The Association of Builders requests in the Constitutional Court the annulment of the decision to increase the reference of apartments

The increase in the reference prices of apartments for Tirana not only increased the obligation of the citizens for the building tax, but gave an immediate effect on the costs of the construction activity, since the value of the infrastructure tax is determined on these prices.

The Association of Builders has asked the Constitutional Court for the partial annulment of the decision approved last July with the increase in reference prices. The first session that will be public is set to take place on June 18, 2024.

With reference to the object of the lawsuit, the Builders' Association requests the annulment of annex 1 of the decision, which defines the changed prices of the apartment sales references, and the letter "dh" of annex 2 of the decision, which defines retroactive actions for "the price per square meter of construction area for constructions the new one registered according to the use permit in ASHK, after the entry into force of this decision, will be indexed with the coefficient 0.2 (zero point two) times higher than the price of the surface of the residential apartment according to the list defined in Annex 1 attached of this decision, for the first 5 years after the registration of the use permit in ASHK.

"The partial annulment of decision no. 457, dated 26.07.2023 of the Council of Ministers "On some changes in decision no. 132, dated 07.03.2018 of the Council of Ministers "On the methodology for determining the taxable value of real estate "building", the tax base for specific categories, the nature and priority of information and data for determining the tax base, as well as the criteria and rules for the alternative assessment of the tax obligation", amended" (VKM no. 457/2023) letter "dh" of Annex 2, as well as in the part named to be defined in Annex 1, point a. 2) that the average reference prices for the sale and purchase of buildings used for residential purposes for the Municipality of Tirana will be applied to construction permits granted after the entry into force of this decision, as incompatible with the Constitution.

2. The suspension of the implementation of the letter "dh" of Annex 2, as well as point a.2) of Annex 1, for construction permits granted before the entry into force of VKM no. 457/2023 until the entry into force of the decision of the Constitutional Court", it is quoted in the object of the lawsuit sent to the Constitutional Court.

Added 40% infrastructure tax obligations and up to 300 euros/m2 prices

The infrastructure impact tax from new constructions is subject to all entities that seek to be provided with development permits and construction permits for residential, administrative, production, and other service facilities. The tax is paid by the builders before the construction permit is issued.

For Tirana, it is at the level of 8% and is calculated per square meter above the reference prices, which from August of last year increased from 5 to 76% for the 32 cadastral areas of Tirana.

Their growth also occurred in 5 municipalities of the capital, such as: Kashar, Petrela, Preza, Farka and Dajti.

The Chairman of the Association of Builders Erjon Harizi said that after the changes in the reference, the obligation of the impact tax on the infrastructure increased by an average of 40% per square meter in Tirana.

Due to the increase in the cost of taxes, the prices of apartments in Tirana, according to the Association of Builders, have increased by 200 to 300 euros per square meter.

In 2022, from the infrastructure impact tax, the largest Municipality in the country collected 7.4 billion ALL and 7 billion ALL for 2023.

The collection forecasts for this tax, referring to data from the budget, are expected to be for 2024 in the amount of 6.3 billion ALL and for the period 2025-2026 from 6.5 billion ALL.

The Association of Builders also warned in the letter sent in September to Prime Minister Edi Rama that with the entry into force of the decision to increase the fiscal prices, the fiscal burden will be increased for both individuals and builders.

In addition to the effects of the property tax increase, the decision to increase the reference prices, according to the Association of Builders, will also increase the income tax liability for cases of sale and purchase transactions, even for those individuals who have carried out revaluation of houses.

"In the conditions where VKM no. 457 entered into force with the publication in the Official Gazette no. 112 dated 28.07.2023, for areas where the reference price has increased, the change will have an immediate effect on the finances of individuals and legal entities, owners of real estate.

But at the same time, the reference prices provided for in this VKM are used to determine the reference price for the effects of the tax application for the transfer of ownership provided for in the Law "On Income", thus giving an immediate impact on individuals who will carry out real estate transactions, including those who have recently carried out the revaluation according to Law no. 90/2019 "On the revaluation of real estate.

The decision gives an immediate impact on the construction activity, since these prices serve as the main factor for determining the value of the infrastructure tax and in monetary values ??replacing the 3% tax of the contribution to social housing (according to the practice adapted from Municipality of Tirana with VKB No. 105, dated 25.10.2019) and consequently also on Income Tax", was quoted in the letter of the Association of Builders.

The Association of Builders proposed that the entry into force of the decision with the increased fiscal prices be gradual or that the application against the developers be related only to projects that start and end after the entry into force of the decision.