Reform recommendations to improve Albania’s business climate
In recent years, Albania made significant progress in aligning its legislative framework with the EU acquis. These legislative reforms positively impacted Albania’s business climate, but companies still face practical obstacles in their daily operations. In a recent study conducted by the German Economic Team, we present concrete recommendations to address persistent issues such as legal uncertainty in tax procedures, rigid corporate tax prepayment rules, and weak support for exporters. Further topics include the implementation of data protection regulations and unresolved land ownership issues, which continue to delay investment projects. A key conclusion emerging from our study is that Albania’s reforms will only deliver their full impact if implementation is strengthened and businesses — especially MSMEs — are more closely involved early in the reform process.
Introduction
Albania has experienced steady economic growth in recent years, supported by the alignment of its legislation with the EU acquis. Despite important initiatives to improve its business climate, some technical and administrative hindrances continue to affect it. To better understand the challenges faced by foreign investors and to develop concrete reform proposals, the German Economic Team (GET) conducted a detailed study on Albania’s business climate.
In close cooperation with the Foreign Investors Association of Albania (FIAA), we distributed a structured questionnaire to member companies of FIAA and other business associations. This allowed us to identify the issues firms consider most relevant for their daily operations. Building on this, in-depth interviews were conducted with selected companies during a fact-finding mission to Tirana in December 2024. These insights were further refined with input from GET experts, external specialists, and local stakeholders to ensure that the resulting recommendations are both practical and aligned with Albania’s broader reform and EU integration agenda.
This newsletter briefly presents some of the recommendations included in our study from December 2024.
Legal uncertainty in the field of taxation
Legal uncertainty and high compliance costs remain key concerns for companies operating in Albania. Frequent amendments to tax laws, vague provisions, and inconsistent enforcement create unpredictability and increase the risk of unfair tax assessments. For example, Law 9920/2008 on Tax Procedures and its by-law has been amended more than 25 times, while the new Income Tax Law (29/2023) has already undergone three changes and was partially annulled by the Constitutional Court in its first year.
Although Albania has taken steps to improve transparency — such as requiring the publication of technical tax rulings — enforcement has fallen short. The General Tax Directorate has not published updates since 2021, leaving companies without reliable guidance. The Medium-Term Revenue Strategy (2024–2027) outlines reform priorities but does not address these core issues.
To improve predictability, the General Tax Directorate should start to routinely publish technical decisions and release rulings from 2022 to 2024 in retrospect. These would offer practical clarity and help identify legal inconsistencies. In the longer term, Albania should consider consolidating its tax laws into a comprehensive tax code. This would simplify procedures, reduce interpretive uncertainty, and align the country’s framework with international best practices — creating a more transparent and investor-friendly tax environment.
Prepayments of corporate income tax
Corporate income tax (CIT) prepayment rules continue to create challenges for companies in Albania. Firms must pay advance instalments based on profits from the past two years, even when current earnings have declined. Although the law allows companies to request a reduction, firms report that such requests are often delayed or denied, creating liquidity constraints and operational difficulties.
The legal basis for reductions exists in Article 63 of the Income Tax Law (29/2023) and Instruction 26/2023. These outline valid grounds for reduced payments, including sharp declines in sales or purchases, contract losses, and unforeseen disruptions. However, the process lacks procedural clarity — there are no standardised submission formats, response deadlines, or clear appeal mechanisms. This legal uncertainty discourages firms from seeking reductions and undermines predictability.
To address these issues, the procedure for requesting reductions should be clearly defined and integrated into the e-filing system, with specific timelines for review and a requirement for tax authorities to justify rejections. In parallel, the right to appeal CIT prepayment decisions should be explicitly stated in the law, with simplified and accelerated appeal procedures. These changes would improve transparency, protect companies from undue financial strain, and foster greater trust in the tax system.
Export promotion
Exporting firms in Albania have stated that it is challenging for them to access foreign markets due to limited institutional support. Companies report the absence of dedicated trade promotion bodies and a lack of coordinated economic diplomacy, with efforts often focused on tourism rather than goods exports.
To better support exporters, the Albanian Investment Development Agency (AIDA) has partnered with international donors such as the GIZ and has improved information sharing. Additionally, the current Business and Investment Development Strategy (2021–2027) places export promotion high on the agenda. Looking ahead, the Ministry of Economy, Culture and Innovation (MEKI) aims to adopt a new Export Promotion and Facilitation Programme by December 2025, with business consultations planned for mid-year.
To maximise the effectiveness of these efforts, several actions could be considered. First, we think it is crucial to pay close attention to including the private sector when developing the upcoming export promotion programme, to ensure it effectively addresses the needs of the private sector. Second, AIDA could further extend its service offering — e.g. by providing training and advisory services to exporters. Participation in international trade fairs could be widened by ensuring transparent selection procedures or introducing a rotational system. Lastly, stronger cooperation between MEKI, AIDA and the Ministry for Europe and Foreign Affairs could help strengthen Albania’s economic diplomacy to effectively promote exports abroad.
Implementation of data protection regulation
Weak enforcement of data protection regulations in Albania has led to serious data breaches in recent years, damaging the country’s reputation and discouraging foreign investment. Companies – especially those in data-sensitive sectors like business process outsourcing – report that this has made it harder to gain international clients and has reduced incentives to invest in compliance, as non-compliance often goes unpunished.
In a major step forward, Albania adopted a new Law on Personal Data Protection (124/2024), aligning with the EU’s GDPR and introducing key principles such as the right to be forgotten, data portability, and privacy by design. However, previous challenges stemmed not from an inadequate legal framework, but from insufficient enforcement of existing rules. It is therefore essential that the new law is implemented effectively and consistently to rebuild trust and credibility.
For this, three areas require attention. First, the Information and Data Protection Commissioner (IDP) must be strengthened with additional resources and expertise. Second, detailed by-laws should be developed to clarify enforcement procedures and compliance expectations—ideally through consultations with the private sector. Finally, stronger collaboration between the IDP and business associations is needed. This could include practical guidance, templates for compliance, and joint training sessions to help firms across sectors implement the new law effectively and restore trust in Albania’s data environment.
Property rights and land ownership
Unclear land ownership and weak property rights continue to delay projects and deter investment, especially in key tourism and infrastructure zones. Firms cite outdated cadastral records and unresolved disputes as major barriers. While recent reforms—such as the creation of the State Agency for Cadastre, legal streamlining, and the rollout of online services—are steps forward, gaps remain. To address these, the cadastre should be fully digitised, starting with priority economic areas. Simultaneously, overlapping claims must be resolved swiftly through dedicated units within the State Agency for Cadastre and transparent processes.
Outlook
By continuing to improve its business climate – particularly through stronger enforcement, clearer procedures, and earlier involvement of the private sector – Albania could attract greater foreign investment and create more high-quality jobs. Both are key to sustaining growth and retaining talent on the country’s path toward EU integration.
This Newsletter is based on the Policy Study Improving the Business Climate – Boosting Investment: Proposals from International Investors in Albania.
