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Taxation of apartments for daily rent, what is happening to them? Is it worth investing and what do the experts suggest?

2024-02-17 09:20:06Biznes SHKRUAR NGA REDAKSIA VOX

Taxation of apartments for daily rent, what is happening to them? Is it worth

Although the daily rental sector is expanding due to the flourishing of tourism, their taxation remains problematic, as this market is developing in a highly informal manner.

According to the Hospitality and Tourism Association, by July last year, it was found that 48% of daily rental structures were informal. Even staying outside the taxation system, this part of the accommodation is also hitting the hotel industry, through unfair competition.

To solve the problem, the Albanian authorities turned to the Booking and Airbnb platforms with a request for the identification of these structures.

After the request of the Albanian authorities, the Booking platform, through an announcement, asked the owners of the apartments that if they do not declare the NIPT, from November 1 they will pay 20% VAT for the commissions that Booking holds.

For example, if the daily rent of a house is 100 euros, Booking usually receives 12-18% commission, or 12-18 euros. Now Booking will keep the VAT from the apartment owners on the commission it receives, that is 20% of the 12-18 euros, or an additional 2.4-3.6 euros.

Booking will then pay this amount to the Albanian fiscal authorities.

While the amount that Booking will keep as VAT on the commissions may not be very high, the aim of Taxation is to, through these payments, identify the individuals registered on this platform, since the data from the payments made by Booking will are sent to the Tax Directorate.

After identification by Taxes, individual owners have two alternatives: First, they can continue to maintain the status they have, ie. not register in Taxes, but in the meantime they have to pay 15% as tax on the income they receive from the rent.

Second, to be registered as a categorized commercial entity, as an accommodation structure for which the VAT liability is 6%. Categorization as an accommodation structure for the benefit of 6% VAT is carried out by the Ministry of Tourism, and further, after receiving it, the commercial entity is registered for NIPT in Taxation.

Economist Romina Radonshiqi earlier recommended that it is more beneficial for these businesses to be registered as accommodation structures in order to benefit from the 6% VAT.

According to Ms. Radonshiqi, formalization is extremely important for these structures, because it promotes competition, provides more security for the protection of tourists and creates opportunities in the further development of this sector.

But this year has not started well for the daily rental business. Estimates from real estate agents indicate that many of these structures are closing. "Not everyone is continuing to hold these activities. Many of them are lasting 3 to 6 months, then they close.

We have had cases where they close it as a business and then someone else rents the apartment to re-let it for daily rent. These businesses are being closed mainly by individuals who, in addition to income from employment, provided other income from short-term rent", emphasizes Lorina Rada, from the real estate agency "Century 21 CPM".

Stela Dhami, from "Colliers International Albania", says that 2023 was a test year, both for owners and consumers.

"Those owners, who have the time/desire to deal with a daily management of the property will continue to rent it daily/short term. Those who have understood the difficulties of property management can rethink their strategy and reposition the property as part of a long-term rental market," she asserted.

While Eron Çumani, from the real estate agency "Saranda Property", says that many owners of apartments for daily rent in Saranda are not informed about the legal changes in order to formalize the market.

But Mr. Čumani predicts that many of them, due to legal "strictions", are expected to be given from apartments for daily rent to apartments for long-term rent. Hasn't the time come for this market to be formalized?

After the formalization law, is it worth investing to rent an apartment by the day?

With the high selling prices of apartments and low rental rates, compared to European countries, for many individuals buying an apartment with the aim of returning the investment through long-term rental is considered unprofitable, as the investment time reaches up to 25 years.

While the average term for investment return in European countries is 15 to 17 years.

Many individuals chose to rent an apartment long-term or buy it and rent it out daily, because the profit was faster.

Real estate agents claim that after the legal changes for the formalization of this sector, it is found that many structures are being closed, also due to management difficulties, since their owners were employed elsewhere with a stable income.

For real estate agents, after the legal changes, it is more convenient to manage a portfolio of several properties, a model that until now has mostly been developed by agencies.

Meanwhile, others are preferring to make this investment abroad rather than in Albania. The most preferred place remains Dubai, where many Albanians are buying apartments for daily rent. Amarlido Stërkaj, CEO of the "Extra Real Estate" company, claims that there are many Albanians who buy apartments for daily rent.

Daily rental prices in luxury properties in Dubai range from 17,000 ALL to 50,000 ALL per night.

While the return on investment time through long-term leasing in Dubai is estimated at 7 to 10 years, due to cheaper property prices and more expensive rent.

According to Numbeos data, Miami in the US is ranked among the cities with the lowest return on investment through long-term rental. The investment period there reaches up to 6 years.


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