Contract
With the transfer of ownership, the act of selling, donating, or relinquishing immovable property is understood. The legal act for the transfer of ownership of immovable property and real rights over them must be done by notarial act and registered, otherwise it is not valid.
A legal act that is not made in the form expressly required by law is void. In other cases, the legal act is valid, but it cannot be proven by witnesses.
The transfer of ownership of real estate is an economically costly action for every person involved in the transaction. Specifically, at the moment a decision is made to conduct a transaction in the real estate market, in addition to the price of the property, a number of payments that accompany the registration of the ownership transfer with the competent authorities must be taken into consideration.
Taxes and fees payable
At the time of transfer of ownership of real estate, a number of fees, charges, and taxes are applied as follows:
Public Notary Service Fees
Local taxes on the transfer of real estate ownership.
Personal income tax on the transfer of ownership of real estate
Fees for services provided by the Real Estate Registry Office
Notary fee
The Notarial Fee is paid at the time of the formal transfer of ownership contract before a Public Notary. Meanwhile, the agent for the property tax and transfer tax, as well as the service fee, is the Land Registry Office, which transfers the collected revenues in favor of the local government and the tax administration within the deadlines stipulated by law.
For the performance of notarial acts and actions, as well as for the notarial service of registration of acts for the alienation of immovable property with the immovable property registration office, a fee is paid which is determined by the Ministry of Justice, after consulting the Ministry of Finance and the National Notarial Council.
Fees for the transfer of ownership of real estate through sale or donation are determined by Order of the Ministry of Justice. No. 279, dated 14.6.2012 for the approval of notarial service fees. Specifically, the notarial fee for the notarial act of transfer of ownership of immovable property is calculated based on the transaction value determined in the notarial act. Specifically for transaction values:
from 100,000 to 6,000,000 lek 0.35 %
from 6,000,001 to 15,000,000 lek 0.3 %
from 15,000,001 to 50,000,000 lek 0.28 %
from 50,000,001 to 100,000,000 lek 0.25 %
over 100,000,001 lek 0.23 %
In any case, if the price in the sales contract is lower than the reference price determined for that area, the fee will be calculated based on the reference price. Based on the order No. 306, dated 07.31.2013 to the Minister of Justice, the Property Exchange Contract is charged at the value of 10,000 Lek.
Personal income tax on the transfer of real estate ownership
Income Tax Law No. 8438, dated 28.12.1998 on Income Tax (amended) The legal and sub-legal acts issued pursuant to it regulate the relationships arising in the field of personal income tax, profit tax, as well as withholding tax on income. It defines the rules for the collection and administration of personal income tax for individuals, profit tax for commercial companies, as well as for natural persons (registered traders) when they are subject to profit tax.
Income tax law No. 8438, dated 12.28.1998 For Income Tax Among other things, income from the transfer of ownership of immovable property acquired by a person with permanent residence in the Republic of Albania, as well as income from the transfer of ownership of immovable property, shall be considered if these properties are located in the territory of the Republic of Albania.
For personal income tax purposes, income from the transfer of ownership of immovable property is considered taxable income. Income realized from the transfer of ownership of agricultural land from a registered farmer to another farmer or to a natural or legal person engaged in agricultural activity is exempt from personal income tax.
Cases of transfer of ownership within the marital relationship of husband, wife, children, through donation and/or waiver of property are also excluded, when the property originates from compulsory co-ownership acquired by law. No. 7501, dated July 19, 1991, “On Land”, ”changed".
How is tax paid?
The tax is paid by the individual transferring ownership of the immovable property, before the registration of the aforementioned property is carried out, in accordance with legal acts. Immovable property shall not be registered without proof of payment of the obligation at the immovable property registration offices.
How is tax calculated?
The calculation of tax for the transfer of real estate ownership rights is done according to the Joint Instruction No. 29, dated 07.30.2018 of the Ministry of Finance and the Ministry of Justice, for the implementation of Article 11 of Law No. 8438 of December 28, 1998 "On Income Tax," as amended. According to this sub-legislative act, The capital gain realized as a result of the transfer of ownership rights over immovable assets—buildings, plots of land, and agricultural land—is taxed at a rate of 15% of the capital gain realized.
Me termin“realized capital gain”, it is understood as the positive difference between the selling price and the purchase price of land and/or building real estate. The exchange of land for built space, based on an exchange contract, does not constitute a moment for calculating any capital gain from the transfer of real estate.
The sale value of the real estate is determined in the notarized sales contract, which is signed by the parties (seller and buyer). The contract must express the surface area in square meters of the property subject to the contract, the price per square meter, and its value.
In cases where the ownership of immovable property is transferred for the second time and consecutively, for the purpose of calculating the realized capital gain, the difference between the last sale value and the purchase value determined in the preceding contract for this property will be considered.
