Personal Income Tax: Determination of Taxable Income: Investment Income (Legal Changes After January 2024)

Investment income

Investment income, if not considered business income pursuant to article 13 of this law, include the following revenue:
a) interest, dividend, and royalty income;
b) capital gains from the alienation of securities or financial instruments;
c) capital gains realized from life insurance schemes;
c) return on investment from private pension schemes;
d) Capital gains from the alienation of immovable property;
dh) rental income from real estate;
e) income from the extraction or utilization of virtual means, as defined in Article 16 of this law; f) income from transactions with virtual means.

2. The income as follows is excluded income from investments:
   a) income from the disposal of movable assets, except for the disposal of vehicles, airplanes, and ships if they are sold within less than 12 months of purchase;
   b) income from the transfer of agricultural land ownership rights, when the legal heir retains the land for the same purpose and activity;
   c) interest income and capital gain from Eurobonds issued by the Republic of Albania, when the beneficiary is a non-resident individual.

3. Income from investments jointly held by more than one family member is considered income for the family member with the highest annual taxable income.

Taxable income from the disposal of securities, financial instruments, and virtual assets

1. The taxable income from the disposal of securities or financial instruments is determined as the difference between the selling price and the purchase price of these disposed assets. Any expense directly related to the purchase and sale of securities or financial instruments is included in the purchase price and the selling price and is not added or deducted, respectively.
2. If taxable income from the alienation of securities or financial instruments results in a loss in a tax year, such a loss can be offset against taxable investment income from the alienation of other securities or financial instruments in the same tax year.
3. Taxable income from the disposal of virtual assets is determined as the difference between the sale value and the purchase value of these assets. If the taxable income from the disposal of virtual assets results in a loss in a tax year, the taxable income is considered to be zero.
4. For titles or financial instruments listed on the stock exchange, purchase and sale prices are determined by the relevant trading documents on the date of sale.
5. In the case of securities or financial instruments acquired by inheritance or donation, the purchase price for tax purposes is the taxable value of the donated or inherited securities or financial instruments at the time of acquisition.
6. The transformation of titles includes the contribution to the nature of titles as initial capital or an increase in the capital of an entity.

7. The Minister responsible for finance will approve by instruction the general rules and calculation methods for the implementation of this article.

Taxable income from the sale of real property

1. Taxable income from investment property disposals is determined as the difference between the sale price and the purchase price of the asset.
2. The purchase price in relation to the unrealized income from the alienation of real estate cannot be deducted from the tax base.
3. In the case of immovable property acquired through inheritance or donation, or renunciation of ownership, the purchase price for tax purposes is the taxable value of the donated or inherited property at the time of acquisition.
4. If the taxable income from investments under this article results in a loss in a tax year, the taxable income from investments from the alienation of property shall be considered to be zero.
5. The selling price of real estate is estimated at the higher price between the selling price according to the contract and the reference price determined by applicable laws for the real estate.
6. The purchase value of land in the case of exchanging land ownership rights for the ownership rights of a building constructed on that land is calculated using the reference price per square meter of land approved by decision of the Council of Ministers for cities and areas within cities. The selling price is calculated based on the market value of the real estate acquired in exchange for the land, taking into account all parts of the construction area that benefit the landowner. The exchange of land for construction area, based on an exchange contract, does not constitute a taxable event for the calculation of any capital gain from the transfer of real estate. The methodology for calculating the purchase and selling prices is determined by decision of the Council of Ministers.
7. Personal income tax on income from investments from the alienation of real property shall be paid by the natural person who transfers ownership rights over the real property, prior to the registration of the aforementioned properties in the real estate cadastre, in accordance with the relevant legal provisions. The responsible institution of the real estate cadastre shall not register the real property until the tax payment has been confirmed. The institution responsible for the registration of real properties shall transfer, by the 20th of the following month, the tax collected in accordance with the provisions of this article to the tax administration's account.
8. The ministers responsible for finance and the institution responsible for the registration of real estate shall jointly determine by instruction the conditions, procedures, and methodology for the implementation of this article.

Annual taxable income from investments

Annual taxable investment income is determined as the total of taxable investment income.

Source: General Directorate of Taxes.