Companies and groups of companies with related party
transactions must comply with the revised TP rules, and failure
to do so can lead to hefty fines.
An entity is considered a related party if there is a
possibility of exercising control over or exerting considerable
influence on the business decisions made. The direct or
indirect possession of 50% or more of the shares in capital
mean that control over the taxpayer is possible, while owning
at least 50% of the voting rights is considered as having an
influence on business decisions.
The types of transactions subject to TP rules include:
- Product sales;
- Product acquisitions;
- Management fee payments;
- Provision of management services;
- Cost-sharing within the group;
- Research and development activities;
- Provisions for other services; and
- The use of other services.
Taxpayers should choose one of the methods described in the
OECD's TP Guidelines when engaging in transactions with a
related party. A taxpayer should also describe the decisive
reasons for the determination regarding the method used for the
reconciliation of the transfer prices with the arm's length
principle for the transactions carried out with the associate
The taxpayer should choose one of the following TP
- The comparable uncontrolled price (CUP) method;
- The resale price method (RPM);
- The cost plus method (CPM);
- The transactional net margin method (TNMM); or
- The profit split method (PSM).
Taxpayers can use another method only when none of the above
methods can be reasonably applied.
TP audits and penalties
TP documentation must be submitted to the tax authorities in
Albania on an annual basis by filling a "controlled transaction
notice". It may be submitted in hard copy along with the
balance sheet and the financial statements or electronically,
as required by the tax authority.
In the case of a potential tax audit, the tax administration
is obligated to perform the same transfer pricing method used
by the taxpayer.
It is worth noting that TP penalties were only introduced in
Albania less than a decade ago. Article 115/1 was introduced
into Law No. 9920 on May 19 2008 "On Tax Procedures" to impose
penalties relating to TP. Before this change, no provisions or
penalties regarding TP were in force.
Drilona Likaj (firstname.lastname@example.org)
and Anastasia Sagianni (email@example.com)
Tel: + 355 (0) 42 248 548