A non-resident is taxed in Albania only on income sourced in Albania. The method of taxation depends on one question: whether the activity establishes a permanent establishment or not. When a permanent establishment is created, the profit attributed to it is taxed at 15% under the corporate regime. When one is not created, the payments are taxed at source by the Albanian payer.
This page explains when a permanent establishment is created, which income is sourced in Albania, how much is withheld at source on payments to nonresidents, and how a foreign employee is treated.
Read also: When are you considered a tax resident in Albania?.
A non-resident company may be taxed in Albania as a business, and not only through withholding, when it establishes a permanent establishment, also called a fixed place of business. The law provides time limits that give rise to it.
When the permanent seat is created
| Activity | Time limit |
|---|---|
| Construction or assembly site | Over 6 months |
| Exploration and exploitation of natural resources | Over 3 months |
| Offering services in Albania | More than 6 months within a 12-month period |
When the permanent establishment is created, the profit attributed to it is taxed under the corporate regime, i.e., at 15%. Registration, accounting, and reporting obligations follow the same logic as for a resident company.
A foreign company performs installation services in Albania for 8 months within a 12-month period. The six-month limit is exceeded, so a permanent establishment is created. The attributable profit of 5,000,000 lek is taxed at 15% and yields 750,000 lek. Had it lasted four months, the activity would not have created a permanent establishment and the payments would have remained under the withholding regime, meaning that a 1,000,000-lek payment would have been subject to a 150,000-lek tax.
Contracts with durations near the time limits are analyzed before signing. A two-week extension could change the entire tax regime of the project.
A non-resident is taxed only on income sourced in Albania. The source is determined by the country where the asset is located, where the activity takes place, or where the payer is located, depending on the category.
Typical income sourced in Albania
| And the income | Treatment |
|---|---|
| Acquisition of permanent residence in Albania | Profit tax, 15% |
| Services provided for an Albanian person | Withholding at source, 15% |
| Rent for property located in Albania | Withholding at source, 15% |
| Dividend from an Albanian company | Withholding tax, 8% |
| Wage for work performed in Albania | Payroll tax, 13.1% or 23.1% |
Read also: Double Taxation Avoidance Agreements and Certificate of Residence.
For many payment categories, tax is withheld by the Albanian payer, who declares and remits it. The general rate is 15%, while dividends are taxed at 8%. The obligation lies with the payer, so the mistake costs the Albanian business, not the foreign provider.
Rates under domestic law
| Payment to a non-resident | The |
|---|---|
| Dividend | 8% |
| Interest | 15% |
| Honoraria and author's rights | 15% |
| Services provided for an Albanian person | 15% |
| Insurance and reinsurance | 15% |
| Board members' fees | 15% |
| Construction and assembly | 15% |
| Artists and athletes | 15% |
| Rent | 15% |
When there is an agreement and the documentation is complete, the rate may be reduced or not applied. The exact rate depends on the specific agreement, so it is read on a case-by-case basis and is not assumed.
Read also: Dividends, rent, and withholding tax: procedures and deadlines.
A foreign employee performing work in Albania is taxed on their Albanian-sourced salary in the same way as an Albanian employee. The employer withholds the tax from the salary and submits the payroll by the 20th of the following month.
The payroll tax rate is 13% up to an annual taxable base of 2,040,000 lek and 23% on the excess. Social security and health insurance contributions are 16.71% for the employer and 11.21% for the employee, on gross pay, within a minimum of 50,000 lek and a maximum of 186,416 lek for social security.
A foreign employee on an Albanian contract with a gross salary of 150,000 lekë per month, i.e., 1,800,000 lekë per year. The personal deduction of 360,000 lekë reduces the taxable base to 1,440,000 lekë, which remains within the 13.1% bracket and results in an annual tax of 187,200 lekë. Contributions on the gross salary are 300,600 lekë for the employer and 201,600 lekë for the employee, because the salary remains below the social security maximum.
When a foreign employee remains covered by his home country's social security system and there is a bilateral social security agreement, the treatment of contributions may vary. The existence and terms of the agreement for the specific country must be confirmed before payroll processing.
Read also: How much does an employee cost, including wages and contributions?.
The service contract is extended beyond six months without assessing the establishment of a permanent headquarters.
Withholding at source is not applied because it is assumed that the obligation lies with the foreign provider, whereas the law places it on the Albanian payer.
The treaty rate applies without a residence certificate, and any difference becomes the liability of the Albanian payer.
The foreign supplier's invoice is paid in full, and the withholding tax is then paid out of the Albanian business's own pocket.
The foreign employee is kept off the payroll because he has a contract with the parent company abroad.
The permanent seat is de facto established but not registered, so there is no accounting or annual report.
The project's months are counted by phases, not by the 12-month period measured by law.
A construction or assembly site lasting more than six months, an activity for natural resources lasting more than three months, and the provision of services for more than six months within a 12-month period.
The profit attributed to the head office is taxed at 15% under the corporate regime, and the reporting obligations are the same as for a resident company.
Under domestic law, 15.1% for services, fees, interest, rent and other categories, and 8.1% for dividends. The agreement may reduce the rate when the documentation is complete.
The Albanian payer. He withholds the tax, reports it, and remits it, so documentation is required before payment.
Yes, for work performed in Albania. Wages are taxed at 13% up to an annual basic salary of 2,040,000 lek and at 23% on the excess.
As a rule, it is calculated on the gross wage, with 16.71% paid by the employer and 11.21% by the employee. When there is a bilateral agreement on social security, the treatment must be verified for the specific country.
It is not taxed. A non-resident is taxed only on income sourced in Albania.
The six-month limit within the 12-month period, because extending it may create permanent establishments. Please contact us before signing the contract addendum.
Law No. 29/2023 “On income tax"“, as amended, Article 4 on the source of income, Article 5 on permanent establishment, Article 12 on employment, Article 22 on deductions, Article 24 on rates, Article 41 on the corporate rate, Articles 58 and 59 on withholding tax, Article 65 on the payroll
Law No. 7703, dated May 11, 1993 “For Social Security,” as amended, section 10, and Law No. 10383, dated February 24, 2011 “Mandatory Health Care Insurance,” as amended, Articles 7 and 8
VKM No. 77, dated January 28, 2015, updated, for contribution measures, and Government Decree No. 776/2025 for the minimum wage
Instruction No. 11, dated July 23, 2024, and Annex 2, for the implementation of double taxation avoidance agreements
The text of Consolidated Law.