Albania is a country with extraordinary potential for foreign investment, but has often been held back by legal uncertainties, weak enforcement, and a lack of a clear vision for strategic investors. Law No. 7764, dated November 2, 1993, “On Foreign Investments” It was adopted at a time when Albania had just entered the market economy and needed a swift, protective framework for foreign capital. But today, more than 30 years later, many of its provisions have become outdated, while investors' needs have grown and become more complex.

This blog analyzes the actual substance of this law, its clash with on-the-ground practice, and the challenges foreign investors face every day in Albania. In the end, it poses a question that is more than rhetorical: is it time for a new law?

The guarantees offered by the law for investors

The law in question is brief but conceptually clear. It allows foreign investment without the need for prior authorization and treats the foreign investor on the same level as the domestic investor. In essence, foreign investors are guaranteed three key rights: protection against expropriation, the right to transfer all their profits and capital out of Albania, and the right to pursue international arbitration in the event of a dispute with Albanian authorities. If we analyze it in more detail, the law grants the foreign investor the right to employ foreign nationals, to own movable and immovable property, to benefit from intellectual property protection, and to realize profits that they can freely transfer out of Albania.

Furthermore, it provides that in the event of expropriation, the investor shall receive immediate and fair compensation, calculated at market value and transferable in convertible currency. In the event of a dispute with the state, the investor may choose to pursue the Albanian judicial route or to refer the matter to an international tribunal, such as the Center. International Centre for Settlement of Investment Disputes in Washington. This is one of the law's strongest points and one of the few instruments that guarantees a degree of neutrality in resolving disputes.

When Law Meets Reality: Practices in the Field

Although on paper the law appears quite liberal and favorable, in practice the reality is much more complex. Investors encounter difficulties from the very moment they decide to register a company in Albania. Bureaucratic processes are lengthy, requirements are not standardized, and institutions do not communicate with each other in real time.

For example, an investor seeking to apply for a building permit may face unreasonable obstacles from the municipality because of the absence of a document that the QKB had previously accepted without issue.

Another practical problem is fiscal uncertainty. The law on foreign investments does not directly address tax aspects, but these have a direct impact on the investor's decision-making. Tax incentives for sectors such as IT, tourism, or renewable energy are often granted for limited periods and are not guaranteed in the long term. Frequent changes to tax legislation, a lack of clear guidance, and contradictory interpretations by the tax administration create uncertainty and tension for investors.

Furthermore, beyond the legal and fiscal aspects, a major problem is also the lack of a dedicated structure for tracking and facilitating foreign investments. Albania does not have a functional one-stop shop for foreign investors, nor any institution responsible for overseeing an investment project through to completion. Investors wander between different offices, having to submit documents multiple times and often facing different treatment in different municipalities.

Sectors where investors are most active

In recent years there has been a significant increase in investments in certain sectors for which Albania has comparative advantages. Tourism is undoubtedly the most prominent sector, with foreign investments in accommodation facilities in the south of the country, protected areas, and historic cities such as Gjirokastra and Berati. In this sector, the advantages are competitive property prices, the absence of existing structures, and significant development potential. However, the problem lies in weak infrastructure, insecure property titles, and delays in environmental permits.

Another emerging sector is renewable energy, particularly solar and wind farm projects. Albania has begun implementing competitive schemes for awarding concessions for these projects, but the administrative capacity to manage strategic projects remains limited.

Technology and IT services are also sectors of growing interest, thanks to low labor costs and tax exemptions offered by law to technology companies. However, to attract significant investments in this sector, Albania needs to substantially improve its universities' capacity, encourage talent retention in the country, and establish dedicated zones for technological development.

The role of double taxation avoidance agreements

One of the most important instruments that actually helps foreign investors is the network of agreements for avoidance of double taxation which Albania has signed with over 40 countries, including Italy, Austria, Germany, the USA, and Turkey. These agreements reduce withholding tax rates on dividends, interest, and services and allow for a fairer allocation of taxation between the Albanian state and the investor's country of origin. In practice, they enable a company to structure the distribution of profits or payments for services in a more efficient and predictable way.

The case of an Italian company that has a branch in Albania and distributes profits to its parent company in Italy is illustrative: thanks to the agreement, it pays only 51% withholding tax instead of the standard 81%. This has an immediate impact on the investment's profitability.

Is it time for a new law?

Without a doubt, yes. The current law is a product of a time when foreign capital was a novelty and the Albanian legal system was in its infancy. Today, Albania needs a new investment policy that is tied to national economic development and is in harmony with European standards. The law must clearly address the role of state agencies in assisting investors, include concrete measures to support investments in priority sectors, and establish clear mechanisms for monitoring and assistance throughout the life of the investment.

It is necessary to establish direct support policies for strategic investments that create jobs, transfer technology, and increase exports. This would require improving the legal framework, fully digitizing procedures, and strengthening support structures for foreign enterprises.

How can we help?

At AlProfit Consult, we have helped dozens of foreign companies operating in Albania in fields such as tourism, technology, processing industries, and specialized services. From registration with the QKB and advising on the optimal legal and tax structure to monthly and annual filings, we offer an integrated service that eases the investor's administrative and legal burden.

Read also Information on the current legal framework

For any investor interested in Albania, professional support in the early stages is crucial. Not only to avoid mistakes, but also to ensure that the investment is sustainable and protected in the long term.