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Albania: Treaty analysis: Albania and Kosovo sign new double taxation agreement

Asllani-Ndreka-Dorina

Dorina Asllani Ndreka

An agreement for the avoidance of double taxation of income and capital taxes and the prevention of fiscal evasion, concluded between the Republic of Albania and the Republic of Kosovo, entered into force in March 2015 and will apply from January 1 2016.

The agreement replaced and updated the previously-valid 2004 agreement, which was concluded by the Council of Ministers of Albania and by the UN Mission in Kosovo on behalf of Kosovo. By introducing new clauses and by updating the existing provisions, the aim of the new agreement is to create a complete legal framework for handling the tax treatment of physical and legal persons with businesses activities or revenues under the tax jurisdiction of both countries.

Albania and Kosovo are not just bordering countries; they share several features, including language, history and tradition. However, there are also economic and political reasons which make the double tax treaty (DTT) crucial for the continuation of financial and economic cooperation between the two countries.

Many companies perform business activities in both countries, and this number is constantly increasing due to the opportunities offered by both states. Albania and Kosovo have agreed on the free movement of persons and guarantee several facilities regarding the transit of goods. According to data published by the Tirana Chamber of Commerce and Industry, there are now 502 Albanian businesses that operate in Kosovo. This number is expected to grow due to the provisions of the new treaty.

One of the objectives of the agreement is the redefinition of the mutual cooperation clause and the obligation of the contracting states to exchange information to prevent fiscal evasion by entities that operate in both countries.

The following taxes will be subject to the new agreement:

In Albania:
  • Taxes on income, including company profit tax, personal income tax from capital gains and from alienation of movable and immovable property;

  • Tax on small business activities; and

  • Tax on wealth.

In Kosovo:
  • Personal income tax;

  • Corporate income tax; and

  • Property tax.

The new treaty also includes several other changes and novelties. It contains a provision regarding the fiscal treatment of stateless persons as well as an arbitration clause which is a new possibility for solving disputes arising from the agreement. In accordance with the new provisions, the contracting states have the obligation to render information to the other party, and also to lend assistance in the collection of revenue claims.

Considering the special relations between the two countries, the agreement will improve economic flow, open new economic perspectives of cooperation and help foreign investors consider the possibility of increasing their activity in both states.

Dorina Asllani Ndreka (tirana@eurofast.eu)

Eurofast Global, Tirana Office

Tel: + 355 (0) 42 248 548

Website: www.eurofast.eu

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