Albania Economy Overview

Currency

Albanian Lek (ALL)

Working hours

40 – 50 hours/week

Public/bank holidays

13 public holidays

Capital

Tirana

Languages

Albanian

Population

2.82 million

Minimum hourly salary

175 ALL ($1.66) gross or 130 ALL ($1.23) net

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Misclassification can lead to legal disputes, penalties, and damage to employee relations.

Fun fact

Albania is a developing country with an upper-middle income economy driven by the service sector, with manufacturing and tourism also playing significant roles.

Almost 2.8 million people live in Albania and the GDP in 2023 was $22.98 billion after growing by 3.3%.

In the first quarter of 2024, Albania experienced economic growth of 3.63%. This positive movement in Albania has been driven by increased construction and tourism in addition to growing domestic demand and net exports.

Service industries are at the heart of Albania’s economy, representing over 54% of its GDP. Other significant sectors include energy, mining, tourism, and agriculture, the final of which is responsible for approximately half of all employment. 

Albania is home to the largest onshore oil reserves in Europe as well as significant offshore oil and gas deposits and an excellent geography for harnessing the potential of hydroelectric power.

Albania has a median age of approximately 38, and roughly 60% of the population lives in urban areas. This gives it a large and accessible labor force totaling almost 1.4 million. For businesses seeking to expand into the Albanian market, this provides considerable opportunities.

This guide is designed to highlight the potential of doing business in Albania.

Overview of Albania's Economy

In recent years, Albania’s economy has consciously moved from its traditional centralized system to one that embraces the free market. Through a series of reforms, its government is working hard to create more jobs, connect the country, and promote competition to support equitable growth and enhanced productivity.

Traditional Economic Sectors Emerging Economic Sectors
Agriculture Tourism
Textiles Digitization
Fossil fuel energy Green energy (Hydroelectricity)

While agriculture, textiles, and fossil fuel energy continue to represent significant portions of the Albanian economy, the modern focus is on tourism. In 2023, tourism generated revenue exceeding $4.5 billion and created 269,000 jobs. 

This, in addition to digitization programs, is driving diversification, increasing both wages and employment, growing GDP per capita, and reducing poverty. As one of only two countries in the world powered entirely by hydroelectricity, Albania is also emerging as a potential contributor to the future of green energy.

While the near-future success of Albania’s economy will be closely tied to the speed of global recovery from recent challenges, it is currently experiencing falling inflation, and its banking system is showing great resilience. The government’s Medium-Term Revenue Strategy seeks to improve tax administration and reduce deficits, with public debt expected to continue falling. It has already declined from 74.5% in June 2020 to 57.1% in December 2023.

Economic Challenges Government Initiatives
Reliance on external financing Medium-Term Revenue Strategy
Exposure to global forces (exchange and interest rates, food and energy prices) Domestic reforms to strengthen economic position

While Albania still relies heavily on external financing, which leaves it exposed to global forces, including exchange and interest rates plus food and energy prices, it is dedicated to domestic reforms that aim to strengthen its position. In January 2017, the International Monetary Fund reported the country’s “Economic program remains on track, [with] good progress in implementing structural reforms.”

Taxes

Employer Tax: 16.7%

Social Security

15% (applied on salary between 34,000 and 149,954 ALL monthly)

Health Insurance

1.70% (applied on salary between 34,000 and 149,954 ALL monthly)

Employee Tax: 11.2%

Social Security

9.5% (applied on salary between 34,000 and 149,954 ALL monthly)

Health Insurance

1.70%  (applied on salary between 34,000 and 149,954 ALL monthly)

Income Tax

Albania taxes employment income progressively: 0% up to ALL 30,000/month, 13% on the slice from ALL 30,001 to 200,000, and 23% above ALL 200,000 (with a fixed ALL 22,100 applied once income exceeds 200,000).

