Background
Repeal of tax for financing urban planning studies
Comment
Background
Until recently, the main laws providing for construction-related taxes in Albania were the Law on Territory Planning (8405/1998, as amended) and the Law on Local Taxes (9632/2006, as amended).
Law 8405/1998 established the tax for financing urban planning studies, which was payable before a construction permit could be obtained. The tax was equal to 1% of the value of the investment for the construction project, calculated based on an estimate of the works to be conducted. For infrastructure projects, the tax was equal to 0.1% of the value of the investment.
Law 9632/2006 established the local tax for the infrastructure impact of new constructions, which is also payable before a construction permit could be obtained. The tax is generally equal to between 1% and 3% of the value of the investment, although in the Tirana Municipality the tax is between 2% and 4% of the value of the investment. Once again, the tax is calculated based on an estimate of the works to be conducted. The local government authorities will specify the amount of the tax based on the type of construction planned. For infrastructure projects, the tax is equal to 0.1% of the value of the investment.
Repeal of tax for financing urban planning studies
On April 23 2009 the Albanian Parliament approved a new Territory Planning Law (10119/2009). Pursuant to Article 9 of the law, Chapters V and VII - concerning the Territory Planning Register (a public register containing all legislation, data and information related to applications for permits and issued permits) and territory development control (including development and construction permit procedures) - shall become effective upon the approval of the Model Planning Regulations pursuant to Article 88, the Uniform Development Regulation pursuant to Article 62 and other secondary legislation pursuant to Article 55; and in any event by no later than September 1 2010.
Article 92 of the law specified that until this secondary legislation had been approved, Law 8405/1998 would remain effective. It further provided that Law 8405/1998 would be repealed on September 1 2010.
However, this effective date was postponed several times. The full provisions of Law 10119/2009 finally became effective on September 30 2011, at which point the tax for financing urban planning studies was abolished.
Comment
Under the Albanian Constitution, taxes must be imposed by law. A full list of local taxes is set out in Law 9632/2006, which does not include the tax for financing urban planning studies. It is not yet clear whether the abolition of this tax is a planned tax reduction for construction-related activities, or simply an administrative oversight due to the confusion created by the postponement of the effective date of Law 10119/2009. Regardless of why the tax was repealed, this represents a notable cost reduction for construction projects in Albania. Developers should therefore consider whether they can accelerate the procedures for obtaining construction permits and thus benefit from the tax reduction, as this may well be a temporary situation.
For further information on this topic please contact Shpati Hoxha at Hoxha Memi & Hoxha by telephone (+355 4 227 4558), fax (+355 4 224 4047) or email ([email protected]).