Albania changes the double taxation agreement with Switzerland

Albania/October 2015

In 1999, Albania and Switzerland signed an Agreement the main scope of which is the avoidance of double taxation. The general objective of this kind of agreements is to make sure individuals and companies operating and residing in both countries will pay relevant taxes only once, therefore reducing their fiscal burden and facilitating their economic activities.

Fifteen years after the Convention’s adoption, the economic and tax landscape is very different in both countries, particularly in Albania. Considering the increase of trade exchange between the two countries, it was deemed necessary to cope with these changes. Both countries have agreed to sign a protocol to the convention, with the aim of changing the existing agreement. The protocol was signed in September 2015, by the deputy foreign minister of the Republic of Albania and the Secretary of State of Switzerland. The main changes that the protocol introduces to the agreement relate to updating the Albanian taxes, the inclusion of the arbitration clause, administrative cooperation and obligatory 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 within this year.

The protocol reflects the changes that the Albanian tax system has been going through. It includes the income taxes (the corporate profits tax and the personal income tax); the capital gains tax from the alienation of movable or immovable property; the tax on small business activities as well as the property tax.

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. The 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 positively reflect in the economic relations between the two countries.

Drilona Likaj,
Eurofast Tirana Office, Albania

T. +355 42 248 548E.