This Draft-Instruction published by the Ministry of Finance on 25/03/2024 with a closing date of 22/04/2024 open for comments defines the criteria and procedures for the implementation of the provisions of the Agreements for the avoidance of double taxation and the prevention of fiscal evasion.
“Double taxation” is when the same income, earned by the same person, is taxed twice: once in the country where the income is realized and once in the country where the taxpayer has his residence. Double taxation arises when both countries claim that, based on the criteria of their domestic laws (which may be different), a natural person or an entity is considered resident in both countries (dual residence) and is subject to the obligation of full tax in both states. As a result of this issue, “Double Taxation Avoidance Agreements” were created .
The Double Taxation Treaty agreement (DTT) contains criteria and rules that determine in which contracting state a natural person or entity will be considered a resident, regardless of the provisions of the internal legislation of the contracting states. Agreements for the avoidance of double taxation allow the elimination of double taxation by determining which of the countries has the right to tax some income of an entity or natural person, or by dividing this right between the two countries, but without burdening the taxpayer with double taxation. These agreements also aim to avoid fiscal evasion through the exchange of information for all natural persons or entities that exercise activity in both countries between which the Agreement was concluded.
Albanian resident tax payers must complete the documentation according to the deadlines specified in the law.
The documentation that proves the implementation of DTT is:
a. The forms according to the established model which contains complete data for the Albanian resident taxpayer, for the tax resident taxpayer in the other contracting state, the type of payment from the Albanian taxpayer (income for the resident taxpayer in the other state).
b. Service contracts with the non-resident company, in the language(s) signed by the parties.
c. Certificate of residence for the supplier (person not resident in Albania) who is resident in the other Contracting State.
d. A summary list of foreign invoices issued by the tax resident in the other country, for which MTD has been applied;
e. List of payments made by the Albanian taxpayer to the taxpayer resident in the other country, for which DTT has been applied.
Deadlines for submitting/uploading documentation in the tax system and penalties.
Pursuant to the law “On tax procedures in the Republic of Albania “, the following deadlines are set for the uploading/submission of supporting documentation by the taxpayer for the implementation of the DTT:
a) The documentation listed above must be uploaded to the electronic tax system/submitted within the calendar year following the year in which the provisions of the DTT-s are implemented. If the electronic tax system does not allow the electronic upload of the documentation, or there are technical problems, the taxpayer submits the requested documentation to the relevant regional tax directorate by official letter on paper or with an electronic carrier (CD).
b) If the taxpayer does not upload the documentation to the system/does not submit it within the deadline set at that time, a fine of 10,000 ALL will be applied to the taxpayer for each month of late submission. This fine is applied up to the following 24 months, after the end of the specified period.
c) If the taxpayer does not submit the documentation even after the 24-month deadline has passed, then the taxpayer loses the right to apply the provisions of the DTT and must pay/return the unpaid taxes or the reduced part of the tax according to the DTT , as well as fines and interests for late payment in accordance with the Law “On Tax Procedures in the Republic of Albania”.
DTT , Documents , Deadlines .
