US Expat Tax Guide: Filing Taxes in Albania
- Living as an Expat in Albania
- Albania at a Glance
- US Expat Taxes in Albania
- Who Has to File Taxes in Albania?
- How do I know if I’m a Resident of Albania?
- Income Taxes in Albania
- Other Tax Situations in Albania
- Do the US and Albania have a Tax Treaty?
- Does Albania have a Totalization Agreement with the US?
- What Tax Forms do US expats in Albania Need to File?
- What US Tax Deductions are Available to Americans?
- Navigating Tax Compliance for US Expats in Albania
Living as an Expat in Albania
From the Accursed Mountains to colorful buildings lining the capital city of Tirana, Albania has a rich and fascinating culture. It’s no surprise many US citizens may find themselves deciding to stay in this charming Mediterranean country. Nestled across the Adriatic Sea, Albania offers quick access to most of Europe’s most famous countries, making it a perfect place for US travelers to set up a home base.
Navigating tax compliance can be daunting for US expats in Albania, especially with the absence of a tax treaty between the two countries. However, understanding the tax structure and benefits can help ensure that expats can maximize their tax benefits and avoid any potential penalties.
In this comprehensive guide, we provide everything expats need to know to stay tax compliant in both the US and Albania, including key tax benefits, filing requirements, and deadlines. Whether you’re new to the expat lifestyle or an experienced veteran, this guide will help make the tax process as smooth and stress-free as possible.
Albania at a Glance
- Primary Tax Form for Residents: Annual Personal Income Tax Return
- Tax Year: January 1st to December 31st
- Tax Deadline: March 31st of the subsequent tax year.
- Currency: Albanian Lek (ALL)
- Population: 2.9 million (as of 2021)
- Number of US Expats: around 150 US expats living in Albania
- Capital City: Tirana
- Primary Language: Albanian
- Tax Treaty: No
- Totalization Agreement: No
US Expat Taxes in Albania
US expats in Albania are subject to both US and Albanian tax laws, which can make tax compliance a complex and confusing process. Albania does not have a tax treaty with the US, which means that expats may not be able to take advantage of certain tax benefits, such as the foreign tax credit.
To avoid double taxation, US expats in Albania must file their taxes in both countries and report their worldwide income to the US. They may also be eligible for certain exclusions and deductions, such as the Foreign Earned Income Exclusion and the Foreign Housing Exclusion.
It is important for US expats in Albania to stay up-to-date on tax filing requirements and deadlines, as failure to do so can result in penalties and fines.
Who Has to File Taxes in Albania?
In Albania, individuals are required to file taxes if they are considered residents for tax purposes or if they earn an income within the country.
For tax purposes, individuals are considered residents if they have permanent residence in Albania or if they stay in the country for at least 183 days within a 12-month period.
Residents in Albania are subject to a flat income tax rate of 15%, regardless of their income level. They are also required to file an annual tax return and pay any taxes owed by the end of March of the following year.
Non-residents who earn income in Albania may also be subject to Albanian taxes, but the tax rate may vary depending on the type of income and the length of stay in the country.
How do I know if I’m a Resident of Albania?
Your income tax rate in Albania hinges on whether or not you’re a resident of the country.
Here’s how to know your residency status when living in Albania.
Qualifying as a Resident of Albania
The two main ways US expats can be considered a resident of Albania are if:
- You live in Albania for more than 183 days in a given tax year; these days can be consecutive or intermittent as long as they fall in the same year.
- You rent or own a permanent home in Albania during the tax year.
If either of the above applies to you, you’ll likely be taxed as an Albanian resident. If you have lived in Albania for 183 days or fewer and do not have a permanent home in the country, you will likely be considered a non-resident.
US expats can live in Albania for up to one year as a non-resident. After that, you’re required to apply for residency.
Income Taxes in Albania
Both residents and non-residents are charged income tax on a progressive scale ranging from 13% – 22%. Albania utilizes the standard calendar year as its tax year — the same as the US — and returns must be filed by April 30th. Taxes are also due by this date.
If you make under ALL 40,000 a month, you will not owe income taxes.
Here’s what Albania charges for income tax, depending on your monthly income:
Albania income tax rate if you earn ALL 40,001 – 50,000 Monthly
|Income tax bracket||Tax rate||Taxes owed|
|ALL 0 – 30,000||0%||No taxes owed on first 30,000|
|ALL 30,001 – 50,000||6.5%||6.5% of the amount over ALL 30,001|
Albania income tax rate if you earn over ALL 50,001 monthly
|Income tax bracket||Tax rate||Taxes owed|
|ALL 0 – 30,000||0%||No taxes owed on first 30,000|
|ALL 30,001 – 200,000||13%||13% of the amount over ALL 30,001|
|ALL 200,001 and higher||23%||ALL 22,100 and 23% of the amount over ALL 200,001|
US expats who are considered residents in Albania would pay Albania taxes on all income earned that year. Nonresidents would only owe taxes on income made in the country.
