Double tax treaties in Albania

Albania began to conclude double tax treaties starting the year 1993. First country that signed this type of agreement with Albania was Hungary. In 1994 double tax treaties were signed with Poland, Romania, Czech Republic, Malaysia and Turkey followed in 1995 by agreements with Russia, Croatia, Italy and Greece. The year 1998 brought new treaties with Macedonia, Sweden followed in the next year by treaties with Bulgaria and Norway.

Starting year 2000, Albania has signed treaties with Malta, Moldova, Belgium, France, Egypt, Holland, Kosovo, Serbia and Montenegro, Austria, Slovenia, Latvia, Korea, Bosnia and Herzegovina, Luxembourg, Ireland, Estonia, Germany, Kuwait, Spain, Singapore, Qatar, China, Switzerland, as well as the United Kingdom, India, the United Arab Emirates, Israel, Saudi Arabia, Morocco, Iceland, Finland and Slovakia (46 treaties signed, 42 in force).

The majority of double tax treaties signed by Albania with foreign companies follows the OECD Model Double taxation Convention and contains provisions regarding the withholding taxes on income and profits.

In order to enjoy the benefits of the double tax treaties, the companies must bring evidence regarding the residency in another state from the competent foreign authorities.

Before being put in practice, a treaty must be ratified by the Albanian Parliament. A double tax treaty has priority in front of a local legislation, because of the international character possessed.

The application of the Double Tax Treaties must respect the Instruction 6 of February 10th 2004, approved by the ministry of finance.

Usually the withholding taxes on dividends are 5% if the foreign company’s shareholders have at least 25% or 50% of the capital of an Albanian company. A treaty rate of 10% is provided in the remaining cases, but since the domestic rate is only 8%, 8% applies in practice.

Special provisions were concluded with Spain and Netherlands in the double tax treaties signed with the Netherlands (2004) and Spain (2010). Our team can also help you set up a company in Albania.

The double tax treaty signed with Netherlands specifies that the withholding tax on dividends is 0% if the foreign shareholders own at least 50% of the share capital, 5% if the shareholders own 25% of the share capital and 15% in other cases (in practice capped at the 8% domestic rate).

The double tax treaty signed with Spain specifies that the withholding tax on dividends is 0% if the foreign shareholders have at least 75% of the share capital, 5% if the foreign shareholders have 10% of the share capital and 10% in other cases (in practice capped at the 8% domestic rate).

The interests are taxed with 6% and in certain cases are not taxed at all if the beneficial owner is the Spanish state, the central bank or a financial institution, a local Spanish authority, a pension fund or in certain cases when the payer is the Albanian state or a local authority. Royalty payments to Spain are not payable.

With certain countries were signed treaties where the treaty withholding tax on dividends is 10% regardless the situation (the lower 8% domestic rate applies in practice) (China, Russia, Egypt, Italy, etc.).

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