In 1999, Albania and Switzerland signed an agreement, the main aim of which was the avoidance of double taxation. The general objective of this kind of agreement is to ensure individuals and companies operating and residing in both countries pay the relevant taxes only once, therefore reducing their fiscal burden and facilitating their economic activities.
Now, a decade and a half after the agreement's adoption, the economic and tax landscape is very different in both countries, particularly in Albania. Considering the increase of trade flows between the two countries, it was deemed necessary to look at the agreement again to take into account the new landscape.
Both countries have agreed to sign a protocol to the convention, with the aim of updating the existing agreement. The protocol was signed in September 2015 by the deputy foreign minister of the Republic of Albania and the Swiss Secretary of State. The main changes which the protocol introduces to the agreement relate to an update of the Albanian taxes covered, the inclusion of an arbitration clause, administrative cooperation and mandatory information exchange.
In February 2015, after several months of negotiations, the protocol to the 1999 Convention between Albania and Switzerland was initialed. The changes introduced by the protocol were subject to consultation with business associations and the final document was signed in September 2015 and is expected to enter in force later this year.
The protocol reflects the changes that the Albanian tax system has been going through. It includes the income taxes (corporate profits tax and personal income tax); capital gains tax from the alienation of movable or immovable property; property tax and the tax on small business activities.
The existing agreement provides specific regulation regarding cases when one or both parties impose taxes which are in violation of the agreement. In these cases, despite the internal regulation regarding appeal procedures, the interested party has the right to submit the case to the competent authorities in its state of residence. The competent authorities of both states should reach an agreement regarding the case within three years. The new changes include the provision of an arbitration settlement, in case both countries' competent authorities are unable to reach an agreement to resolve the case. Arbitration should be requested by the interested person.
Another important change to the convention is the introduction of the administrative assistance clause, which is in line with the international standard for the exchange of information upon request. Both countries are obliged to exchange information, with the scope of carrying out the provisions of the agreement, or performing the enforcement of the domestic laws concerning all types of taxes. The protocol binds the parties to render the information available to the other signatory state, even if the requested information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity. To protect the affected businesses or individuals, the exchanged information is treated as secret.
Considering that Swiss businesses have increased in number and expanded their activities in Albania, it is expected that the latest changes to the convention will have a positive impact on economic relations between the two countries.
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