Understanding Salary Contributions and Taxes in Albania
Understanding Salary Contributions and Taxes in Albania
In Albania, wages are the primary source of income for most individuals, accounting for over 60% of household earnings. For 2024, the minimum wage is set at 40,000 ALL, which forms the basis for calculating taxes and social contributions.
Social Security and Healthcare Contributions
Employees and employers both contribute to social security and healthcare. Employees pay 9.5% of their gross salary to social security, while employers contribute 15%. However, contributions are capped at a maximum salary of 176,416 ALL. For healthcare, both employees and employers each contribute 1.7% of the gross salary, with no upper limit.
For the self-employed, social security contributions equal 23% of 40,000 ALL, and healthcare contributions are 3.4% of 80,000 ALL.
Income Tax (TAP)
Income tax in Albania follows a progressive system:
- 0% for salaries up to 50,000 ALL,
- 13% for incomes between 50,001 and 200,000 ALL,
- 23% for incomes above 200,000 ALL.
Freelancers, who may earn in foreign currencies, face additional administrative costs and exchange rate fluctuations. Monthly expenses, including contributions, typically range from 270 to 320 euros.
Wage Reporting Challenges
A common issue in Albania is the underreporting of wages, where employees declare lower salaries than they actually receive. This practice reduces their future social benefits and pension entitlements while also depriving the state of essential tax revenue. It distorts competition and allows informal practices to thrive in the labor market.
While Albania's tax and social contribution system is structured to protect employees and ensure fairness, issues like wage underreporting continue to undermine the system's effectiveness.
