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| Dorina Asllani Ndreka |
Albania and Iceland signed an agreement for the avoidance of
double taxation and the prevention of tax evasion regarding
income tax (DTA) on September 26 2014, which was ratified by
both countries and entered into force on January 6 2016. Under
the treaty provisions, its general implementation has begun as
of January 1 2017.
The treaty is the first of this kind between the two
countries double taxation of income tax and tax evasion in both
countries. The treaty will also be applied to any similar or
identical tax that may be imposed in the future by the partner
countries.
The agreement creates the legal framework for the
information exchange and the cooperation between tax
authorities of both countries, as a guarantee for the
implementation of the agreement provisions.
The taxes covered in the treaty include personal income tax,
corporate profit tax and tax on small business activities in
Albania. Whereas, in Iceland, it covers the state income tax
and the municipalities' income tax. The competent authorities
of both countries will notify each other for any essential
change regarding their tax legal framework.
A permanent establishment, as defined by the DTA, will
include any construction/building/installation project (or
related supervisory activities), the duration of which exceeds
six months in a 12-month period. The same duration rule is
applicable to the provision of services through personnel
engaged for such purpose (aggregate duration exceeding six
months).
The withholding tax rate for dividends has been defined as
10% in all cases, except in those cases where there is at least
25% ownership in which case a 5% rate will apply. The standard
10% rate will also apply to interest and royalties
payments.
In case a resident of one of the contracting states has
income, which in accordance to this treaty's provisions may be
taxed in the other contracting state, then the first
contracting state will allow a deduction from the resident's
tax liability. The deduction is equal to the tax amount paid
for this specific income in the other state. However, such a
deduction will in no case exceed the income tax calculated
before the deduction.
Albania and Iceland are trying to revive their commercial
relations. Albania has signed the free trade agreement with
EFTA countries, which includes Iceland. The DTA will be of
additional help in achieving this objective.
Dorina Asllani Ndreka (tirana@eurofast.eu)
Eurofast
Tel: + 355 (0) 42 248 548
Website: www.eurofast.eu