In cases where the value per square meter (m2) of the selling price determined in the contract is lower than the value according to the reference prices determined in the Prime Minister's Directive dated 12.28.2016, the reference prices shall be applied for tax calculation purposes.
The determination of the purchase value is based on the prior purchase contract. If the prior purchase contract was made in foreign currency (e.g., euros, dollars, etc.), the conversion to lek is carried out at the exchange rate of the day on which this purchase was made. For buildings constructed and registered at the real estate registries, which do not have a purchase value, or the purchase value is expressed in currencies such as gold francs or gold napoleons, as well as for buildings privatized under law no. 7652, dated 23.12.1992 “On the privatization of state-owned housing,” as amended, For the purpose of determining the tax on the transfer of ownership, the cost of utilization per square meter, as determined by the effective subordinate legislation for the National Housing Agency, in the year of registration of the real estate, shall be taken as the purchase value (deductible value).
In the case of selling a building obtained through land exchange, based on an exchange contract, the purchase value will be considered the value of the portion of land corresponding to the area of the building being sold.
In the case of a simultaneous sale of land and a building on that land, the tax obligation is calculated based on the sum of the tax obligation for the sale of the building and the tax obligation for the sale of the land around the building.
In cases of sale of non-residential buildings, the minimum sale price per square meter of built area is determined as follows:
- The price per square meter of built-up area for commercial and service activities is 1.5 (one and a half) times higher than the price for residential areas, depending on the city. This category will also include commercial buildings where mixed production, trade, or retail services are simultaneously carried out. In areas included in the Municipality of Tirana, this coefficient is twice as high.
- The price per square meter of building area for covered parking and basements is 701 TP3T of the price of residential apartment areas by city.
- The price per square meter of open parking construction area is 301 TP3T of the price of residential apartment areas by city.
- The price per square meter of building space intended for industrial activities, such as the production, processing, or storage of industrial goods, including factories, depots, warehouses and other similar facilities, is 50% of the price of residential units in the respective area by city.
- The price per square meter of building area used for agriculture and livestock farming, or supporting activities, such as storage, storage and preservation of agricultural and livestock products, is 30% of the price of residential areas in the respective zone, excluding food processing.
- The price per square meter of residential construction in the administrative units outside the respective city that were merged into the local government units is reduced to 35%, compared with the price of the nearest area, excluding residential zones. In the areas included in the Municipality of Tirana, this reduction is 30% compared to the price of the nearest area.
- For buildings privatized under Law No. 7652 of December 23, 1992 "On the Privatization of State-Owned Housing," as amended, the price per square meter is 70% of the price according to the zones in the table, only in the case of the first sale. If the value calculated as 70% of the reference prices according to the table zones has been used even once, whether in a revaluation of the property or otherwise, it will no longer be used as a reference price.
Taxation in cases of transfer of ownership through donation, or relinquishment of ownership in favor of a third party.
For cases of transfer of ownership through donation, or relinquishment of ownership in favor of a third party or other co-owners, the transaction is considered taxable and for the purpose of calculating the tax liability, the procedure will be as in the case of transfer of ownership of land and building through a sale deed. The valuation report for the donated or relinquished property is not mandatory to be submitted in the documentation for the transfer of real estate ownership through donation or relinquishment. The value of the properties reflected in these reports, as well as in donation or exchange contracts, is not referential for the calculation of the realized capital gain.
Sale of Property acquired by inheritance.
In the case of selling real estate, land, and/or buildings, acquired through inheritance and court decisions, the purchase value will be considered:
- When the building and/or land has a value according to notary deeds or revaluation registered in the Cadastre, before or after the registration of the inheritance certificate, the value of the building and/or land according to these deeds, registered in the Cadastre, shall be taken as the purchase value (deductible value).
- When the building and/or land have no registered value at the time of acquisition, such as a purchase value for building real estate acquired by inheritance, the value will be based on the utilization cost in the year the inheritance deed is registered.
- For real estate acquired by inheritance, the purchase value will be the value calculated using land price indexing according to the valuation map, with the average annual inflation calculated for the year in which the inheritance deed was registered (annex no. 1, attached to this joint instruction.
Asset transaction tax.
Cases of real estate exchanges occurring between individuals are subject to capital gains tax realized from the difference between reference prices of the properties being exchanged. The registration of a property exchanged for a property located in another city is done by obtaining confirmation for the application of the exchanged property in each city, as well as ensuring the payment of the property transfer tax for the gain realized from the difference between the values of the exchanged properties.
In cases of real estate sales originating from an exchange contract, the value used for purchase (deductible value) will be the value according to the notarized deeds or reassessment, registered in the Real Estate Registration Office (ZRPP) for the real estate used in the exchange.
In cases of the sale of property originating from an exchange contract for which tax was calculated and paid at the time of exchange, its value at the time of the exchange according to reference prices will be considered as a deductible value for the property being sold.
