- The accounting of a company with a foreign owner follows the same rules as any Albanian company, but withholding tax to Italy varies according to the bilateral agreement.
- A construction site establishes a permanent establishment after six months under Albanian law, but after twelve months for an Italian enterprise. The agreement applies.
- On dividends to Italy, 81 percent is withheld, not 101 percent, because the domestic rate is lower than the treaty limit. On interest and royalties, 51 percent is withheld instead of 151 percent.
- Documentation of transactions with the parent company becomes mandatory for controlled transactions exceeding 50,000,000 lek per year, with a deadline of March 31.
- The employer's cost on the gross wage is 16.71%, regardless of the employee's nationality.
Accounting for a company with a foreign owner in Albania follows the same law as any other resident company, namely Law No. 25/2018 on Accounting and Law No. 29/2023 on Income Tax. The change is not in bookkeeping. It is in the moment when the tax obligation arises and in the rate that applies to funds leaving Albania for the owner's country.
For Italian entrepreneurs, this distinction has a single source: the double taxation avoidance agreement between Albania and Italy. It was signed on December 12, 1994, and has tax effect as of January 1, 2000. From our daily work with Italian clients we see the same mistake. The provision of Albanian law is applied even where the treaty provides a lower rate. Or the opposite happens: the treaty rate is applied even where Albanian law is already more favorable.
This guide brings together in one place what a foreign entrepreneur encounters in turn. The form of presence in Albania and the moment when tax residency arises. The actual rates on dividends, interest, and fees. The documentation of transfer pricing with the parent company, employment costs, and the annual calendar. Each figure is provided with the relevant article, and where the act's text has not been cited, this is stated explicitly.
Read also: Opening a business in Albania by foreign nationals
Three forms of presence in Albania, and which one to choose when
Before taxes comes a single choice. A new limited liability company with an Italian partner, a branch of the parent company, or a Representative office. All three are registered with the National Business Center, but they allow different things.
Law No. 7764/1993 on foreign investments allows 100% foreign ownership. No Albanian partner is required, and no separate minimum capital is required for foreigners. The charter capital of an LLC remains 100 lekë, the same as for a domestic founder.
| Form | What is allowed and what is not |
|---|---|
| New Company LLC. | A separate legal entity under Albanian law. It can issue invoices, hire employees, and distribute dividends. A partner's liability is limited to their capital. The most commonly used form when the business activity is stable. |
| Branch of the parent company | It is not a separate legal entity. The Italian company is directly liable for its obligations. It may carry on commercial activities and is treated as a permanent establishment for tax purposes. |
| Representative office | It does not carry out commercial activities and does not issue invoices. It serves for presentation, market research, and coordination. The cost is lower, but it does not generate revenue in Albania. |
What does the QKB require for the foreign partner and administrator?
When the founder is an Italian company, the QKB requires the parent company's documents, apostilled and translated into Albanian by an official translator. This stems from Article 28, paragraph 5, letters a through d, of Law No. 9723/2007 on business registration. Typical documents include the deed of incorporation, the articles of association, the extract from the Italian commercial register, and the decision of the body authorizing the investment.
When the founder is an Italian individual, an identification document is sufficient. A foreign administrator does not need a work permit merely to serve as an administrator. He needs one if he actually works in Albania under an employment contract. We address this distinction in Rules for foreigners in Albania.
Who must be declared as the beneficial owner and within how many days?
The beneficial owner, that is, the natural person who ultimately owns or controls the company, must be declared within 30 days of registration. The basis is Law No. 112/2020, Article 13, as amended by Law No. 6/2022. When ownership passes through one or more Italian companies, the chain is traced back to the natural person.
This obligation is often overlooked because it is not part of the initial registration form. It is a separate, secondary application with its own deadline.
When the tax obligation arises in Albania
A company registered in Albania is a tax resident from day one. It pays 15% on taxable profit in accordance with Articles 40 to 43 of Law No. 29/2023. Until December 31, 2029, the transitional provision of Article 69 also remains in effect. Under this provision, the rate is 0.1% when annual gross revenue does not exceed 14,000,000 lek. The assessment is based on turnover, not on profit.
The real question arises when the Italian company doesn't establish an Albanian company at all but comes to work. Then the issue isn't residency, it's… permanent seat.
When a construction site becomes a permanent headquarters, after 6 months or after 12
Here, two texts provide two answers, and this is the most important distinction in the entire article. Article 5 of Law No. 29/2023 states that a construction or assembly site establishes a permanent establishment when it exceeds six months. Article 5, paragraph 2, letter g, of the Albania-Italy agreement sets the threshold at more than 12 months.
