As in Tirana, the 8% level for the infrastructure impact tax for new construction is also being applied to several large municipalities in the country, such as Durrës, Vlorë, Fier and Shkodër.
But the implementation of the 8% infrastructure impact tax is affecting costs for builders in the districts, due to the increased obligation. Builders in the city of Fier have proposed to the Municipal Council the reduction of the infrastructure impact tax to 3%, which from 2025 will reach 8%, the same as in Tirana. The Municipality of Fier has also announced that consultations on the builders' proposal for the revision of the infrastructure impact tax will begin on April 2.
Arben Çuko, the deputy mayor of the municipal council in Fier, and also a builder, told Monitor that the implementation of the 8% tax rate is expected to burden the sector and risks being reflected in the increase in apartment prices, in case the situation for issuing new permits for residential or service purposes is unblocked. According to him, the issuance of construction permits for residential purposes by the Fier municipality has been blocked for almost 12 years.
Çuko also adds that the 8% level set for the tax is the same as the Tirana municipality, but meanwhile the market for sales prices and permits is not comparable.
"In Fier, the maximum price for the sale of apartments reaches 900 euros per square meter, while in Tirana prices range from 2,000-2,500 to 3,000 euros per square meter. Also in the city of Fier, the construction sector has had a blockage of permits for about 12 years. The proposal to reduce the tax is seen as a way to revitalize investments and the sector in case there is an unblocking of the situation with construction permits," he underlines.
The infrastructure impact tax is calculated as 8% of the sales price per square meter. For example, for a maximum sales price of 900 euros per square meter in the city of Fier, the liability for the developer amounts to about 72 euros per square meter. With the 3% rate proposed by the developers, the liability for the tax would be 27 euros per square meter.
Calculated according to the proposed reference prices for the districts (for the city of Fier the maximum reference price is proposed to be 62 thousand lek per square meter) for the 8% level it is 4,960 lek per square meter and for the 3% level the obligation is calculated to be 1,860 lek per square meter.
In the event of the unblocking of the issuance of construction permits, builder Arben Çuko warns that price increases will be inevitable, influenced not only by the high obligation for the infrastructure impact tax, but also by rising labor costs and material prices.
"For example, laying tiles has gone from about 450 lek/per square meter to 1,200 lek per square meter, while for plastering (plaster), in addition to materials, about 600 lek per square meter are required just for the cost of labor. Meanwhile, prices for electrical and plumbing materials have also increased."
The cost of labor has also increased significantly, with a simple worker refusing to work for less than 5,000 lek per day.
These factors, combined with the high tax rate of 8%, will exert strong pressure on the sale prices of apartments in the event of the unblocking of the issuance of construction permits.
In the city of Durrës, from January 1, 2023, the tax on new constructions with residential and service functions is 8%. While in the city of Vlora, from January 1, 2024, the tax varies from 4% to 8% according to areas, with the application of the maximum level being extended to more urban areas. In the municipality of Shkodra, an infrastructure impact tax of 4 to 8% according to areas is also applied.
Data on total collections nationwide show that this tax is generating increasing revenue for municipalities, but the main share of total collections is held by Tirana, the municipality of Kamza, Durres and the coastal areas.
In 2024, according to data from the Association of Municipalities of Albania, around 18.5 billion lek were collected, with an increase of 42% compared to 2023.
Over 53% of the total was realized in Tirana, while Durrës accounted for about 7.4%. In other municipalities, the share is lower: Elbasan with about 3.9%, Vlorë about 3.3%, Shkodër 2.9%, Fier 2.6% and Korçë about 2.2%.
Tirana alone collected around 14.3 billion lekë in 2024, driven by the increase in construction permits and the increase in reference prices that began to be implemented in August 2023. Also, according to INSTAT data, the area provided for construction reached a record level of over 1.9 million square meters, around 36% more than a year ago and the highest level ever recorded./ Monitor
