All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

Albania: Changes in the tax deductibility of cross-border management and consulting fees


A new law, which becomes effective April 30 2013, has made stricter the requirements for the tax deductibility of consulting, technical service and management fees invoiced from abroad.

Pursuant to the income tax law provision amendment, consulting, technical and management fees invoiced from abroad had been tax deductible to the extent the amount invoiced was paid during the fiscal year which the service referred to. Moreover, according to the Minister of Finance’s instructions, the amounts have also been tax deductible when the corresponding 10% withholding tax was paid to the tax authorities within the fiscal year of the service supply.

Pursuant to the new law, the tax deductibility of the relevant expense for technical and consultancy services and management fees becomes dependent not on the payment of the invoice, but on the payment of the withholding tax to the tax authorities which will have to take place before December 31 of the year in which the service was provided. Therefore, local entities will need to communicate with their foreign service providers, whether affiliates or third parties, requesting to receive invoices or at least pro-forma invoices well in advance of December 31 of the year the service was rendered and plan to effect the corresponding withholding tax payment before year-end.

In case of an applicable tax treaty protecting the relevant income from being subject to Albanian withholding tax at the standard 10% rate, the local entity will have to communicate with the foreign service provider to receive the complete file of supporting documents for filing the tax treaty relief claim with the Albanian Tax Authorities several months before the calendar year-end, which the service refers to. Otherwise, it may risk not obtaining the tax treaty relief clearance on time and thus to have to withhold and pay tax at 10% on the invoiced amount to ensure the tax deductibility of the expense. Under the old provisions, settlement of the invoice was sufficient, which could be followed by initiating the tax treaty relief procedure in a subsequent year. Pursuant to the new rule, unless tax treaty relief has been previously applied for and obtained, the failure to withhold the 10% tax on the relevant cross-border consulting, technical service and management fees before the year-end causes the relevant expense not to be tax deductible.

Jona Bica ( is a tax senior at Ernst & Young, principal Corporate Tax correspondent for Albania.

more across site & bottom lb ros

More from across our site

The Italian government published plans to levy capital gains tax on cryptocurrency transactions, while Brazil and the UK signed a new tax treaty.
Multinational companies fear the scrutiny of aggressive tax audits may be overstepping the mark on transfer pricing methodology.
Standardisation and outsourcing are two possible solutions amid increasing regulations and scrutiny on transfer pricing, say sources.
Inaugural awards announces winners
The UN’s decision to seek a leadership role in global tax policy could be a crucial turning point but won’t be the end of the OECD, say tax experts.
The UN may be set to assume a global role in tax policy that would rival the OECD, while automakers lobby the US to change its tax rules on Chinese materials.
Companies including Valentino and EveryMatrix say the early adoption of EU public CbCR rules could boost transparency of local and foreign MNEs, despite the short notice.
ITR invites tax firms, in-house teams, and tax professionals to make submissions for the 2023 ITR Tax Awards in Asia-Pacific, Europe Middle East & Africa, and the Americas.
Tax authorities and customs are failing multinationals by creating uncertainty with contradictory assessment and guidance, say in-house tax directors.
The CJEU said the General Court erred in law when it ruled that both companies benefitted from Italian state aid.