Balkan VAT policy developments

Recent fiscal discussions in the Balkans have focused on Value Added Tax (VAT) adjustments. In Albania, the government has proposed a 2027 fiscal package that would reduce the VAT on essential food items from 20% to 6% to assist low- and middle-income families. This proposal includes 54 essential items such as bread, flour, milk, eggs, rice, meat, and vegetables. To offset these reductions, the government suggests increasing the standard VAT rate to 21% and raising the rate for certain tourism services from 6% to 10%. The package also intends to lower the mandatory VAT registration threshold from 10 million lekë to 5 million lekë in annual turnover, a move expected to add approximately 17,516 new taxpayers. While the government aims to formalize the economy, critics question if food price reductions will reach consumers or be absorbed by traders.

In Montenegro, the European Alliance parliamentary club has proposed reducing the VAT rate on accommodation services from 15% back to 7%. Representatives Branislav Nenezić and Boris Mugoša noted that the 7% rate was in effect until January 1, 2025, before the increase to 15%. Mugoša stated that Montenegro currently has the “third-highest VAT rate for accommodation in Europe,” which may drive tourists toward competing destinations. Proponents argue that returning to the lower rate would enhance the competitiveness of the Montenegrin tourism sector and create fairer conditions for registered hoteliers and caterers compared to informal operators.