Al Transfer Pricing

Albania transfer pricing, tax year 2026

Source-cited draft. Drafted from Law No. 29/2023, Instruction No. 29 of 16.11.2023, the General Instruction No. 26 of 8.9.2023 (as amended to Instruction No. 9 of 12.3.2026) and Law No. 9920/2008, all read on tatime.gov.al on 2026-10-23. No accountant has reviewed it. Do not file from it without review by a qualified Albanian professional.

The rules sit in three places. Law No. 29/2023 "On income tax" sets the related-person definition (art. 3(13)), the transfer pricing regime (arts. 32 to 39) and the arm's length principle (art. 44). Instruction No. 29 of 16.11.2023 of the Minister of Finance and Economy, "On transfer pricing and advance pricing agreements", fills in the detail; it replaced Instruction No. 16 of 18.6.2014 and Instruction No. 9 of 27.2.2015 and took effect with Law 29/2023 (Instruction 29/2023, points 38 and 39). Law No. 9920/2008 "On tax procedures" sets the penalties (art. 115/1) and country-by-country reporting (arts. 63/1 to 63/6, 115/4). The instruction follows the OECD Transfer Pricing Guidelines; where they conflict with Albanian law and instructions, Albanian law wins (point 2).

Related skills: al-corporate-tax (the 15% rate, the taxable base, withholding, the 31 March return), albania-income-tax (individuals), albania-tax-optimization (planning). This skill does not repeat them.

Who this applies to

Related persons (Law 29/2023, art. 3(13)). A related person is any person linked to another in a relationship that directly or indirectly affects the tax base through management, control or ownership. Two persons are related if one or both would act on the instructions, requests, suggestions or will of the other or of a third person. The law always treats these as related:

• spouses, cohabiting partners, and first-degree descendants and ascendants;
• an entity in which any person holds, directly or indirectly, at least 50% of the voting or management rights, dividend rights or capital rights;
• two or more entities in which another person holds at least 50% of those rights in each.

A holding attributed to a person from a related person cannot be attributed again to another related person. Being an employee or a customer does not by itself make two persons related, unless the relationship affects the tax base.

The instruction's tests (Instruction 29/2023, points 3.2 to 3.5). One person can act on the other's will if it: (a) holds or can control 50% or more of the other legal person's voting rights; (b) can control the composition of its board; (c) is entitled to 50% or more of its profits; (d) is a relative of the other, or related to a relative; or (e) on established facts and circumstances, controls its business decisions. "Relative" means spouse, cohabiting partner, and first-degree descendants and ascendants. The tax administration carries the burden of proving the "acting on the will of another" test. Shares held by related parties count in deciding indirect ownership. The instruction's example: A holds 60% of B and B holds 55% of C, so A is treated as holding over 50% of C indirectly. Control passes through the chain; the percentages are not multiplied.

Controlled transactions (art. 32(2)). The transfer pricing machinery in arts. 32 to 39 applies to:

• a transaction between related persons where one is resident and the other non-resident;
• a transaction between a non-resident's Albanian permanent establishment and another non-resident related party;
• a transaction between a resident and a related resident, where it is attributed to that resident's permanent establishment abroad;
• dealings between a non-resident and its own Albanian permanent establishment, and between a resident and its own permanent establishment abroad;
• any transaction between a resident (or an Albanian permanent establishment) and a resident of a jurisdiction listed by ministerial instruction, whether or not the parties are related.

The listed jurisdictions are in Annex 1 to Instruction 29/2023 (point 3.6), printed as a table on page 22 of the tatime.gov.al PDF. It names 65: Andorra, Antigua & Bermuda, Antigua, Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda, Brunei, Costa Rica, Dominica, Fiji, Gibraltar, Grenada, Guadeloupe, Guam, Guatemala, Guernsey, Guyana, Haiti, Hong Kong, British Virgin Islands, Cook Islands, Falkland Islands, Channel Islands ("Ishujt Normand"), Solomon Islands, Turks and Caicos, Christmas Island, Mariana Islands, Marshall Islands, US Virgin Islands, Isle of Man, Jamaica, Jersey, Liberia, Liechtenstein, Macao, Madeira, Maldives, Martinique, Mauritius, Micronesia, Monaco, Montserrat, Nauru, Netherlands Antilles, Niue, Oman, Palau, Panama, Philippines, Dominican Republic, Samoa, San Marino, Seychelles, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Suriname, Tanzania, Tonga, "Trinidad Tobacco" (as printed; read as Trinidad and Tobago) and Vanuatu. Any transaction with a resident of one of these is a controlled transaction, related or not.

