INVESTMENTS IN REAL ESTATE
Restrictions on the acquisition of property
Law No. 8743 “On State property”, dated 22 February 2001 makes a distinction between state and public property – the latter includes property owned by the state which is functional and indivisible from the state itself and considered of public interest (parks, rivers, lakes, etc).Currently foreign investors can acquire real estate property in Albania in these conditions:
- No restrictions on the acquisition of the residential units (i.e. Apartments, offices, etc.);
- Not entitle to obtain ownership title over agricultural land, woodland, pasture and meadow, but only entitle to lease such type of real estate for a period up to 99 years;
- Entitle to purchase private or state-owned constructible land plot on condition that the investment built over the land plot exceeds at least three times the value of such land plot.
Lease of real estate property
Foreigners can freely lease real estate property, in accordance with the relevant provisions of the Civil Code and sectorial legislation. The Albanian Civil Code provides for no minimum period requirement for rental or lease agreement (s) but the maximum period is 30 years unless otherwise provided by speciﬁc laws. Meanwhile, the Lease Agreement for properties that will be used for accommodation purposes cannot exceed the maximum term of 5 years.
Registration of Real Estate in Albania
Based on Law 111/2018 “On Cadaster” the ownership rights and other real rights on land and buildings should be registered with the related cadastral register. These registers contains all the data of the real estate.
Tax of Real Estate
Transfers of real estate are subject to a transfer tax that is payable by the seller.The rate/amount of the tax depends on the type of the real estate and its location. The transfer fee of buildings is calculated based on the area of the property that is transferred.
The transfer tax is to be paid prior to registration of the real estate with the Register
The transfer of real estate is exempt from VAT
The tax payable by the seller who is a physical person is the tax on the income gained from the disposal of the real estate and consists of 15% of the capital gained (difference between the sale price and the purchase price of the former)
Meanwhile, with the new amendments to Law 8438 “On Income Tax”, the transfer of property rights to family members under a Donation/Gift Contract is considered as tax-free transaction. As of January 2020, the 15 % tax exemption on property transfer is applied only in cases when a property is donated between the family line: husband, wife, children’s and only once to one beneficiary.The tax on the income gained from a real estate transfer by legal entitles is calculated jointly with the tax on the overall income generated by that entity during the respective ﬁscal year.
An entrepreneur may decide to stop doing business for a number of different reasons.
Transfer of business
Albania’s Civil Code governs business transfers and offers the legal basis for common forms of business transfer:
Transferring of business name and liability
According to Article 5 of the law on Entrepreneurs and Commercial Companies, the transferee may continue to use the registered name and other distinctive signs of the activity provided that the transferor or his or her inheritors approve of such use. In such an event, the transferee inherits all commercial liabilities of the transferor.
Safeguarding employee rights
The Labor Code ensures that employee’s rights continue to be safeguarded in the case of transfers of undertakings. The rights and obligations arising from the contract of employment on the date of a transfer are transferred to the transferee.
Law on Entrepreneurs and Commercial Companies establishes the dissolution of companies in the following cases:
- Expiry of the term for which it was constituted;
- Decision of its members/general assembly;
- Start of bankruptcy proceedings;
- Court decision (compulsory liquidation);
- Failure to carry out any commercial activity for two years and to notify the suspension of activity to the national registration center.
The aim of the insolvency proceeding is the settling, in a collective manner, of the debtor’s obligations through liquidating all his or her assets and distributing all his or her revenues or, in the event of a reorganization plan, through reaching of another agreement, aimed at preserving the activity.
The insolvency proceedings may only be opened by means of an application by the debtor or his or her creditors. Tax authorities may also submit an insolvency application against a legal person.
When submitting an application, a creditor must demonstrate that he/she has a legitimate interest for the opening of the insolvency proceedings, while the court must ﬁnd the grounds sufficient and convincing. Grounds for opening insolvency proceedings are:
- Inability to make payment; and/or
Participants in the proceedings
The court is responsible for the procedural course of the insolvency proceedings.
It has special powers and duties at the opening stage of the proceedings. The court decides, inter alia, about: The opening the proceedings; The interim security measures; The appointment of an insolvency administrator.
Winding up proceedings
If no reorganization plan is submitted, the insolvency assets are realized by the insolvency administrator. The proceeds are distributed by the insolvency administrator in accordance with a distribution list, containing all insolvency claims to be taken into account in the distribution.
Closure of the proceedings
After the ﬁnal distribution has been carried out, the insolvency proceedings are officially closed, and the decision is made publicly known. The creditors can assert their remaining claims against the debtor without restriction.