The Albanian parliament closed the 2017 legislative session by approving inter alia important amendments to the Tourism Law that aim to incentivize the development of tourism sector in Albania and attraction of foreign investments in the so called in ‘elite tourism’. Legal incentives in this sector were absent for years but with a new fresh focus on the development of the sector, the new government took no time after being elected, to propose just recently several fiscal incentives which further pressed for amendments to the Tourism Law.
As of 1 January 2018, the following fiscal incentives in the tourism sector entered into force:
- VAT decrease from 20% to 6% in the hotels tourism sector including accommodation and all other services offered within ‘5-star hotel facilities’ awarded with the ‘special status’ and that are holders of a registered and well-known trademark i.e. brand name. For all other tourism hotel facilities, the reduced VAT of 6% will be applicable only for accommodation services;
- Exemption from profit tax (of 15%) for a 10-year period for 4-star and 5-star accommodation facilities awarded with the ‘special status’ until the year 2024. The exemption shall become effective at the commencement of the economic activity, but in any case, not later than 3 years from the award of the ‘special status’;
- Exemption from tax on new constructions for 5-star hotel facilities awarded with the ‘special status’ and that are holders of a registered and well-known trademark i.e. brand name.
Tourism Law Amendments
According to the Tourism Law amendments effective as of 12 January 2018, beneficiaries of the new fiscal incentives are those investments in 4-star or 5-star hotel facilities that are realized as follows:
- through establishment of accommodation facilities from well-known hotel groups that invest and manage the facilities;
- through a well-known hotel group that cooperates with a local or foreign investor for the management of the facility constructed by the local or foreign investor.
More concretely, changes to Tourism Law introduce new concepts of:
- 4-star or 5-star accommodation facilities, special status (i.e. an accommodation facility that includes the 4-star or 5-star hotel and/or resort that fulfils the conditions of the law);
- Investor in 4-star or 5-star accommodation facilities, special status (i.e. the entity that finances the construction and/or undertakes the construction of accommodation facilities that fulfil the conditions of the law); and
- Managing operator in 4-star or 5-star accommodation facilities, special status (i.e. managing operator in 4-star or 5-star accommodation facilities that undertakes the operation and management of the accommodation facility either directly or through franchise or other similar type of agreements).
The special status for 4-star or 5-star accommodation facilities can only be granted by the Council of Ministers upon application, if the following main conditions are met:
- the applicant is the investor of a 4-star or 4-star accommodation facility, certified as such by a competent agency appointed by the Council of Ministers, upon proposal of the Minister of Tourism;
- the investment has a value of no less than EUR 8 million for the construction of 4-star accommodation facility and EUR 15 million for the construction of 5-star accommodation facility.
Further details on the procedures and documentation that should be submitted by the applicant are yet to be defined by the Council of Ministers upon proposal of the Minister of Tourism.
Entities awarded with the ‘special status of investor for 4-star or 5-star accommodation facilities’ must enter into a development agreement with the Ministry of Tourism to determine the terms and conditions for the development of the project, respective obligations of the parties, consequences in case obligations are not timely met, etc.
Needless to mention, the latest incentives are expected to boost investments in the tourism sector in Albania. However, the legal framework is yet not complete. Detailed rules for the implementation of the incentives are expected to be approved by the Council of Ministers in the first semester of 2018.