Albania and Kosovo sign a new agreement on double taxation

Albania/November 2015

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.

The agreement replaced and updated the previously-valid 2004 agreement, which was concluded by the Council of Ministers of Albania and by the United Nations 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 agreement for the avoidance of double taxation and tax evasion crucial for the financial and economic cooperation between the two countries.

The number of companies performing business activities in both countries is rather large and is constantly increasing due to the opportunities offered to them 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, currently there are 502 Albanian businesses that operate in Kosovo. This number is expected to grow due to the new perspectives provided by 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 in order to prevent fiscal evasion by entities that operate in both countries.

The agreement updates the tax system of Albania and Kosovo, according to the recent changes. Subject to the new agreement will be the following taxes:

In Albania:

1.Taxes on income, including company profit tax, personal income tax from capital gains and from alienation of movable and immovable property.

2.Tax on small business activities;

3.Tax on wealth.

In Kosovo:

1.Personal income tax;

2.Corporate income tax;

3.Property tax

The new treaty also includes several 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.

The agreement between Albania and Kosovo has entered into force in March 2015, but will be applicable as of 1 January 2016. Considering the special relations between the two countries, the agreement will improve the 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,
T. + 355 (0) 42 248 548
+ 355 (0) 42 248 548