If the real estate land (agricultural land or plot) used for exchange with the property being sold has no predecessor value, then the purchase price will be the price calculated using land price indexing according to the valuation map, with the average annual inflation calculated for the year in which the exchange contract was registered at ZRPP.
Taxation in cases of property division among co-owners.
The division of property between co-owners is subject to property transfer tax on the profit realized from the difference between the values of the properties acquired from the division of property, and the value of the properties according to their shares in the co-ownership.
Dilapidated buildings
In cases of the sale of buildings with an amortization coefficient above 50 %, the taxable sale value of the real estate will be determined by persons licensed to appraise real estate, only in the case of the first sale. In cases where the building's value as assessed by a licensed appraiser is less than half of the value determined according to reference prices, the value determined by the licensed appraiser shall be taken into account for the purpose of the property's sale value.
Local tax on the transfer of ownership of real estate.
To offset the costs of managing the development process on existing public infrastructure, local governments impose several local taxes. Local taxes in the Republic of Albania are regulated according to the provisions of the Law No. 9632, dated 30.10.2006 For the Local Tax System (amended). Local taxes also include the local tax on the transfer of ownership of immovable property.
The tax on the transfer of ownership rights for immovable property is imposed on buildings and all immovable property at the moment of the transfer of ownership rights over them. The tax is paid by the person transferring the ownership rights over the immovable property, before the registration is carried out, in accordance with the applicable legal acts.
Collection of this tax is carried out by the real estate registration offices, which, in their role as tax agents, retain 3 percent of the amount collected and remit the difference to the respective municipal budget in whose territory the property is located, no later than the 30th of the following month.
For buildings
The base for the tax on the transfer of ownership rights for buildings is the construction area whose ownership is transferred. The tax rate is set in Albanian Lekë per square meter of the tax base. The tax liability is calculated by multiplying the tax rate by its base.
Other assets
The tax base for the transfer of ownership of other immovable properties is their sale value.
The tax rate is determined as a percentage, and the indicative tax rate is 2 percent. The tax liability is calculated by multiplying the tax rate by its base. The Tax Rate varies depending on the Municipality where the immovable property is located.
Example in Tirana Municipality (with Decision no. 59 dated 30.12.2015) it is determined:
Stain/m²
| Tirana City, NJA = Dajt, Farke, Kashar | NJA = Berzhite, Baldushk, Vaqarr, Petrele, Peze, Ndroq, Krabe, Shengjergj, ZallHerr, Zall-Bastar (-30%) | |
| I. Residential building | 1000 | 700 |
| II. Other buildings for trade and services | 2000 | 1400 |
| II. Other buildings | 1500 | 1050 |
Exemptions from property transfer tax on real estate
Excluded from the payment of the tax on the transfer of ownership rights for real estate are:
- National Housing Agency, Ministry of Finance, and central and local government bodies;
- individuals who are subject to personal income tax, in support of law no. 8438, dated 28.12.1998 “On Income Tax”;
- the subjects, who donate real estate, when the direct beneficiaries are:
- state and public institutions and bodies, central and local;
- religious communities or non-profit organizations, when the donation relates to their non-profit activities. In these cases, the donor, after receiving confirmation from the municipal council for tax exemption, registers the donated real estate. At the time of registration, the donor pays their share to the tax agent.
In cases where the parties themselves admit or it is legally proven that a donation was simulated as a sale to evade taxes, taxes equal to double the value shall be applied, according to the laws in force.
Fees for services provided by the Real Estate Registry Office
The Real Estate Registry Office has fees determined by bylaws for all the services it offers. In the case of real estate transfers, the fees are fixed as follows:
| Service Type | Tarifa (fee) | Commission/fee percentage | Legal deadline for submission to the Central Registry (days) | Maximum procedural period |
| Registration of ownership transfer by law, by court decision, or by administrative act. | 3,500 | 10% | 30 | 7 |
| Registration of sales contracts | 3,500 | 10% | 30 | 2 |
| Registration of the donation contract. | 3,500 | 10% | 30 | 2 |
| Registration of declaration of renunciation of ownership | 800 | 10% | 30 | 2 |
| Exchange contract registration. | 3,500 | 10% | 30 | 7 |
| Registration of a sales contract, exchange contract, and donation contract with reservation / condition of immovable property. | 900 | 0 | 0 | 3 |
| Request for registration of merger, division, or partition of real estate. | 700 | 0 | 0 | 15 |
For the above reasons, taxes and duties represent the main source of public revenue with which the state meets public needs. Today, they represent regular and permanent income, collected from legal and natural persons to meet public needs. To achieve a number of economic and social goals of the state, a large portion of national income is collected and redistributed in the aforementioned ways.
The process of transferring ownership of real estate is a relatively expensive process, and if the state applies very high taxes, it risks discouraging real estate market investors and leading to a stagnation of the market. In any case, every investor should have a clear overview of the expenses that will come with carrying out the transaction, so as not to be caught unprepared.
Source: Realpas.al