For an Italian enterprise, the agreement prevails. Thus, between the sixth and twelfth months, the project does not establish a permanent establishment in Albania, provided that the Italian residence is documented. If documentation is lacking, the domestic six-month threshold applies and the profits of that project are taxed at 15%.
For the provision of services, the Albanian law sets another threshold: more than six months within a 12-month period. For the exploration of natural resources, the threshold is more than three months. Both are in Article 5 of Law No. 29/2023.
When an individual becomes an Albanian tax resident
An Italian administrator who spends 183 days or more during the tax year in Albania becomes an Albanian tax resident. The same effect applies when the center of vital interests is in Albania, regardless of the number of days. The basis is Article 8 of Law No. 29/2023.
The consequence is broad. The Albanian resident declares worldwide income in Albania, not just Albanian income. Tax paid abroad is credited up to the amount of the Albanian tax on the same income, in accordance with Articles 25 and 26. Any excess is not refunded.
Dividends, interest, and fees to Italy
When money flows from the Albanian company to Italy, withholding tax is applied. The domestic rate and the treaty cap are not the same thing, and the lower of the two is always applied. The table below shows exactly this, because in two out of three cases the treaty prevails and in one case Albanian law does.
| Payment type | Albanian law | The agreement | Applies |
|---|---|---|---|
| Dividend | 8%, Article 59 | up to 10%, Article 10, Point 2 | 8% |
| Interest | 15%, Article 58 | up to 5%, Article 11, paragraph 2 | 5% |
| Honoraria and author's rights | 15%, Article 58 | up to 5%, Article 12, paragraph 2 | 5% |
Why is 8% applied to the dividend instead of 10%?
The agreement does not set a rate; it sets a cap. Article 10, paragraph 2, states that the withholding tax shall not exceed 10% of the gross amount when the recipient is the beneficial owner. Albanian law already applies a 8% rate on dividends, pursuant to Article 59 of Law No. 29/2023.
Since 8% is below the 10% ceiling, 8% applies. The agreement never raises an internal rate; it only caps it. This is precisely the case where relying on the agreement's rate would be a mistake to the client's detriment.
What document is required to implement the agreement?
The benefit under the agreement does not arise automatically. The Italian recipient must prove his Italian tax residency with a residence certificate issued by the Italian tax authorities. Without it, the withholding agent applies the full rate of 15%.
The documentation must be submitted within the following calendar year. Late filing costs 10,000 lek per month, up to 24 months. After 24 months the right to enforce the agreement is lost and the full tax is payable together with penalties and interest. The basis is Article 115/3 of Law No. 9920/2008, added by Law No. 95/2023. The procedure and formats are at double taxation avoidance agreements.
Limitation. The full text of Directive No. 11, dated July 23, 2024, has not been read by us. Therefore, we provide the obligation and the deadline, but not the complete list of documents in Annex 2.
Transfer prices when working for the parent company
Many Albanian companies owned by Italians operate primarily or exclusively for the parent company. This is entirely legal, but it creates an obligation that often comes to light only later. The authorities may require proof that the prices between the two related companies are market prices.
When the obligation for annual notification arises
The annual notification of controlled transactions becomes mandatory when the total controlled transactions exceed 50,000,000 lek within the year, including loan surpluses. The deadline is March 31, together with the annual profit tax return.
The delay in notification costs 10,000 lek per month of delay, with no limit on the number of months. The basis is Article 115(1) of Law No. 9920/2008, and the threshold comes from Instruction No. 29, dated November 16, 2023, points 14.1 and 14.3. We maintain the full treatment on the page about. transfer of the price.
How long do you have to submit the file after the request?
When the administration requests the documentation file, the submission deadline is 30 days. The translation of foreign documents has 45 days. Both deadlines are in the same directive.
A detail worth noting. Once the price transfer file has been submitted, a subsequent adjustment brings only additional obligations and interest, not penalties. So the pre-prepared file isn't just a formality; it removes a real risk.
Accounting of a company with a foreign owner, currency and statements
An Albanian company owned by a foreign owner maintains its accounting and presents its financial statements in lek, even when it invoices everything in euros. This stems from Law No. 25/2018 and the national accounting standards. Invoicing in euros is allowed, but for accounting purposes the conversion is made at the exchange rate on the date of the transaction.
What happens with the exchange rate differences?
The differences in the exchange rate between the invoice date and the date of collection are income or expenses of the period. For a company that invoices in euros and pays salaries in lek, this item is not insignificant and directly affects taxable profit.
Which mirrors are required and until when?
Annual financial statements and the assembly resolution must be filed with the QKB by July 31. The minimum set includes the statement of financial position, the statement of performance, and the explanatory notes. The statement of cash flows is required only for medium, large, and public interest entities. The practical steps are in our guide on the submission of financial statements to the QKB.
