- Updated
- December 2021
- Sections
- 13
- Questions
- 33
Key Facts
Core Framework
Law no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7. Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
The provisions of the law no. 8438/1998 on transfer pricing (articles 36-36/7) and The Instruction of Ministry of Finance “On transfer pricing” is based on the principles in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.
Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
Yes. Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”, Article 5.7 “Comparability” recommends a process adapted from the 9 step process in the OECD TPG 2010.
Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
Yes. Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”, Article 5.7 “Comparability” mentions: “4) review of existing internal comparable uncontrolled transactions, if any; 5) determination of available sources of information on external comparable transactions where such external comparable transactions are needed taking into account their relative reliability;”
Law no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7. Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
Yes. Law no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36/4 defines 'Range of market indicators' as a set of relevant financial indicators derived from the application of the most appropriate method. It also defines the median as the 50th percentile.
Documentation
Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing
Yes. According to point 13 “Corresponding adjustments”, of Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”.
Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing
Yes. According to point 13 “Corresponding adjustments”, of Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”.
Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing
Yes. According to point 13 “Corresponding adjustments”, of Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”.
TP Methods
- CUP
- Resale Price
- Cost Plus
- TNMM
- Profit Split
- Other
Selection: Most appropriate method
Dispute Resolution
Simplifications
Special Topics
Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
Yes. According to para 11 “Specific transaction types” of the Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”, guidance is provided for transactions involving licenses, sales or other transfers of intangible property.
Law no. 9920, dated 19.5.2008, “On tax procedures in the Republic of Albania”
Yes. Article 115/1 provides for a fixed fine of ALL 10,000 per month for late submission of the 'Notification of controlled annual transactions'. Taxpayers who have submitted documentation are required to pay only additional duty and interest, but not fines, in case of adjustments.
Full OECD Questionnaire
Legal ReferenceLaw no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7. Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
The provisions of the law no. 8438/1998 on transfer pricing (articles 36-36/7) and The Instruction of Ministry of Finance “On transfer pricing” is based on the principles in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.
Legal ReferenceLaw no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7. Law no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 2 “Definitions”, para 4
Yes. Two persons are considered to be related parties, when: i) one person participates directly or indirectly in the management, control or capital of the other person; or ii) the same person or persons participate (s) directly or indirectly in the management, control or the capital of both persons. A person participates directly or indirectly in the management, control or capital of another person when: i) that person owns, directly or indirectly, 50 percent or more of the share capital of the other person; or ii) that person effectively controls the business decisions of such other person.
Legal ReferenceLaw no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7. Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing” Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”, Article 8;
Yes. In accordance with Article 36/2, paragraph 2 of the Law on Income Tax, a taxpayer may in specific circumstances apply a transfer pricing method other than any of the approved methods, such as, for example a discounted cash flow or valuation techniques.
- CUP (provided)
- Resale Price (provided)
- Cost Plus (provided)
- TNMM (provided)
- Profit Split (provided)
- Other (provided)
Legal ReferenceLaw no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7.
Most appropriate method. Compliance with the market principle of a controlled transaction will be determined by applying the most appropriate method of transfer pricing, as the case may be, according to determinations made by instruction of the Minister of Finance.
- Hierarchy of methods (not selected)
- Most appropriate method (selected)
- Other (not selected)
For controlled transactions involving commodities, the guidance contained in paragraphs 2.18-2.22 of the TPG is followed. As our domestic legislation is based on TPG, in every case the approach based on TPG is appropriate.
- For controlled transactions involving commodities, the guidance contained in paragraphs 2.18-2.22 of the TPG is followed. (selected)
- Domestic legislation mandates the use of a specific method for controlled transactions involving commodities (not selected)
- Other (not selected)
Legal ReferenceInstruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
Yes. Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”, Article 5.7 “Comparability” recommends a process adapted from the 9 step process in the OECD TPG 2010.
Legal ReferenceInstruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
Yes. Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”, Article 5.7 “Comparability” mentions: “4) review of existing internal comparable uncontrolled transactions, if any; 5) determination of available sources of information on external comparable transactions where such external comparable transactions are needed taking into account their relative reliability;”
Legal ReferenceLaw no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7. Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
Yes. Law no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36/4 defines 'Range of market indicators' as a set of relevant financial indicators derived from the application of the most appropriate method. It also defines the median as the 50th percentile.
Legal ReferenceInstruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
Yes. Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”, Article 6 “Comparability adjustments” states that adjustments should be considered only if they are expected to increase the reliability of the results.
Legal ReferenceInstruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
Yes. According to para 11 “Specific transaction types” of the Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”, guidance is provided for transactions involving licenses, sales or other transfers of intangible property.
Legal ReferenceInstruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”
Yes. According to para 11 “Specific transaction types” of the Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”, guidance is provided for service transactions.
Legal ReferenceLaw no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7.
Yes. According to point 4, article 21 “Non-deductible expenses” of Income tax law, in the case of loans, borrowing or financing by related parties, net interest expense exceeding 30 percent of EBITDA is not recognized as deductible.
Legal ReferenceLaw no. 8438, dated 28.12.1998 “On Income Tax”, amended, Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing
- Master file consistent with Annex I to Chapter V of the TPG (selected)
- Local file consistent with Annex II to Chapter V of the TPG (selected)
- Country-by-country report consistent with Annex III to Chapter V of the TPG (not selected)
- Specific transfer pricing returns (separate or annexed to the tax return) (not selected)
- Other (specify): (not selected)
Legal ReferenceLaw no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7.
Transfer pricing documentation shall be provided to the tax administration at its request within 30 days of receiving the request. Documentation may be submitted in Albanian or English. If in English, the Tax Authority has the right to request translation into Albanian within 30 days at the taxpayer's expense. Taxpayers above a specified threshold must submit an annual controlled transactions notice/form.
Legal ReferenceLaw no. 9920, dated 19.5.2008, “On tax procedures in the Republic of Albania”
Yes. Article 115/1 provides for a fixed fine of ALL 10,000 per month for late submission of the 'Notification of controlled annual transactions'. Taxpayers who have submitted documentation are required to pay only additional duty and interest, but not fines, in case of adjustments.
Taxpayers are not obliged to provide the Annual Form of Controlled Transaction or transfer pricing documentation if their aggregate amount of annual controlled transactions does not exceed ALL 50,000,000 (approximately EUR 410,000).
Legal ReferenceLaw no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7.
Advance Pricing Agreements (APA) and Mutual Agreement Procedures (MAP) are available. APAs can be unilateral, bilateral, or multilateral. The maximum covered period for APAs is 5 years.
- Rulings (not selected)
- Enhanced engagement programs (not selected)
- Advance Pricing Agreements (APA) (selected)
- Mutual Agreement Procedures (selected)
- Other (please specify): (not selected)
Legal ReferenceLaw no. 8438, dated 28.12.1998 “On Income Tax”, amended, Article 36-36/7.
Yes. According to article 36/5 “Corresponding adjustments”, if an adjustment is made by a tax administration in another country, the Albanian tax administration shall examine its consistency with the market principle and may make an appropriate adjustment.
Legal ReferenceInstruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing
Yes. According to point 13 “Corresponding adjustments”, of Instruction of Ministry of Finance No. 16, dated 18.06.2014 “On transfer pricing”.
Legal ReferenceInternational agreements
Yes. Our approach is to implement it for all our treaties.
There are no other legislative aspects or administrative procedures regarding transfer pricing.
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