Albanian Transfer Pricing Regulations
Transfer pricing rules have been present for more than a decade in the Albanian Corporate Income Tax (CIT) Law, but specific and detailed regulations on the application of these rules have been published in the Official Journal No 70, dated 20.05.2014. The recent changes have totally transformed Article 36 of the Law on Income Tax (No. 8438, dated 28.12.1998) by adding 7 more articles related to specific rules and actions. Who is affected? Companies and Groups of companies with related party transactions are affected by Transfer Pricing rules. Related Party Definition An entity is considered a related party if there is a possibility of exercising control over or exerting considerable influence on business decisions made. The direct or indirect possession of at least 50% of the shares in capital shall mean that control over the taxpayer is possible. The case of direct or indirect possession of at least 50% of the voting rights is considered as having an influence on business decisions. Type of Transactions subject to transfer pricing are: product sales; product acquisition; lendings; borrowings; royalties; management fee payment; provision of management services; cost-sharing within the group; research and development activities; provision of other services; and use of other services. Transfer Pricing Methods The taxpayer should choose one of the methods described in the OECD guidelines. The taxpayers should also describe the decisive reasons for the determination regarding the method used for the reconciliation of the transfer prices with “the arm’s length” principle for the transactions carried out with the associate enterprises. The taxpayer should choose one of the following methods:- Comparable Uncontrolled Price (CUP) method
- Resale Price Method
- Cost Plus Method
- Transactional Net Margin Method (TNMM)
- Profit Split Method
[print_link]