Purely domestic transactions. A sale between two Albanian resident related companies, with no foreign permanent establishment involved, is not a "controlled transaction" under art. 32(2). Art. 44(1) still says transactions between related parties must follow the arm's length principle, and art. 10(4) applies the same rule to personal income tax. So domestic related-party pricing must be at arm's length, but the notice, documentation and median-adjustment rules are written for controlled transactions.

What a controlled transaction covers (point 3.1). Goods (raw materials, finished products); services; intangibles (copyright, licences, patents, trademarks, know-how); financial transactions (rents, interest, guarantee fees); and capital transactions (buying or selling shares, investments, and long-term tangible and intangible assets).

Rates, bands and thresholds

The taxable base

The adjustment (art. 32(1)). An entity in a controlled transaction must check that its terms meet the arm's length principle. Where they do not, the entity's taxable profit may be increased to the arm's length level. The law allows an increase; it gives no power to reduce the entity's own profit, except through a corresponding adjustment (art. 38). An adjustment is made only with the written approval of the director of the Regional Tax Directorate (Instruction 29/2023 point 12.1).

Comparability (art. 33). Five factors: the characteristics of the goods or services; functions performed, assets used and risks assumed; contractual terms; economic circumstances; and business strategies. Where there is no written contract, the terms can be inferred from correspondence, conduct and the economics (point 5.4). Foreign comparables are accepted where no internal comparable exists, provided geographic differences are analysed and adjusted for (point 7.3). If same-year comparables are not available when the file is prepared, the latest available year may be used (point 7.4).

Methods (art. 34). The most appropriate of five: comparable uncontrolled price, resale price, cost plus, transactional net margin, and transactional profit split. A different method is allowed if none of the five can reasonably be used and the taxpayer proves the result is arm's length; the burden is on the taxpayer (art. 34(2)). One method is enough (art. 34(3)). An audit starts from the taxpayer's method, unless the administration proves it is not the most appropriate (art. 34(4); point 9.3). Under the net margin method the instruction names net profit (before interest and tax) to sales, to total costs, to equity and to assets (point 8.4).

Range and median (art. 36; points 12.2 to 12.4). A result inside the arm's length range is not adjusted. A result outside it may be adjusted to the median, unless the administration or the taxpayer proves that another point fits the facts better; whoever seeks the other point carries the burden. The median is the 50th percentile: with an odd number of results, the middle one; with an even number, the average of the two middle results (point 12.3, examples 1 and 2). The administration should not disregard or restructure the actual transaction except where its substance differs from its form, or where the arrangements as a whole differ from what independent parties acting rationally would agree and block pricing (point 12.5).

Aggregation (art. 35). Closely linked transactions that cannot be priced separately may be combined.

Services (point 11.1). An intra-group service charge is arm's length only if the service was actually provided, gives the recipient economic or commercial value, is something an independent party would pay for or do itself, and is priced as independent parties would agree. Specific services are tested one by one; where they cannot be identified, costs are allocated with reasonable allocation keys (points 11.2, 11.3).

Corresponding adjustments (art. 38; points 13.1 to 13.5). Where a treaty partner adjusts a related party's profit and the same profit was taxed in Albania, the Albanian taxpayer can apply in writing to the Regional Tax Directorate. The application lists the related party, the years, the amounts, a residence certificate, proof of the foreign adjustment and its basis, the comparability analysis and method, and confirmation that the related party will not pursue further recourse abroad. The director answers within three months. The request does not take away the right to a treaty mutual agreement procedure.

