Transfer Pricing

Transfer Pricing has been provided for in the Law no. 42/2014 for some additions and changes to the Law no.8438, dated 28.12.1998, on “Income Tax” as amended.

According to the tax administration, the objective of Transfer Pricing is to preserve the tax base on transactions between companies that are considered related parties and, for the taxpayer, to avoid double taxation.

Transfer Pricing manifests the transactions made by multinational companies, which develop part of their business activities in Albania (in the form of subsidiary or branch).

If a taxpayer subject to income tax engages in one or more controlled transactions, he shall state the taxable profit in a way compliant with the market principal (arm’s length).

The compatibility with the market principle of a controlled transaction shall be defined by applying the most adequate transfer pricing method.

The Law and Instruction on Transfer Pricing provide that taxpayers shall prepare and present the appropriate information and analysis to verify that the controlled transactions are made in compliance with the market principle (arm’s length).

The Instruction on Transfer Pricing determines that only taxpayers who have total controlled transactions (loan balances included) which exceed the amount of 50.000.000 ALL during the reporting period, are subject of filling this form. To estimate the total of the controllable transactions of a taxpayer related to the reporting period, absolute values must be used.

The due time for the submission of the “Annual Controlled Transactions Notice” is the estimated date for the submission of the “Declaration and payment of income tax form”. In case of failure to deliver on time the “Annual Controlled Transactions Notice” in compliance with the respective dispositions of the Instruction of the Minister of Finance on “Transfer Pricing”, the taxpayer shall be charged a fixed fine of 10.000 (ten thousand) ALL, for each month of delay.

Find the legal framework on transfer pricing at the bottom of this page.

The International Institutions that assisted the establishment of the sector and the implementation of the legal package:

• The World Bank group – IFC experts
• OECD in cooperation with the Italian Income Agency – through “Tax Inspectors without borders” program.