Gross Income (ALL)

Up to 30,000

30,001 – 200,000

More than 200,001

Tax Rate

0%

13% of the amount exceeding ALL 30,000

ALL 22,100 + 23% of the amount exceeding ALL 200,000

Business Regulation in Albania

Doing business in Albania means adhering to its legal framework and staying compliant with all business regulations. 

Free trade agreements allow anyone, whether a citizen or a foreigner, to register and open a business in Albania in the form of Simple or Commercial Companies, General Partnerships, Limited Liability Organizations, Joint Ventures, or by opening branches of foreign companies. 

All these, however, will be governed by the rules of financial, regulatory, and legal bodies in all aspects of trading. Regulations which must be followed in Albania include:

Business Registration and Compliance

In the interest of attracting foreign investment, Albania has streamlined its business registration processes. This should be done with the National Business Center (QKB) and can be carried out online, either directly or through a representative. Doing so constitutes a commitment to maintaining compliance with all regulations for corporate formation, environmental standards, labor laws, and taxation.

Taxation

Foreign businesses operating in Albania are taxed on income generated within the territory. Corporate Income Taxation (Profit Tax) currently stands at 15% and VAT at 20%.

VAT obligations begin after a business has achieved a turnover of ALL 10 million (approx. $100,000), while Profit Tax begins at ALL 14 million (approx. $150,000). This tax-free status for small businesses is intended to incentivize new enterprises and assist growth.

Labor Laws

As regulated by the Labor Code, employment in Albania is subject to strict guidelines which have been established to promote successful enterprises while protecting worker’s rights. These cover elements such as standard work weeks, minimum wage, paid leave entitlement, and termination protocols.

Albania also has specific anti-discrimination laws, social security requirements, and taxes for both employers and employees.

Intellectual Property

Working under supervision from the Minister of Tourism, Culture, Youth and Sports,  the Albanian Office for Copyright (ZSHDA) is the prime body responsible for protecting intellectual property (IP) rights within Albania. While Albania is not yet a full member of the European Union, the ZSHDA operates largely in line with EU standards to ensure high-quality protection for its businesses.

Benefits of Doing Business in Albania

As an emerging free market economy, the potential advantages of doing business in Albania are many. It is experiencing strong and consistent growth and has a proactive government dedicated to reforming not just the business environment of Albania but the infrastructure that supports it. 

Geographically, Albania enjoys convenient access and connectivity to both Southern Europe and the Balkans. This, combined with an ongoing drive to diversify the economy and embrace new opportunities, makes Albania an attractive proposition for expansion.

Growing Market

Perched between Southern and Eastern Europe, close to the gateway to Asia, Albania is a well-located country with a growing middle class. Its climate and geography create a huge untapped potential for tourism, and its economy is seeing significant growth in both personal consumption and exports. 

Despite recent global challenges, Albania is demonstrating steady and sustained growth as it embraces reform and diversification to bolster the affluence of its citizens and the country’s potential in global markets.

Government Incentives

The Albanian government is committed to a program of national reforms and improvements designed to make it increasingly attractive to foreign investors and global businesses. This includes enhancing the country’s infrastructure while offering subsidies and tax breaks and also reducing certain import tariffs.

Among other incentives and allowances, Albania’s tax system does not differentiate between local and foreign investors, there are no limits on the share of foreign ownership in companies within the territory, and many costs for wages and training are deductible from taxable income at higher than 100%.

Infrastructure Improvements

A founder of the South East Europe Transport Observatory (SEETO) and a member of the Black Sea Economic Cooperation (BSEC), Albania is very aware of the need to improve infrastructure and transport both within its borders and in collaboration with its neighbors. 

Projects to achieve this include upgrading road and rail networks to benefit tourists, commuters, and international connections. Albania is also dedicated to strengthening its port services, including a new seaport in the northern town of Shëngjin and the modernization of Tirana International Airport.

Skilled Labor Force

Albania has a large, young, and highly-skilled labor force of both male and female workers keen to embrace the opportunities brought to the country by new investment. It boasts a strong work ethic with a direct communication style and, in addition to local languages, includes significant numbers who are fluent in English, Italian, Serbian, Croatian, and Romanian.

