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The government has proposed a significant reform to the way residential building tax will be calculated. In addition to increasing the tax rate, the draft law introduces a new calculation method designed to benefit lower-value homes, while properties located in the most expensive areas will face a higher tax burden. If approved, these changes will affect thousands of households in Tirana and, subsequently, municipalities across Albania according to the thresholds established for each municipality. Currently, the residential building tax is calculated based on the value of the property, which is determined using the official government reference prices. The current formula is: Property Value × 0.05% = Annual Property Tax In 2023, after the government increased the official reference property prices, many households experienced an immediate increase in their annual property tax, even though the tax rate itself remained unchanged. The draft law introduces two major changes: Increasing the property tax rate from 0.05% to 0.1% or 0.2%, depending on the decision of each Municipal Council. Introducing a new method for calculating the taxable value of a primary residence. It is this new calculation method that will determine how much each property owner ultimately pays. For a primary residence, the draft law proposes that up to 50% of the property's value may be considered tax-exempt, but only if certain conditions are met. For the Municipality of Tirana, the proposed maximum tax-free threshold is: ALL 8.4 million If the property's value does not exceed twice this threshold (ALL 16.8 million), property tax will be calculated on only half of the property's value. If the property's value exceeds ALL 16.8 million, the 50% deduction no longer applies. Instead, homeowners will benefit only from the fixed tax-free threshold of ALL 8.4 million, while the remaining value will be subject to taxation. The greatest impact is expected in areas with the highest official reference prices, including: Former Blloku Pyramid Area Myslym Shyri Embassy Block Artificial Lake Area For example, a 90 m² apartment in the former Blloku area has an official reference value of approximately ALL 20.5 million. Under the current system, the owner pays: ALL 10,278 per year (0.05%) If the tax rate increases to 0.1%, the annual obligation becomes: ALL 12,156 per year This represents an increase of approximately 18%, even after applying the tax-free threshold. If the 0.2% rate is approved, the annual obligation rises to: ALL 20,556 per year In practice, this doubles the amount currently paid. In suburban neighborhoods and areas with lower reference prices, the impact is expected to be more limited. If the Municipal Council adopts the 0.1% rate, many households will continue paying almost the same amount as they do today, thanks to the proposed tax deduction. However, if the 0.2% rate is approved, homeowners in these areas would also see their annual property tax roughly double. For example, an apartment located in the Ali Demi – Shkozë area currently pays: ALL 4,626 per year With a 0.2% tax rate, the annual obligation would increase to: ALL 9,252 per year The draft law relies on Tirana's existing division into 11 cadastral zones, comprising 32 sub-zones, including: Former Blloku Pyramid Area Pazari i Ri Myslym Shyri Komuna e Parisit Artificial Lake Selvia Don Bosko Zogu i Zi Lapraka Ali Demi Allias Fresku Kombinat Yzberisht Sauk Kinostudio Porcelan Medrese Bregu i Lumit The differences in official reference prices across these neighborhoods explain why the new tax formula will not affect all homeowners equally. If the draft law is approved in its current form, every homeowner should consider: The official reference value of their property. Whether the property is their primary residence. The tax-free threshold applicable in their municipality. The property tax rate adopted by the Municipal Council (0.1% or 0.2%). These factors will determine the annual property tax payable. The proposed reform aims to create a more progressive taxation system by providing tax relief for lower-value homes while increasing the contribution of higher-value properties. However, the final financial impact will depend largely on the tax rate chosen by each municipality. For homeowners and real estate investors alike, understanding not only a property's purchase price but also the recurring tax obligations associated with ownership is becoming increasingly important, as these costs directly affect the overall cost of owning and investing in real estate.How is property tax currently calculated?
What does the new formula propose?
Who benefits from the 50% deduction?
What happens in Tirana's most expensive areas?
What about lower-value areas?
Which areas of Tirana are affected?
What should property owners keep in mind?
What does this mean for homeowners?
