisted procedure or strategic investment/investment, special procedure.

The proposal for the approval of the Project with Strategic Potential must go through several verifications, which include the reaction of the institutions indicated above as well as the institutions that are directly related to the implementation of the investment.

The applying investor must also submit (a) the investment business plan, (b) the investment financing plan, (c) the work program for the realization of the project/strategic investment (d) the evaluation of the social and economic and strategic impact of the project , as well as their justifying and supplementary documents.

According to the legal criteria for the deadline for functioning of the law, over the last eight years (2016 – 2024) has been postponed over four times the deadline for submitting requirements by investment entities interested in incorporating in the procedures for obtaining the status “Investment/ Strategic Investor, Procedure Assisted/special ”, and the latest deadline adopted by law is December 31, 2024.

After the initial steps, the investors who benefit from the status of Strategic Investor, Assisted Procedure are monitored and guided by AIDA, which in the role of “one stop shop” is the agency responsible for all services to strategic investors interacting with them, as well as with other institutions for legal benefits and fiscal, but also for transparency towards the public.

AIDA has a direct impact on these investors to benefit from services, public funds according to the contract, as well as ease related to preparatory actions, preparation of documents and application with accelerated procedure, consolidation of land conditions, support with auxiliary infrastructure, but in all these years it is established that there has been no quality transparency in fulfilling one of the main criteria, that of verifying the public interest.

Investors who have received the status of strategic investment/investor, a special procedure, in addition to the above -mentioned services and facilities, have also been provided with additional service related to the expropriation of immovable property and private property to enable the development and implementation of investment projects strategic, as well as the approval by the Assembly, the strategic investment contracts to increase the security of the legal relationship between the investor and the Albanian state.

Investors who have obtained the status of “Investment/Strategic Investor, Special Procedure” before seeking the expropriation of real estate owners, private property, are obliged to carry out and document efforts to reach an agreement with these owners.

This is a special agreement, proposed by the investor, to link to private owners, which provides appropriate alternative and/or compensatory instruments.

If the implementation of the strategic project is impossible through partnership with them, then the investor can offer the owners an agreement for the purchase of the property.

If the strategic investor cannot reach an agreement with the real estate owners and after following the steps for carrying out all the procedures for reaching agreements with the owners, the investor can request expropriation, in accordance with the procedures defined by the legislation on expropriations.

Also, with the proposal of the Strategic Investments Committee, the Council of Ministers can approve the permission to use the sea, lakes, rivers and their beds, as well as relevant areas, in order to implement a strategic investment project.

Furthermore, strategic investors are offered the opportunity to request the participation of the state in the realization of the corresponding strategic investment.

The government can participate in a strategic investment as (a) its co-developer, in the capacity of a partner of the company that will make the investment, contributing in money or in kind, (b) co-developer of a certain territorial area, in which strategic investments are made. This partnership affects the development of the area through:

– improvement and development of existing facilities and infrastructures,
– building new infrastructures or taking other supporting measures;
– in other forms of participation, which may include, but are not limited to, making available real or movable assets, assets, machines, rights or various facilities, granting the right to use the harbors and coasts, as well as their combinations or other forms of support.

In Albania, there are several legal incentives for strategic investments in the Industry and Logistics sector, depending on the total value of the investment, which varies from 5 million euros to 50 million euros in the technology development sector and from 30 million euros to 50 million euros in the technology development sector.

Investments worth 100 million euros enjoy incentives in any type of industrial sector. In general, economic incentives include:

– land consolidation;
– support programs;
– support with auxiliary infrastructure;
– access to state real estate for project development and execution;
– expropriation of real estate owned by private individuals to enable the development and realization of a project.

There are currently two technological and economic development zones (TEDA), specifically designated for the development of industrial parks and subject to incentives in Albania.

The tax incentives dedicated to these areas are:

– 20% of capital expenditures are deductible for two years from the start of economic activity in the area.
– relief of 50% of the applicable VAT rate for five years, zero VAT rate for the supply of goods to TEDA,
infrastructure impact tax relief,
– exemption from real estate tax for buildings constructed in TEDA for five years,
– tax exemption for the transfer of the right to real estate,
– 150% of salary expenses,
– social and health contributions paid by the employer to the employee will be deductible during the first year of activity.

Currently, there are no specific tax exemptions or preferences for the Industry and Logistics sector. However, any project/investment in various sectors of the economy (including Industry & Logistics) will benefit from an exemption from VAT if the company resident in Albania imports:

– machinery or equipment for the fulfillment of an investment contract, the value of which is equal to or greater than 50 million lek (around 480.000 euros);
– machinery or equipment for the fulfillment of investment contracts in the active processing sector, regardless of the value of the investment.

For companies operating in the research and development sector, the VAT is reduced to 50% for the first five years of research activity.

The costs of training employees in the technology and economic development sectors, for the purpose of calculating taxable profit, are calculated for tax purposes as double their amount for ten years from the start of economic activity.

For companies operating in the automotive sector, VAT is reduced to 5%, from 15%, which is usually applied in other sectors.

For accommodation structures “Hotel/Resort with four and five stars, special status”, according to the definition in the legislation of the field of tourism and which are holders of a registered and internationally recognized trademark “brand name”. The exemption from the profit tax, provided for in this paragraph, is applied for a period of 10 years for those structures, which benefit from the special status until December 2024. The effects of the exemption begin at the moment of the beginning of the economic activity of the accommodation structure, but not later than 3 years from receiving the special status.

For the entities, which develop economic activity according to law no. 38/2012 “For agricultural cooperative societies”, the income tax rate of 5% will be applied until 31
December 2029.

For legal entities, which exercise economic activity for the production or development of software, the profit tax at the rate of 5% will be applied until December 31, 2025.

[1] https://punetejashtme.gov.al/lista-e-ligjeve-per-investimet-e-huaja/

https://investmentpolicy.unctad.org/investment-laws/laws/168/print/3