Interest: how the limits stack. Financing is a controlled transaction (point 3.1), so the interest rate on a related-party loan must be arm's length. Two further limits apply to all interest, related or not:

1. Interest above the Bank of Albania's published average annual 12-month lending rate of commercial banks is not deductible (art. 50(1)(dh)); microcredit loans are excepted. Each entity uses the rate published on the Bank of Albania website for the month in which the loan was taken (General Instruction 26/2023 point 50.1(f)).
2. Net interest expense is deductible only up to 30% of EBITDA; the disallowed amount carries forward five years, oldest first (art. 30; General Instruction 26/2023 points 30.1 to 30.8). Under the General Instruction as amended by Instruction 9/2026, EBITDA starts from profit before tax (point 30.2) and adds back interest expense and depreciation and amortisation as adjusted for tax (point 30.4: profit + taxes + interest + depreciation). Law 29/2023 art. 30(2) still words the starting point as taxable income; where the two give different numbers, ask before relying on the instruction's figure. Exempt income is left out of EBITDA (art. 30(2)).

The General Instruction says the art. 50(1)(dh) rate cap is taken into account when measuring deductible interest for the EBITDA test (point 30.4). Law 29/2023 has no debt-to-equity ratio. Banks, non-bank lenders, insurers and leasing companies are outside the EBITDA rule (art. 30(5)).

Deadlines and filing

What the annual notice asks for (Annex 2). Part I: taxpayer name, NIPT, address, contact, a short business description, and the non-resident company that controls the taxpayer (name, country of incorporation, tax residence, % held). Part II: each controlled transaction with the counterparty's name, whether related, tax residence, transaction code, allowable deductions and assessable income in ALL (same code and same party aggregated, never offset), the method (CUP, RS, CP, TNMM, CPM or OM) and whether documentation has been prepared; opening and closing balances of loans received from and given to related parties and persons in listed jurisdictions, and whether interest-free; changes in group structure, functions, assets or risks; capital transactions (sale proceeds and purchase price); and whether goods or services were supplied to related parties for no or non-monetary consideration.

What the documentation contains (point 15.3). (a) An overview of the business, its markets, the group structure with every member's legal form and shareholding, and each member's role; (b) the controlled transactions with the five comparability factors and the pricing policy; (c) why the method and financial indicator were chosen; (d) the comparability analysis: the search process, why any internal comparable was rejected, the comparables, and every comparability adjustment; (e) any supporting economic analysis and projections; (f) any APA or similar ruling abroad covering the transactions; (g) the conclusion on arm's length, with any adjustment made; (h) anything else material.

Master file and local file. Albania does not use the OECD "master file / local file" names in the instruction. It accepts documentation prepared under the EU Code of Conduct on transfer pricing documentation (Council resolution 2006/C 176/01): a "masterfile" plus Albanian country-specific documentation meets art. 37 if produced within 45 days of the request (point 15.4). Documentation that is incomplete, contains false or inaccurate facts, or leaves out relevant facts does not meet art. 37 (point 15.8).

Advance pricing agreements (art. 39; points 16 to 37).

• Types: unilateral (with the General Directorate of Taxes), bilateral and multilateral (with treaty partners). Where a treaty covers the transactions, the application should be bilateral or multilateral; a unilateral APA is then accepted only in special cases, such as a partner unwilling to negotiate (point 22.2).
• Six phases: pre-filing meeting, formal application, evaluation, negotiation, drafting and signature, annual compliance report (point 23.1). The pre-filing meeting is held within 60 days of the request (point 24.4).
• Term: up to 5 years, starting with the fiscal year after signature; longer only where the APA implements a reciprocal intergovernmental agreement ratified by law (point 21.2). No rollback to earlier years, but if the APA is signed after the first proposed fiscal year, the year in which it was proposed is covered (points 21.1 to 21.3).
• Effect: no art. 32 adjustment to covered transactions while the terms and critical assumptions hold. A breached critical assumption must be reported within 30 days (point 28.5). The APA can be revised, cancelled (from the date of the event) or revoked (as if it never existed, for negligent misstatement) (points 32 to 34).

