Albania has introduced Law No. 29/2023 “On Income Tax,” which came into effect on January 1, 2024, replacing the previous Law No. 8438/1998. This reform modernizes the tax system, aligns with international standards, and impacts both resident and non-resident businesses operating in Albania.
Corporate Income Tax Updates Corporate Tax Rates: • Businesses with annual revenue up to 14 million ALL are exempt from corporate income tax until December 31, 2029. • From January 1, 2030, these businesses will be subject to a 15% corporate tax rate. • Companies earning above 14 million ALL are already taxed at 15%. • Dividend tax remains at 8%. Tax Residency A company is considered tax resident in Albania if: • Its head office is located in Albania, or • Its place of effective management (i.e., where key business decisions are made) is in Albania. Entities that meet these conditions are subject to Albanian corporate taxation on their worldwide income. Permanent Establishment (PE) Rules The new law refines the definition of a Permanent Establishment (PE), determining when a foreign entity becomes taxable in Albania. A foreign business has a PE in Albania if: 1. Fixed Place of Business: It has a physical location where business activities are carried out, including: • Offices, branches, factories, workshops; • Mines, oil wells, quarries, or other natural resource sites; • Construction or installation projects lasting six months or more; 2. Service-Based PE: Foreign companies providing consulting or other services in Albania for more than six months within a 12-month period (whether through employees or other individuals) are deemed to have a PE. Compliance & Business Impact Companies operating in Albania should: • Assess tax residency status to determine if they are subject to Albanian taxation. • Review operational structures to check if their activities trigger a PE under the updated criteria. • Ensure compliance with the new corporate tax rates and deadlines. This legislation significantly impacts multinational businesses, requiring careful tax planning and legal assessment. Consulting tax professionals is advised to navigate these changes effectively.
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February 2025
AuthorLareda Zenunaj, LL.M in Taxation |