Best Expat Tax Advice for Americans Living in Albania

Best Expat Tax Advice for Americans Living in Albania

This small Mediterranean country is hidden gem. From the snow-capped mountains to the sparkling ocean waters in the summer, you may be completely enveloped in the mystery and rich culture of Albania. If you have decided to live in Albania, it is important to know how it will affect your taxes. Fortunately, we have the top expat tax advice for Americans living in Albania!

1. How Working in Albania Impacts US Expat Taxes

Americans living in Albania—or anywhere else in the world—must file an annual US expat tax return. The US also requires that you include all worldwide income on your tax return, including any income that is also subject to tax in Albania. 

While it may appear that being taxed on your worldwide income will result in double taxation, there are several important deductions and credits available to help offset your income and reduce your taxable income. Many expats qualify for: 

  • Foreign Earned Income Exclusion (FEIE) 
  • Foreign Tax Credit 
  • Foreign Housing Exclusion 

If you meet certain residency requirements (through the Physical Presence Test or the Bona Fide Residence Test) you can exclude up to $108,700 of your 2021 foreign earnings on your US tax return ($112,00 for 2022). In addition, the Foreign Housing Exclusion allows you to deduct a certain portion of your living expenses. The US understands that living overseas is often more expensive than living in the US, and the housing exclusion can be very useful for lowering your taxable income. 

The Foreign Tax Credit reduces your US tax dollar for dollar on what you pay in taxes to Albania. However, the credit is limited to only those earnings that have not been excluded via the FEIE or Foreign Housing Exclusion. The Foreign Tax Credit is particularly useful if you won’t be in Albania long enough to qualify for FEIE, as this would be the best way to offset your US tax liability. A tax professional would provide the expat tax advice you need to decide which deductions and credits will save you the most money. 

2. Who is a Resident of Albania?

You are considered a resident of Albania if either of the following applies: 

  • You are present for at least 183 days during the fiscal year. 
  • You are deemed to have a permanent residence, family, or vital interests in Albania. 

3. Is Foreign Income Taxed Within Albania?

Residents are taxed on their worldwide income while non-residents are only taxed on their Albanian-sourced income. 

4. Albanian Income Tax Rates

Albania’s tax structure is simple. Below, you can see the current tax rates for residents and non-residents in Albania. All amounts are given in Albanian lek (ALL). 

  • 0 – 30,000: 0% 
  • 30,001 – 150,000: 13% of the gross amount exceeding ALL 30,000 
  • 150,000 and over: ALL 15,600 plus 23% of the gross amount exceeding ALL 150,000 

In the case of employment income, employers are required to withhold the necessary taxes from their employees’ paychecks. 

5. US – Albania Tax Treaty

The US and Albania do not currently have an income tax treaty in placeHowever, the IRS tax credits listed above can help reduce the risk of double taxation for most US expats. 

6. Tax Due Dates Albania

Just like in the US, the Albanian tax year runs from January 1 to December 31. Residents must file tax returns by April 30th of the year following the tax year. Non-residents are not required to file a tax return but can choose to prepare and file a return including only their Albanian-sourced income. 

7. Social Security in Albania

Employees pay 11.2% to Albania’s Social Security system, while employers pick up another 16.7%. Self-employed individuals must pay a contribution of 30%, calculated on the amount exceeding the minimum amount of salary. 

The US does not have a totalization agreement with Albania, meaning that Americans employed in Albania may be required to contribute to both systems. 

8. Other Taxes in Albania

Again, Albania makes it easy to calculate virtually every tax. Most taxes are assessed at a flat rate of 15%, including:  

  • Investment income tax 
  • Real estate income tax 
  • Capital gains tax 
  • Corporate income tax 
  • Gifts/inheritance tax 

There is also a 20% value-added tax (VAT) on certain goods and services, and a 10% VAT on medicinal products. 

Need More Expat Tax Advice for Americans Living in Albania?

If you have additional questions about expat tax advice, please contact our expert CPAs and IRS Enrolled Agents.