Penalties and interest

Late payment interest (kamatëvonesë) runs from the original due date to the payment date at 120% of the Bank of Albania interbank rate, reset each quarter (Law 9920/2008 art. 76(1), (3)). The General Directorate of Taxes publishes the rate: 7.8% from 08.10.2026. Interest cannot be waived (art. 76(4)).

Concealment or false documents fall under the tax evasion penalty in art. 116 of Law 9920/2008; see al-corporate-tax.

Cross-border points

• Withholding still applies. A related-party payment of interest, royalties, or services to a non-resident carries 15% withholding, dividends 8% (Law 29/2023 arts. 58, 59; see al-corporate-tax). A transfer pricing adjustment does not remove the withholding duty on the amount actually paid.
• Treaty relief and related parties. Under Instruction No. 11 of 23.7.2024 on applying double tax treaties, a payment between related persons, or to a country listed in Annex 1 of Instruction 29/2023, is classed as a risk case when the treaty documentation is reviewed. The treaty documentation is filed by the end of the following calendar year; late filing costs ALL 10,000 a month for up to 24 months and then the treaty benefit is lost (Law 9920/2008 art. 115/3).
• Unpaid non-resident fees. Technical, consulting and management fees invoiced by non-residents and unpaid by the return date are added back until paid (Law 29/2023 art. 50; see al-corporate-tax). This is separate from, and can stack with, a transfer pricing challenge to the size of the fee.
• Foreign tested party. A foreign related party can be the tested party if the method is the most appropriate one, the choice follows point 10, and the taxpayer gives enough information on it (point 10.3).
• Not an EU member. The EU Arbitration Convention and the EU dispute resolution directive do not apply. Disputes go through the mutual agreement procedure of the relevant treaty (point 13.5).
• Country-by-country reports are used for high-level risk assessment only; no adjustment is based on the report itself (Law 9920/2008 art. 63/6(1)).

Worked examples

Example 1: distributor below the range, adjusted to the median

Drini Distribution SHPK is an Albanian subsidiary of an Italian manufacturer. In 2026 it buys goods from its parent for ALL 180,000,000 and sells them in Albania for ALL 200,000,000. Its operating profit is ALL 2,000,000, a 1.0% net margin on sales. Its controlled transactions (ALL 180,000,000) are above ALL 50,000,000, so it files the annual controlled transactions notice by 31 March 2027.

On audit, the benchmark of seven comparable distributors shows net margins on sales of 2.8%, 2.9%, 2.9%, 3.0%, 3.1%, 3.6% and 3.7% (the range in Instruction 29/2023, point 12.3, example 1). Drini's 1.0% is outside the range, so the administration adjusts to the median. With seven results the median is the fourth, 3.0%. Arm's length operating profit is ALL 6,000,000, so taxable profit rises by ALL 4,000,000 and extra corporate tax at 15% is ALL 600,000.

If Drini produced compliant documentation within 45 days, it pays the ALL 600,000 plus late payment interest and no penalty. If it did not, the art. 114 penalty is added. Assume the extra tax is paid more than 365 days after the original due date, so the 365-day cap applies: 0.06% × 365 = 21.9% of ALL 600,000, which is ALL 131,400. Late payment interest is due in both cases and is not computed here.

oaCopy code
name: Drini Distribution SHPK, 2026, net margin adjusted to the median
inputs:
  sales: 200000000
  operating_profit: 2000000
  median_margin_pct: 3.0
  cit_rate_pct: 15
  penalty_daily_pct: 0.06
  penalty_days: 365
steps:
  - median_margin: median_margin_pct / 100
  - arm_length_profit: sales * median_margin
  - adjustment: arm_length_profit - operating_profit
  - extra_cit: adjustment * cit_rate_pct / 100
  - penalty_without_docs: extra_cit * penalty_daily_pct / 100 * penalty_days
expected:
  arm_length_profit: 6000000
  adjustment: 4000000
  extra_cit: 600000
  penalty_without_docs: 131400

Example 2: related-party loan and the 30% EBITDA cap

Vlora Energy SHA borrowed ALL 400,000,000 from its Austrian parent at 9% a year. The client confirms, and its transfer pricing file supports, that 9% is arm's length and not above the Bank of Albania average 12-month lending rate that caps deductible interest under art. 50(1)(dh). So all ALL 36,000,000 of interest passes the first two tests. It has no interest income. The loan balance alone exceeds ALL 50,000,000, so the annual notice is due.