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Business Expansion Options in Albania

There are several pathways for expanding into the Albanian market with each suited to different businesses and objectives. Three of the most common are:

Albania Employer of Record (EOR)

An Albania EOR hires employees on behalf of a company, managing all employment-related legalities and compliance.  The Albania EOR becomes the official legal employer of your Albania team. This method is fast and efficient, making it perfect for companies that need to quickly deploy staff on the ground. 

An EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to focus on their core activities. 

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Recruitment Agencies

Recruitment agencies in Albania help businesses expand by connecting them with skilled local talent across various industries.

Remote People provides recruitment solutions that simplify hiring and ensure compliance with Albanian labor laws.

For businesses looking to grow in Albania, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

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Albania Professional Employer Organization (PEO)

Working with a professional employer organization (PEO) or employer of record (EOR) is often quicker and more efficient when seeking to establish a labor force in Albania. These are local bodies that take the roles of a local entity, recruiter, and human resource manager within Albania. 

 Both will hire and manage staff on behalf of a foreign business, reducing the need for further investment of resources by the expanding company. The key difference is that, legally, a PEO co-employs workers with its client companies while an EOR assumes the role of sole legal employer and all the responsibilities and liabilities with it.

Partnering with a  PEO allows companies to employ local staff in Albania without the need to establish a legal entity. This approach is quicker and less expensive, making it ideal for businesses testing the Albania market or those with limited operations. PEOs handle administrative tasks and ensure that companies comply with Albania regulations, reducing the complexity and risk associated with hiring local employees. 

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Subsidiary Incorporation

Establishing a subsidiary in Albania usually takes the form of a Limited Liability Corporation, which is between 51% and 100% owned by a foreign company. 

The process takes around five days and requires registration with the National Business Center (QKB). This results in the issuing of a Registration Certificate and a Unique Business Identification number and confirms the company is also registered for taxation, health insurance, and social security. 

A subsidiary allows the foreign business to retain control of its operations while also obtaining assets, securing tax advantages, and limiting the potential impact of losses.

Branch Registration

A branch is often established when only a temporary presence is required or when separating liability from the parent company is unnecessary. For tax purposes, a branch is treated as an independent entity and is subject to the same corporate income tax as a subsidiary but, importantly, no withholding tax for the repatriation of after-tax profits. 

Although it is not considered a legal entity, any branch opening in Albania must still be registered with the National Business Center (QKB).

Business Opportunities in Albania​

Albania offers a range of promising business opportunities for investors and entrepreneurs, thanks to its strategic location, ongoing economic reforms, and untapped potential in various sectors.

The country’s efforts to create a more business-friendly environment, coupled with its competitive labor costs and access to regional markets, make it an attractive destination for foreign investment. Some of the most significant opportunities lie in the following sectors:

Business Opportunity Reason
Tourism Albania’s stunning coastline, rich cultural heritage, and growing tourism infrastructure present opportunities in hotel development, tour operations, and related services.
Agriculture and Food Processing With its favorable climate and abundant agricultural resources, Albania offers potential for investments in modern farming techniques, organic production, and food processing.
Energy Albania’s vast hydropower resources and ongoing efforts to diversify its energy mix create opportunities in renewable energy projects, such as solar and wind power.
Manufacturing Competitive labor costs, proximity to European markets, and improving infrastructure make Albania an attractive location for manufacturing industries, particularly in the automotive, textile, and footwear sectors.
Information and Communication Technology (ICT) Albania’s young, skilled workforce and government initiatives to support the ICT sector present opportunities in software development, outsourcing, and digital services.

These opportunities align with Albania’s economic development priorities and benefit from government incentives, such as tax breaks and streamlined business registration processes.

While there are always challenges associated with expanding into new territories, doing business in Albania could bring significant advantages. With careful planning and local expertise, businesses can tap into Albania’s growing market and contribute to its ongoing economic transformation.