Albania changes Hydrocarbons Law

By adopting law no.6/2017, the Albanian Parliament amended the 1993 Law on Hydrocarbons (Exploration and Production). These last changes aim to make the law more easily applicable, as well as to bring it closer to the acquis of EU. The amendments also focus on safeguarding these important public assets.

Law no.6/2017 dated 02.02.2017 includes several definitions which were not originally included in the 1993 law and its previous amendments. Some of the most interesting ones include the definition of the License Agreement, which is the authorization provided by the Ministry for exploration, development and production of hydrocarbons in the contract area. This license includes the possibility to transfer the rights wholly or partially, to a local or foreign legal person, or to an international financial institution. However, if it deems it necessary for matters of national security, the Ministry may reject the transfer of the hydrocarbon agreement quotas.

Worth noting is the fact that a hydrocarbon agreement may include specific clauses about the stability of the tax regime.  A similar provision existed in the previous version of the law, but the new one provides the following conditions:

  • These clauses cannot exceed a term of 12 years from the date of the production’s commencement;
  • The regime of stability excludes the laws and regulations related to national security, labor relations, protection of the nature and the environment, protection of human health and international treaties.;
  • The tax regime’s stability provision does not affect the calculation and payment of applicable taxes by contractors under the tax legislation in force.

The stable tax regime which is provided for under the new Law on Hydrocarbons is defined to be the current one, including the tax rates, applicable forms, terms of payments and all other tax aspects as laid out in the current tax legislation in force.

The new law is effective from the 7th of March 2017, but it will be implemented for new hydrocarbon agreements and will exclude those already signed and those that had started the process of negotiation before that date.

Dorina Asllani Ndreka,
T. + 355 (0) 42 248 548