For the first time in Albania, a reduced VAT rate is set to be applied to basic food basket products.
With the 2027 fiscal package, the government proposes reducing VAT on these products from 20% to 6%, covering food basket items such as bread and flour, milk and natural yogurt, eggs, rice, pasta, cooking oil, meat, basic fish, fresh fruits and vegetables, legumes, sugar, and basic baby food.
The detailed list of products that will benefit from the reduced rate is to be defined by a decision of the Council of Ministers.
The proposed changes aim to lower the prices of food products, a longstanding demand of local producers of consumer goods and importers.
The changes are proposed in the draft law “On some amendments to the law on value added tax”.
“Reducing the VAT rate for food products to 6% is seen as a positive instrument to ease the tax burden on basic consumption and to improve the affordability of these products for Albanian families,” the draft law’s explanatory report states.
Yet, alongside the proposed relief for food basket products, the draft law foresees raising the general VAT rate from 20% to 21%.
“Revising the standard VAT rate, by setting it at 21%, aims to balance the negative effect on budget revenues resulting from applying the reduced VAT rate to basic food products, thereby ensuring a stable base of public revenues to meet budget obligations and to support the financing of public services, investments and economic development priorities,” the report assesses.
Changes are also foreseen for the tourism sector, where the VAT rate is proposed to increase from 6% to 10%. Since 2017, a reduced VAT rate of 6% has applied to the tourism sector.
Adoption and implementation of this draft law is expected to have negative financial effects on the state budget, specifically around 1.6 billion lekë.
The effect of raising the standard VAT rate to 21% is assessed as positive, around 10.6 billion lekë. The effect of reducing the VAT rate on basket products to 6% is assessed as negative, around 12.8 billion lekë. Meanwhile, the effect of raising the reduced VAT rate for the tourism sector to 10% is assessed as positive, around 614 million lekë. Monitor