Fiscal package: Albania among the countries with the highest taxes in the region

Even after the decision not to raise the corporate income tax rate from 15% to 17%, Albania will remain among the countries with the highest tax burdens on profits and dividends in the Western Balkans.

The fiscal package for 2027 provides for dividends to be taxed at 15%, a new 30% rate for salaries above 700,000 lek per month, and an increase in the standard VAT rate from 20% to 21%.

Corporate income tax will continue to be higher than in Kosovo, North Macedonia, and Bosnia and Herzegovina, as well as for most businesses in Montenegro, while it will be the same as in Serbia.

Business representatives have warned that activities and investments could shift toward neighboring countries.

“Monitor’s” comparison includes the main tax rates in the Western Balkan countries, as well as Slovenia, Croatia, Hungary, Romania, Greece, Turkey, and Moldova. These economies have chosen different approaches to taxing profits, personal income, and consumption.

For corporate income tax, Kosovo, North Macedonia, and Bosnia and Herzegovina have a standard rate of 10%. Montenegro starts at 9% and increases the rate progressively to 15%. In Serbia, the rate is 15%, the same as in Albania after the proposal to raise it to 17% was abandoned.

Among the other countries included in the analysis, Hungary has the lowest rate, at 9%. Moldova applies 12%, while Romania applies 16%. In Croatia, corporate income tax is 10% or 18%, depending on business income. Slovenia and Greece have a rate of 22%, while Turkey applies 25%, with a higher rate for the financial sector.

The differences between countries are more pronounced in personal income tax. Albania currently applies progressive rates of 13% and 23% to the portions of taxable income exceeding the respective thresholds.

The new package adds a 30% rate for the portion of gross salary above 700,000 lek per month. The initial draft provided for 32%, but the rate was changed during the presentation of the package on October 28.

The highest personal income tax rate in Kosovo and North Macedonia is 10%. In the Federation of Bosnia and Herzegovina and the Brčko District, salaries are taxed at 10%, while in Republika Srpska the rate is 8%.

Montenegro uses rates of 0%, 9%, and 15%. Serbia applies a 10% tax on salaries, as well as an annual tax on individuals whose income exceeds the prescribed thresholds.

In Slovenia, progressive personal income tax rates range from 16% to 50%; in Greece, they range from 9% to 44%. Croatia has different rates depending on the municipality. Turkey’s rate reaches 40%, while Hungary applies a flat rate of 15%, Moldova 12%, and Romania 10%.

The fiscal package for 2027 introduces changes to the taxation of income and profits, but the government has removed from the plan the corporate income tax increase included in the initial draft.

The draft proposal provided for a 2-percentage-point increase in corporate income tax, from 15% to 17%. This measure was expected to generate approximately 5 billion lek in additional revenue. On October 28, Prime Minister Edi Rama announced that the tax on large businesses would not increase and would remain at 15%.

Unlike corporate income tax, the increase in the dividend tax from 8% to 15% remains part of the package. The Finance Ministry’s initial calculations estimate that it could generate approximately 3 billion lek in additional revenue.

With this change, Albania’s dividend tax rate would be equal to that of Serbia, Montenegro, and Hungary when comparing the general rates applicable to resident individuals.

Dividends are not taxed in Kosovo, while North Macedonia applies a 10% rate. The rules in Bosnia and Herzegovina depend on the entity and the recipient’s residency.

For payments to non-resident companies, the general withholding tax rate is 5% in the Federation and 10% in Republika Srpska, although tax treaties may change it.

Dividend tax rates in the other countries compared are 5% in Greece, 6% in Moldova, 12% in Croatia, 16% in Romania, and 25% in Slovenia.

The proposals for salary taxation in Albania include two measures that would have opposing effects. The threshold above which the 23% rate applies is expected to rise from 200,000 to 300,000 lek per month.

This would reduce the tax burden for some employees and cost the budget approximately 1.98 billion lek.

Meanwhile, a new marginal rate of 30% has been announced for gross salaries exceeding 700,000 lek per month, replacing the 32% rate initially proposed.

It will be calculated only on the portion of the salary exceeding the threshold. The initial explanatory report estimated that the 32% rate would generate approximately 970 million lek in additional annual revenue; the financial impact of the revised version must be reassessed.

The maximum rate of 30% would be significantly higher than the usual taxes on salaries in the other Western Balkan countries, although it would apply to only a limited number of employees.

The package’s changes also affect VAT. For the first time, a reduced rate of 6% is proposed for basic food products, compared with the 20% currently applied. According to the Finance Ministry, this measure would have a budgetary cost of 12.8 billion lek.

At the same time, the standard VAT rate is proposed to increase from 20% to 21%, a change expected to generate 10.6 billion lek in additional revenue. The difference between the effect of this increase and the cost of lowering VAT on food would be approximately 2.2 billion lek.

The VAT registration threshold is also expected to be lowered to annual turnover of 5 million lek, generating an estimated 4.5 billion lek in additional revenue.

Another proposal is to increase VAT on accommodation services from 6% to 10%, with the exception of agritourism; the initial impact of this measure has been estimated at approximately 600 million lek.

Thus, the proposed reduction for food products comes alongside an expansion of the VAT base and an increase in the standard rate for other goods and services.

Reduced VAT rates for food have long been applied in countries across the region, but the list of eligible products varies from one country to another.

Serbia has a standard VAT rate of 20% and a reduced rate of 10% for basic products. In Kosovo, the respective rates are 18% and 8%, while North Macedonia applies 18% as the standard rate and 5% for certain food categories.

Montenegro’s standard rate is 21%, with a 7% rate for some food products. Bosnia and Herzegovina applies a single rate of 17% and has no reduced VAT rate for food.

In Croatia, the standard VAT rate is 25%, while the reduced rates are 5% and 13%. Slovenia applies 22%, with additional rates of 9.5% and 5%.

Greece has a standard rate of 24% and reduced rates of 6% and 13%. In Turkey, the standard rate is 20%, while in Moldova it is 20%, alongside lower rates for certain categories.

Romania increased its standard VAT rate from 19% to 21% in August 2025. For most food products, the country applies a reduced rate of 11%, with the exceptions stipulated by law.

Hungary, which has the highest standard rate at 27%, uses reduced rates of 5% and 18% for certain food categories.