The German Industry and Trade Association in Albania (DIHA) has responded to the new fiscal package. In a statement to the media, DIHA raised concerns about the lack of consultation and the expected impact of the proposed changes on German investors.
“As the representative of German businesses in Albania, DIHA is particularly attentive to the impact of the proposed changes on German investors, existing investments and trade between Germany and Albania, all of which depend on stable and predictable tax conditions for long-term planning.
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DIHA regrets that the business community was not included in the process of drafting the package. The draft laws were not published for public consultation, as required by the legislation on public notification and consultation, while the final texts were presented to the Tax Council only shortly before their submission to Parliament.
Changes of this nature and scale, which are expected to take effect on January 1, 2027, would benefit from an early and transparent consultation process, giving stakeholders an opportunity to submit proposals and businesses the time needed to adapt their contracts, systems, budgets and investment plans. A predictable tax framework remains one of the main factors German and other foreign investors consider when deciding where to invest,” the statement said.
DIHA also noted that the draft package sent to Parliament took into account its representative’s request to the Tax Council not to raise the corporate income tax rate, clearly demonstrating the value of dialogue.
At the same time, however, the draft package includes provisions that were not subject to consultation, such as treating loans to partners or shareholders as deemed dividends.
“Such provisions, which affect the day-to-day financing of many companies, particularly corporate groups and family businesses, deserve the same open discussion as the rest of the package,” the statement added.
DIHA also expressed concern that these measures are financed primarily through higher taxes on businesses and consumption.
Increasing the dividend tax makes equity investments in Albania less attractive and could weaken the country’s position relative to neighboring Western Balkan countries competing to attract the same investments, particularly in the industrial sector.
An increase in the standard VAT rate is likely to be reflected in consumer prices and partially offset the expected benefit of lower VAT on food products.
Raising the VAT rate for tourism services and lowering the VAT registration threshold will impose additional costs on a key export sector and on many small businesses that are not yet prepared for the change.
Higher costs will also affect the competitiveness of Albanian suppliers, including many DIHA members, and their ability to integrate into German and international supply chains. Taken together, these increases could limit the financial resources companies have available for reinvestment, modernization and the creation of new jobs.
DIHA considers the VAT reduction on basic food products an important social measure, but its success will depend on whether the benefit is actually passed on to consumers.
“Lower taxes on middle-income earners will help companies retain skilled workers in Albania, while eliminating the requirement to submit financial statements twice is a welcome step toward reducing bureaucracy.”
DIHA further stressed that it fully supports Albania’s path toward the European Union and believes that alignment with the EU should also include a green fiscal policy, as decarbonization is central to the European Green Deal and the Green Agenda for the Western Balkans.
“In this spirit, DIHA believes that, with the removal of the circulation tax and the transfer of its burden to the annual vehicle tax, electric vehicles should be fully exempt from the annual vehicle tax. This would ensure that the new fiscal framework encourages clean mobility and sends a clear signal in support of Albania’s green transition.
Along the same lines, as an alternative to increasing the standard VAT rate to 21%, DIHA proposes that the Government consider applying a reduced VAT rate to electricity, which in Albania is produced almost entirely from renewable sources and for which EU rules permit a reduced tax rate. This would bring direct benefits to households and lower energy costs for businesses.
For these reasons, DIHA respectfully calls on the Government and Parliament to conduct a full consultation on the package before adopting it, review the implementation timelines for the tax increases and the provisions that have not yet been discussed, and give businesses a reasonable transition period to adapt to the changes.
DIHA and its member companies remain ready to contribute their experience and expertise and to work with the Ministry of Finance and Parliament to find solutions that support sound public finances, a competitive and green Albanian economy, and further growth in German investment and trade with Albania,” the statement said./Monitor
