Albania’s 2027 fiscal package proposes a major restructuring of VAT rates
Higher standard rate, reduced VAT on essential foods and increased taxation of accommodation services
The Albanian government has presented a series of VAT reforms intended to take effect from 1 January 2027, subject to parliamentary approval of the proposed rate changes.
The principal measures are:
- Standard VAT rate: increase from 20% to 21%.
- Essential foods: reduction from 20% to 6% on approximately 54 products.
- Accommodation and tourism: increase in applicable reduced VAT rates from 6% to 10%.
- VAT registration threshold: reduction from ALL 10 million to ALL 5 million annual turnover.
VAT rate rises to 21%
The proposed increase in Albania’s standard VAT rate from 20% to 21% is intended to help finance the substantial reduction in VAT on essential food products.
Finance Minister Petrit Malaj estimates the standard rate increase would generate approximately ALL 10.6 billion in additional annual revenue, compared with an estimated ALL 12.8 billion revenue loss from the food VAT reduction. The government describes the package as a redistribution of the tax burden rather than an overall tax increase.
Essential food VAT cut to 6%
A new 6% reduced VAT rate would apply to approximately 54 essential food products, covering categories including:
- Bread, flour, rice and pasta
- Milk, natural yoghurt and eggs
- Meat and basic fish products
- Fresh fruit and vegetables
- Cooking oil, sugar and legumes
- Basic infant foods
The government estimates the reduction could lower consumer prices for qualifying products by approximately 11–12%, assuming the tax savings are passed through to customers. The detailed list of eligible products will be determined separately by the Council of Ministers.
Accommodation VAT increases to 10%
The fiscal package also proposes raising existing 6% reduced VAT rates applicable to accommodation and certain tourism services to 10%.
The changes would affect hotels and other qualifying accommodation providers. However, Prime Minister Edi Rama has indicated that agritourism businesses would be excluded from the hotel VAT increase. The government argues that the measure will support greater tax compliance and formalisation within Albania’s growing tourism sector.
VAT registration threshold halved
Government Decision No. 822 of 28 October 2026 reduces the annual turnover threshold from ALL 10 million to ALL 5 million, effective 1 January 2027.
The measure will bring more small businesses into the VAT system. Government estimates suggest approximately 17,500 additional businesses could become subject to VAT registration.
Other 2027 tax proposals
The broader fiscal package includes a proposed increase in dividend taxation from 8% to 15%, adjustments to personal income tax brackets and changes to fuel taxation.
The Bank of Albania has warned that the overall inflationary impact will depend on how businesses pass the VAT increases and reductions through to consumer prices.
Implementation timetable
The proposed VAT rate changes are contained in draft legislation undergoing parliamentary consideration. They are intended to apply from 1 January 2027 but are not yet enacted.
Businesses should therefore prepare for changes to VAT determination, product classifications and invoicing systems while monitoring parliamentary approval and publication of the final legislation.
