Albania: Withholding tax and double tax treaties applications

New Law no. 29/2023 on income tax (dated 30 March 2023)—effective starting from 1 January 2024—introduces important changes in the way withholding tax is levied.

One of the most important changes introduced by the new law on income tax relates to the fact that it differentiates between payments made to registered persons (i.e., local entities) and payments made to non-registered persons (individuals or foreign entities).

The new law also provides a clearer definition of the withholding tax agent and requires the payment of services provided by individuals that are not registered for tax purposes and that are subject to 15% withholding tax, to be declared through the payroll declarations.

Withholding tax rates remain unchanged. Standard 15% withholding tax continues to apply for any type of payment subject to withholding tax and the reduced 8% withholding tax applies to dividends only.

Withholding tax return format during 2024 will be prepared based on the same format used in 2023, while the new withholding tax return format as per the new legal provisions is expected to be adopted from January 2025 and onwards.

DTT applications

In addition, changes were introduced to the law on procedures that affect the double tax treaties (DTT) application procedures, deadlines and applicable penalties—effective 1 January 2024:

• Previously, entities had the opportunity to submit DTT applications within two years from the date of payment of a certain invoice or income. With the changes introduced, the DTT applications need to be submitted within the next year from the year of payment, regardless of when the payment has been made in the start or the end of the previous year. Therefore, DTT application for a payment made during 2024 must be submitted for approval with the tax authorities not later than 31 December 2025.
• Failure to submit the DTT application within the next calendar year will be subject to a penalty of ALL 10,000 for every month of delay, up to a period of 24 months. After 24 months, entities lose the right to benefit from the DTT provisions.

Within the first half of 2024, it is expected that the Minister of Finance issue an instruction on the list of the documentation supporting any DTT application filed for approval with the tax authorities.

Read a January 2024 report prepared by the KPMG member firm in Albania