All necessary information for obtaining real-estate in Albania including Basic Principles regarding the Real Estate Cadastre, General Requirements of the Purchase Contract, Necessary Permits, and Taxes. The article was kindly provided to us by the Bulgarian office of Wolf Theiss.
1) Basic Principles regarding the Real Estate Cadastre
Similar to other European countries, the acquisition of real state in Albania is based on two requirements: legal title, on the one hand (e.g. a purchase contract), and the registration of the real estate right with the Real Estate Cadastre (register), on the other hand. As a general rule, the plot of land and the building thereon are considered to be part and parcel of the same property and are registered under the same title. It is mandatory to register unregistered properties with the Real Estate Cadastre.
All documents affecting ownership rights (such as purchase contracts, leases for a term of more than nine years, mortgages, and easements) must be registered with the Real Estate Cadastre. The Real Estate Cadastre offers a computerized system known as the immovable property registry, which, however, does not cover all immovable property in the country.
2) General Requirements of the Purchase Contract
According to the Albanian Civil Code, a real estate purchase must be concluded by means of a notarial deed, which must be registered with the Real Estate Cadastre. The purchase contract must comprise the purchase price and a sufficiently defined description of the property as essentrial terms.
3) Necessary Permits
In general, the acquisition of real estate in Albania does not require the approval of any authority, except for foreigners who are only permitted to acquire land for construction, provided that the value of their intended investment in the land triples the value of the land itself.
In practice, it is inferred that if a foreign investor operates through an Albanian legal entity, such an acquisition of construction land would not be subject to the prior approval requirement mentioned above.
The transfer of rights to buildings and other real property is subject to the Real Estate Transfer Tax. The levied tax is payable by the seller of a property right prior to registration with the Real Estate Registration Office. The tax base for the Real Estate Transfer Tax on buildings is the surface area of the building for which the property right is being transferred. The tax depends on the building category and location. Such tax level varies from LEK 100/ m2 to LEK 2,000/ m2.
The tax base for real property other than buildings is the property’s purchase price (and, under certain circumstances, the market value). The tax level is defined as a percentage and the indicative tax level is 2% of the respective purchase price.
The sale of real estate is also subject to personal income tax. Such tax is paid by the seller and is charged as a flat rate of 10% of the profit generated by the sale. For fiscal purposes, Albanian legislation provides for reference prices that shall be taken into account if the transaction price is less than the reference price. Persons subject to personal income tax are exempted from the Real Estate Transfer Tax.
Image courtesy of Dan Bachman.