For 2026, profit before tax is ALL 20,000,000 and depreciation is ALL 14,000,000 (tax and book the same). EBITDA is ALL 20,000,000 + ALL 36,000,000 + ALL 14,000,000 = ALL 70,000,000. The cap is 30%, ALL 21,000,000. Net interest of ALL 36,000,000 exceeds it by ALL 15,000,000, which is added back and carried forward for five years. Taxable profit is ALL 35,000,000 and corporate tax at 15% is ALL 5,250,000.

oaCopy code
name: Vlora Energy SHA, 2026, related-party interest above 30% of EBITDA
inputs:
  loan: 400000000
  rate_pct: 9
  interest_income: 0
  profit_before_tax: 20000000
  depreciation: 14000000
  cap_pct: 30
  cit_rate_pct: 15
steps:
  - interest_expense: loan * rate_pct / 100
  - net_interest: interest_expense - interest_income
  - ebitda: profit_before_tax + interest_expense + depreciation
  - cap: ebitda * cap_pct / 100
  - disallowed_carried_forward: max(net_interest - cap, 0)
  - taxable_profit: profit_before_tax + disallowed_carried_forward
  - cit: taxable_profit * cit_rate_pct / 100
expected:
  interest_expense: 36000000
  ebitda: 70000000
  cap: 21000000
  disallowed_carried_forward: 15000000
  taxable_profit: 35000000
  cit: 5250000

Ask the client first

1. The group chart, with percentages and board control. Any 50% link, direct or through a chain, board control, or a relative makes the party related.
2. Which counterparties are abroad, or in a listed jurisdiction. Only cross-border, permanent establishment, or listed-jurisdiction dealings are controlled transactions under art. 32(2).
3. Total controlled transactions for 2026, including loan balances. Above ALL 50,000,000 the annual notice is due with the 31 March 2027 return.
4. Is there a transfer pricing file that could be produced within 45 days? It decides whether an adjustment carries the 0.06% a day penalty.
5. Related-party loans: rate, balance, and EBITDA. The arm's length rate, the art. 50(1)(dh) rate cap and the 30% EBITDA cap all apply.
6. Group consolidated revenue and where the ultimate parent is. At ALL 105 billion or more an Albanian parent files a country-by-country report; every Albanian group entity files the notification.

Sources

Not yet confirmed: whether the annual notice is now filed only on e-Filing; the Bank of Albania 12-month lending rate figures that cap deductible interest under Law 29/2023 art. 50(1)(dh) (the rule is the rate for the month the loan was taken; the figures were not read); whether the published 7.8% late payment interest rate is an annual rate applied per day (neither Law 9920/2008 art. 76 nor Instruction 24/2008 point 76 says); whether EBITDA starts from taxable income (Law 29/2023 art. 30(2)) or profit before tax (General Instruction 26/2023 point 30.2 as amended) where they differ; how the administration adjusts purely domestic related-party transactions under art. 44 without the art. 32 machinery; the detailed country-by-country report content set by Council of Ministers decision under Law 9920/2008 art. 63/4(2).

Contributed by Ryan Duguid.

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Today's figures and who stands behind this skill

This file is an AI skill (tax rules your AI follows) from OpenAccountants, copied on 2026-10-23. Rates, thresholds and deadlines change. For the current version of this skill, its official sources and the named accountant (if any) who stands behind it, call get_skill with slug al-transfer-pricing on the OpenAccountants connector (https://www.openaccountants.com/connect), or read https://www.openaccountants.com/skills/al-transfer-pricing. If neither is available, confirm every figure against the official source pages cited above before relying on it.