Ministry of Finance foresees in the medium-term revenue strategy 2022-2026, that the introduction of the VAT scheme in the first sale of new residential apartments will be applied.

"The current law has excluded the application of VAT for the sale of apartments. VAT is applied for the process of their construction by construction entities, while the sale by builders is an excluded supply. Treatment as an excluded supply has taken into account the selling prices of apartments by the public, as the application of VAT would increase the selling price. This policy has been followed from 1996 onwards ", it is said in the medium-term revenue strategy of the Ministry of Finance.

The medium-term revenue strategy 2022-2026 has been drafted on the basis of recommendations from the IMF and will be consulted with business groups.

Builders: The introduction of VAT will be reflected in rising apartment prices

Arben Dervishi, secretary of the Builders Association said that the introduction of the VAT scheme in the first sale of new residential apartments will increase construction costs, and consequently increase prices.

"The Builders Association has not yet consulted on these changes, but the imposition of VAT on the sale of apartments has been opposed in the past, as it increases construction costs. At the completion of the facility the added cost of construction will be paid by the buyer. Builders are charged a lot of taxes. For the development of a construction is initially paid 1% of the price when applying for the permit, 8% at the time of obtaining the permit, 3% tax for the homeless, and 40-45% reach the land payments. In some cases payments to the landowner (when he is single) even reach 50 to 60%. If VAT is added to the sale of apartments, there will be a high increase in costs.

In addition to taxes, builders are also affected by rising raw material prices that have not yet begun to feel full. The price of iron after the crisis with Ukraine rose above 900 USD / ton. Rising costs will increase apartment prices. Builders can bring the selling price to 5,000 or up to 10,000 euros / m2 as in Rome, but the market fails to absorb them. "The imposition of VAT would not only reduce sales, but also the weight of the construction sector of GDP", claims Mr. Dervishi.

In November 2021, the prices of new apartments within the yellow line of construction increased by 10% compared to 2020. In areas such as the former block, Myslym Shyri, Bardhyl Street, the price increase ranged from 15 to 20%. Within the ring, according to real estate agencies, the new apartments did not offer prices lower than 1500 euros / m2, while in the suburbs such as "Porcelain" or "Ali Demi", residential houses were no longer sold at prices below 900 euros / m2. Last year, according to the builders, the demand for early stage construction increased in buildings with high prices up to 4,000 euros per square meter, mainly towers. In all the towers that are being erected in the capital, apartments are being sold at prices from 3,000 to 4,000 euros per square meter.

VAT on the sale of new housing has been targeted since the early 2000s, but the impact it would have on housing prices has prevented governments from applying.

In 2006, when discussing the introduction of VAT on construction, the Albanian Builders Association expressed opposition to the introduction of VAT on the sale of construction. The only reasonable compromise for builders would be the differentiated treatment of VAT for this sector, with a level not higher than 5%. At this point, they refer to the experience of other countries in the region.

Again it was the IMF that recommended the introduction of the VAT scheme in the first sale of new residential housing. The IMF said at the time that exempting all building sales from VAT, including new ones, was very unusual.

Experts at the time said that imposing VAT on the sale of construction is not just a complex problem for government, businesses and potential buyers; this measure also presents serious technical difficulties in implementation.

(Source: Monitor)