Albania’s government has proposed a major change to the country’s value-added tax system, including a reduction in VAT on basic food products from 20% to 6%, under the proposed 2027 fiscal package.

The measure would cover essential food items such as bread and flour, milk and natural yogurt, eggs, rice, pasta, cooking oil, meat, basic fish products, fresh fruit and vegetables, legumes, sugar, and basic baby food.

The detailed list of eligible products is expected to be determined by a decision of the Council of Ministers. According to the draft legislation, the proposed reduction aims to ease the tax burden on essential consumption and improve the affordability of food for Albanian households.

However, the package also proposes increasing the standard VAT rate from 20% to 21%, while VAT for the tourism sector would rise from 6% to 10%. The reduced VAT rate for tourism has been in place since 2017.

According to the explanatory report accompanying the draft law, the government intends to offset the budgetary impact of the reduced rate on basic food products through higher VAT revenues from other sectors.

The proposed changes are expected to have a net negative impact on the state budget of approximately 1.6 billion lek.

The estimated positive budgetary impact of raising the standard VAT rate to 21% is 10.6 billion lek, while the reduction in VAT on basic food products is expected to result in a revenue loss of 12.8 billion lek. The increase in tourism VAT is projected to generate an additional 614 million lek.

Accountants quoted by Monitor have warned that the increase in the standard VAT rate could affect several sectors, including transportation, construction materials, and tourism.

The proposed measures are included in a draft law amending Albania’s Value Added Tax legislation and remain subject to the legislative process.