Tax invoicing and billing to a client abroad
The invoice issued by a Albanian entity is taxed, even if the client is located abroad and even if the invoice is in euros. There is no exemption for the export of goods or services. The full rules are available on the page about. the electronic invoice.
What changes in export VAT?
Export of goods is subject to a zero rate under Articles 57 through 67 of Law No. 92/2014. The threshold for mandatory VAT registration remains at 10,000,000 lek annual turnover, and voluntary registration is allowed above 5,000,000 lek. For a company that exports, voluntary registration often makes sense because it grants the right to claim a refund of the VAT on purchases.
48-hour deadline when the internet connection goes down.
During the connection interruption, the invoice is issued without the identification number and printed on paper. Within 48 hours of the interruption, the connection is reestablished and all such invoices are submitted to the tax administration. Only then are they considered properly fiscalized. The basis is Article 29 of Law No. 87/2019.
How much does an employee in Albania really cost?
This is the first question of almost every Italian entrepreneur, and his answer often stems from a flawed comparison with Italian costs. The employer's cost on the gross wage in Albania is 16.71%, regardless of the employee's nationality.
What does the employer pay on top of the gross salary?
Total contributions are 27.91% of gross pay, divided into 16.71% by the employer and 11.21% by the employee. The national minimum wage is 50,000 lek per month as of January 1, 2026, and the maximum wage for social contribution purposes is 186,416 lek. We provide the full three-tier wage calculation in the article. How much does an employee in Albania cost?.
Foreign worker, unique permit and contributions
Contributions for a foreign employee are exactly the same as for a domestic employee. There is no special rate and no citizenship exemption. The single permit costs 8,000 lek for up to one year, 9,000 lek for up to two years, and 10,000 lek for up to three years. The fees are those published by the Ministry of the Interior. We provide full coverage on the page about it. Employment of foreigners.
Limitation. The bilateral social security agreement between Albania and Italy exists, but the Social Security Institute does not publish its status on a country-by-country basis. Therefore, we do not provide the date of entry into force, the form number, or the duration of coverage here. These are verified on a case-by-case basis before a worker posting scheme is established.
Calculated example. An Italian company with three employees in Tirana.
The figures are rounded and do not come from any real client. The company is an LLC with a sole partner, an Italian company, an administrator with a gross salary of 120,000 lekë, and two employees each earning 80,000 lekë.
Step-by-step calculation
The total gross monthly salary is 280,000 lek. The employer's contribution is 16.71% of this amount, i.e., 46,760 lek. The monthly staff cost is 326,760 lek, and the annual cost is 3,921,120 lek.
Suppose that after all expenses the company closes the year with a taxable profit of 2,000,000 lek and that annual revenue has exceeded 14,000,000 lek. The profit tax is 15%, so 300,000 lek. Net profit after tax remains 1,700,000 lek.
The assembly decides to distribute the entire amount as a dividend to the Italian parent company. 8%, or 136,000 lek, is retained, and 1,564,000 lek goes to Italy. If the 10% conventional cap were applied, the withholding would be 170,000 lekë, that is, 34,000 lekë more. This is why the difference between the cap and the actual rate is not a theoretical detail.
The deadline for paying the tax on a declared but unpaid dividend is the end of the third month following the month in which the assembly made the decision. The basis is Article 56(2) of Law No. 29/2023.
Annual deadlines for a company with a foreign owner
The calendar does not differ from that of any Albanian company, but two entries are added only for this profile: notification of controlled transactions and documentation of the agreement's implementation.
| Deadline | Obligation |
|---|---|
| The 11th of the following month | Sales and purchase VAT books |
| The 14th of the following month | VAT declaration and payment |
| The 20th of the following month | Payroll list, contributions, and withholding tax |
| March 31 | Annual profit tax return and notification of controlled transactions exceeding 50,000,000 lek. |
| March 31, June 30, September 30, December 31 | Quarterly prepayment installments |
| July 31 | Financial statements and the assembly's decision at the QKB |
| Within the following calendar year | Documentation for the implementation of the double taxation agreement |
Inspections and fines that most often affect a new company
Fines are not unique to foreign-owned companies. However, two of them appear more often in this profile because they relate to deadlines that do not exist in Italy or have a different date.
Main fines, with the corresponding section
- Failure to file within the deadline: 10,000 lekë for VAT or corporate income tax payers, 5,000 lekë for others. Law No. 9920/2008, Article 113.
- Late payment: 0.061 TP3T per day on the amount due, for up to 365 days. Article 114.
- Inaccurate statement, 20% of the difference. Article 115.
