Albanians will pay at least 100 million euros per year in additional property taxes

With the implementation of the new reform for real estate taxation, the government expects to increase the share of revenues for this item in Gross Domestic Product from 0.3%, which is currently 0.7 to 1%.

According to calculations, in value, revenues from the real estate taxation reform are expected to increase by about 9.4 billion lek or about 100 million euros to 17 billion lek more or 179 million euros, than what is currently collected.

For 2025, municipalities collected a total of 8.1 billion lek in real estate tax revenue. Revenue from this tax constitutes 0.3% of Gross Domestic Product, according to data from the Ministry of Finance.

After the implementation of the reform for the taxation of real estate, in addition to the building tax, where an increase in the rate and a change in the formula are proposed, taxation is also foreseen for other categories of real estate according to market value, for land and agricultural land.

With the implementation of the reform, according to the forecasts of the International Monetary Fund, revenues from real estate taxes will reach levels of 0.7 to 1% of GDP.

"All proposed changes or innovations, within the framework of this initiative, including increasing the tax base, changing the tax base, minimizing administration costs, increasing the effectiveness of tax collection, etc., will contribute to a significant increase in revenues from real estate taxes. According to IMF forecasts, after the implementation of the reform, the revenues generated could reach levels of 0.7% - 1% of GDP," the report states.

According to calculations, if revenues from real estate taxation reach 0.7% of GDP (GDP at current prices according to INSTAT data reached 2.5 trillion lek (over 25 billion euros) for 2024), revenues in value are estimated to reach 17.6 billion lek or 9.4 billion lek more than what is currently collected. Revenues will increase by 116%.

The most optimistic scenario for achieving revenues at the level of 1% of GDP would bring in total revenues of 25.1 billion lek from real estate taxes, or 17 billion lek more than what is currently collected.

The property tax reform will be implemented gradually in two phases. Due to the complexity of the process and the need to prepare the property valuation infrastructure, the transition to taxation based on market value will start initially for buildings.

According to the draft law, the implementation of the new tax for building units will begin in 2029, while from 2031 the new scheme will also be extended to land and agricultural plots.

Until the new system enters into force, a transitional period will apply. For the building tax, the transitional period will last until December 31, 2028, while for land and agricultural land until December 31, 2030.

For both categories, residential buildings and land, the new tax is expected to increase the liability, with the new formula providing for a reduction in the value of real estate of up to 50%.

For the taxation of the first home, the new formula determines a 50% deduction of the value of the house as non-taxable. But for the deduction of 50% of the value as non-taxable, for the first home, consequently paying half the tax, it determines that it will be benefited if the value of the house (on which the tax will be calculated) does not exceed twice the value of the maximum threshold as non-taxable.

On the contrary, if the value of the house exceeds twice the value of the non-taxable threshold (this value is divided into 7 categories according to municipalities), only the threshold defined in the draft benefits from the non-taxable deduction.

A deduction from the property value is also foreseen for the taxation of land. The deduction will be 50% of the value for both land and agricultural land in the first 2 tax years./ Monitor