Albania’s newly enacted Income Tax Law No. 29/2023 significantly modifies the imposition of withholding tax. One key aspect of this updated income tax legislation is the distinction it highlights between payments to registered persons (local businesses) and payments to non-registered persons (individuals or foreign organizations)
Furthermore, the law offers a more precise definition of the withholding tax agent. It mandates that payments for services provided by individuals not registered for taxation are subject to a 15% withholding tax and must be declared through payroll declarations.
Despite these changes, the withholding tax rates are not modified and remain at the standard 15%. The rate applies to all payments subject to withholding tax, while a reduced 8% withholding tax rate is reserved for dividends.
For the year 2024, the withholding tax return format will be similar to the format of 2023. However, beginning in January 2025, a new withholding tax return format will be implemented per the new legal provisions.
On 20 September 2023, Albania published Income Tax Instruction No. 26 in the Official Gazette to enforce Income Tax Law No. 29/2023. The Income Tax Law No. 8438/1998 was repealed and replaced by Law No. 29/2023, issued on 1 May 2023 and enacted on 1 January 2024.
DTT applications
Albania has also amended the law on procedures governing double tax treaty (DTT) applications, deadlines, and related penalties. The changes went into force on 1 January 2024. The main provisions are as follows:
- In the previous law, entities could submit DTT applications within two years of payment from the payment date for an invoice or income. As per the new law, entities must file DTT applications within the following year of payment, irrespective of the payment date of the previous year. Therefore, DTT applications for payments made in 2024 must be submitted for approval by tax authorities by 31 December 2025.
- Failure to submit the DTT application within the following calendar year will incur a penalty of ALL 10,000 per month of delay, up to 24 months. Beyond this period, entities will lose all DTT benefits.