Other Tax Situations in Albania
If you earn self-employment income in Albania, it’s taxed the same way as employer-earned income (minus any eligible self-employment deductions). So, if you earn over ALL 200,001 a month, you’re subject to 23% income tax.
Companies in Albania pay a flat income tax (CIT) of 15%. Some companies, like software companies, receive tax breaks and only are required to pay 5% CIT.
Value-added Tax (VAT)
Consumers in Albania are required to pay taxes when purchasing goods or services. Known as value-added tax, VAT costs 20% in Albania.
There is no wealth tax in Albania.
Individuals are taxed a flat rate of 15% for gifts and inheritances. The transfer of a property’s rights ownership between family members is exempt from this tax.
Real Estate Tax
If you own property in Albania, you’ll pay real estate tax based on the value of your building each year.
For new construction in Tirana, you’ll pay a property tax of 2% to 4%. Outside of Tirana, you’ll pay a property tax between 1% and 3%.
Property tax rates for buildings range depending on the square meters. The rate you’re charged will depend on the location, building use, year of construction, and other factors.
Albania requires employees to pay 11.2% of their gross monthly salary in Social Security contributions. Employers contribute 16.7%.
Do the US and Albania have a Tax Treaty?
No, Albania does not have a tax treaty with the United States. This means you may be subject to double taxation but may be able to reduce your tax burden with US tax credits.
Does Albania have a Totalization Agreement with the US?
No, Albania does not have a totalization agreement with the US. A totalization agreement helps clarify a US expat’s Social Security obligations to prevent them from paying into Social Security for both countries. This means US expats living in Albania will likely be required to pay in Social Security in both countries.
What Tax Forms do US expats in Albania Need to File?
US expats in Albania are required to file several tax forms with the Internal Revenue Service (IRS) to remain compliant with US tax laws. The most common forms that expats need to file include Form 1040 (US Individual Income Tax Return), Form 1116 (Foreign Tax Credit), and Form 2555 (Foreign Earned Income).
Form 1040 is the main tax return form used by US citizens and residents, and it is used to report worldwide income, including income earned in Albania. Form 1116 is used to claim a credit for foreign taxes paid, while Form 2555 is used to claim the Foreign Earned Income Exclusion, which allows expats to exclude up to a certain amount of their foreign earned income from US taxation.
Additionally, US expats may need to file additional forms, such as the Report of Foreign Bank and Financial Accounts (FBAR) or the Foreign Account Tax Compliance Act (FATCA) Form 8938, depending on their financial situation.
Albania requires residents and non-residents who make over ALL 2 million annually to file an income declaration each year. This must be turned in to the central tax administration by April 30 of the year following the income tax year.
What US Tax Deductions are Available to Americans?
Since there’s no tax treaty set up with Albania, you’ll want to be sure you claim any eligible credits or deductions to minimize your tax liability.
Foreign Earned Income Exclusion
The Foreign Earned Income Exclusion (FEIE) is a US tax credit that lets you exclude a portion to all of your foreign income from taxation. For the 2022 tax year, you can exclude up to $112,000 (but the amount changes each year). If you qualified for this exclusion and made less than this amount in 2022, you could end up without a tax bill.
To claim the Foreign Earned Income Exclusion, you’ll file IRS Form 2555.
Foreign Tax Credit
If you don’t qualify for the Foreign Earned Income Exclusion, the Foreign Tax Credit (FTC) may help lower your tax burden. This credit lets you any income taxes you’ve already paid to Albania, dollar for dollar, from your US tax bill.
For example, if you qualified for the FTC and paid $6,000 in income taxes to Albania in 2022, you can deduct this from your US tax bill.
To claim the Foreign Tax Credit, you’ll file IRS Form 1116.
Foreign Housing Exclusion
If you’re a bona fide resident of Albania, you may be able to claim the Foreign Housing Exclusion to deduct specific housing expenses from your US tax bill. However, you can only claim this exclusion if you’re also claiming the Foreign Earned Income Exclusion.
You’ll also file this on Form 2555.
Navigating Tax Compliance for US Expats in Albania
We hope that our guide has provided you with valuable information about your tax obligations as a US expat residing in Albania. If you still have any questions or concerns regarding your tax liabilities in either country or need assistance determining your Albanian residency status, our team is here to provide expert guidance and support.
Contact us, and one of our customer champions will gladly help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.