- Undeclared employee: 200,000 lek for VAT and profit tax payers; 50,000 lek for others. Article 119.
- Delay in reporting controlled transactions: 10,000 lek per month, unlimited. Article 115/1.
- Delay in submitting the agreement documentation: 10,000 lek per month, up to 24 months. Article 115/3.
- Late payment interest of 7.81 TP3T per year, effective as of April 11, 2026, according to the official table of the General Directorate of Taxes.
Fines for a single obligation do not exceed 100% of the obligation itself, pursuant to Article 111, paragraph 5. Late interest is calculated separately and does not count toward that limit. We provide the full treatment on the page about it. fines and late fees.
Checklist and the three steps for today
First step: check whether the beneficial owner has been declared. The deadline is 30 days from registration, and this application is not processed automatically with the initial registration.
Step two: collect the recipient's Italian residence certificate before the first payment of dividends, interest, or honoraria. Without it, 15% is withheld instead of 8% or 5%.
Step three: total the value of transactions with the parent company during the year, including loan balances. If the amount approaches 50,000,000 lek, the transfer pricing file is prepared by March 31, not after the administration's request.
Every time there is a tax or financial change that affects your business, we notify you directly by email with a practical explanation.
Send me free notificationsEach section takes an activity or a situation and follows it from registration through deadlines, monitoring, and fines.
- Part 1. Restaurant and bar
- Part 2. Dental and medical clinic
- Part 3. The ranch and its accommodation facilities
- Part 4. IT business and service exports
- Part 5. Construction work and technical trades
- Part 6. Store and retail trade
- Part 7. Company with foreign owners, the Italian case. You are here.
The next part takes on small-scale production, agronomy, and garment manufacturing.
Legal basis
- Law No. 29/2023 “On Income Tax,” as amended. Articles 5, 8, 25, 26, 28, 40 through 43, 56, 58, 59 and 69.
- The agreement between Albania and Italy for the avoidance of double taxation, signed on December 12, 1994, ratified by Law No. 7934 of May 17, 1995, effective as of January 1, 2000. Articles 5, 10, 11, and 12.
- Law No. 9920/2008 “On Tax Procedures,” as amended. Articles 111, 113, 114, 115, 115/1, 115/3 and 119.
- Law No. 25/2018 “On Accounting and Financial Statements”.
- Law No. 9723/2007 “On Business Registration,” Article 28, paragraph 5.
- Law No. 112/2020 “On the Register of Beneficial Owners,” Article 13, as amended by Law No. 6/2022.
- Law No. 7764/1993 “On Foreign Investments”.
- Law No. 92/2014 “On Value Added Tax,” as amended. Articles 49, 57 through 67, and 117.
- Law No. 87/2019 “On the invoice and the monitoring system of turnover,” Article 29.
- Instruction No. 29, dated November 16, 2023, points 14.1 and 14.3, on transfer pricing.
- Government Decree No. 776, dated December 19, 2025, on the minimum wage.
We keep the full text of the accounting law at page of Law No. 25/2018. National standards and their announcements are published by National Council of Accountancy.
Frequently asked questions
Can an Italian own a 100% of an Albanian company?
Yes. Law No. 7764/1993 on foreign investments allows full foreign ownership, without a local partner and without prior authorization. The charter capital of an LLC remains 100 lek.
What is different about the accounting of a company with a foreign owner compared to a domestic company?
Bookkeeping and financial statements are the same. Three things differ: withholding tax on outbound payments, the documentation of prices with a related company, and currency rate differences when invoicing in euros.
Should I form a company if my project lasts eight months?
For a construction or assembly site, the Albania–Italy agreement sets the threshold for a permanent establishment at 12 months. Thus, eight months do not create one, provided that Italian residency is documented. Without documentation, the domestic threshold of six months applies.
Can I keep the accounting in euros?
No. Accounting is maintained and financial statements are presented in lek. Invoicing in euros is allowed, and conversion is made at the exchange rate on the date of the transaction.
How much does an employee with a gross salary of 100,000 lekë cost?
The employer's cost is 116,700 lekë per month, which is the gross wage plus a 16.71% contribution. The employee receives in hand the gross wage minus an 11.21% contribution and minus payroll taxes.
When should I submit the notification of transactions with the parent company?
By March 31, together with the annual declaration, when controlled transactions exceed 50,000,000 lek within the year. The delay costs 10,000 lek per month, with no limit on the number of months.
Is the tax paid in Albania recognized in Italy?
The agreement provides for the elimination of double taxation through credit. The specific method of crediting in Italy is handled by the company's Italian advisor, because it is governed by Italian legislation rather than by Albanian law.
