Introduction and Background
Double taxation occurs when the same taxpayer pays tax on the same income in two different countries. This situation creates an unfair burden on businesses and individuals with cross-border activities, which is why countries enter into Double Taxation Avoidance Agreement (DTAA) that coordinate how each income will be taxed in each state. Albania, like many other countries, has such a network of bilateral tax agreements with partner states, aiming to promote investment and trade without double taxation. The effective implementation of these agreements is key for the Albanian business community, especially now that the economy is becoming increasingly globalized.
In July 2024, the Ministry of Finance approved Instruction No. 11, dated 07.23.2024, which set the new criteria and procedures for the practical implementation of MSHTDs in Albania. This instruction comes nearly 20 years after the previous instruction (No. 6, dated 10.2.2004) and reflects the legal changes and the country's new economic and fiscal reality. Most recently, in July 2025, this same directive was amended and supplemented with Instruction No. 15, dated 8.7.2025 to address some practical ambiguities and to update the process according to current needs.
Hereafter, we will explain the main content of the instruction, the legal basis and key fiscal principles it presents; we will highlight recent changes and their reasons; as well as analyze the implementation of tax agreements in Albania to date – what challenges there have been and how the new instruction is expected to address them.
Furthermore, we will discuss the importance of FTAs for Albanian businesses, presenting the updated list of current agreements, a concrete step-by-step example of applying an agreement, a discussion on the domestic legal framework (including the hierarchy between national laws and international agreements), key risks of non-compliance/misinterpretation, and recommendations for further improvements in line with international best practices.
Content of Directive No. 11 (07.23.2024) and Key Principles
Instruction No. 11/2024 It aims to clarify and unify the way the provisions of the MSHTDs are applied in Albania. It clearly defines the legal basis for implementation (based on Article 102(4) of Constitution and in the laws in effectand repeals the old instruction from the year 2004, thus modernizing the approach after a long period of economic and legal developments. The new Guidance begins with a few essential definitions and principles that are key to the correct interpretation of bilateral tax agreements. These principles create a common language for tax professionals and businesses, so that the application of the agreements becomes uniform. Below are the four main concepts addressed in the Guidance:
The principle of tax residency
To determine taxability, one must first determine the tax residency of the person (natural or legal). The guideline explains the term “resident” in the tax sense: a person or entity is considered Resident of a State if they meet the legal criteria of that state (e.g., period of stay, center of vital interests, place of incorporation, etc.) Tax residents are required to declare and pay tax in their country on their global income, that is, on all income worldwide. In practice, this means that a business or individual resident in Albania is taxed in Albania on profits wherever they are earned (inside or outside the country). The residency principle focuses on the taxpayer: if they are a resident of Albania, then Albania has the right to tax them. for global revenues, provided that there is no agreement that restricts these rights.
The principle of the source of income
This principle complements the principle of residence and focuses on the location of the source from which the income originates. Under the source principle, any income or gain is initially considered taxable in the state where it is realized. This applies regardless of whether the recipient of the income is a resident elsewhere. The guidance provides illustrative examples: for example, income from real estate located in a state must be taxed in that state (the location of the property), regardless of where the owner resides. Similarly, if a foreign artist gives a concert in Albania and receives a fee, the source principle requires that this fee be taxed in Albania (where the activity took place) even if the artist is a tax resident elsewhere. This principle ensures that the state where the economy is generated (the sale, the service, the asset) receives its share of the tax. The combination of the residence principle and the source principle in the legislation of most countries is precisely why the concept of a digital tax arises. double taxation when the entities operate cross-border.
The concept of double taxation
When a person or company is a resident of one state (and consequently subject to global income tax there) but also earns income in another state (which taxes that income on a source basis), it may happen that The same income being taxed twice – once from each state. The directive emphasizes that double taxation typically manifests in two forms: (a) legal double taxation, when the same person is taxed twice for the same income, once as a resident and once in the source state; and (b) economic double taxation, when the same income is taxed to two different entities (e.g., a company's profit is taxed and then the distributed dividends are taxed to the shareholders).
Also, legal double taxation can occur in the case of double residence – when two states, under the criteria of their laws, consider the same person to be a tax resident (e.g. an individual may simultaneously meet the residency criteria in both Albania and another country). In the absence of a resolution mechanism, a dual resident would be taxed fully in both jurisdictions. DTAAs address precisely these situations by establishing rules on which state is considered the taxpayer's primary residence and how double taxation will be eliminated.
Typically, agreements provide that the source state either waives a portion of the tax (by reducing the withholding tax rate), or the state of residence gives the taxpayer a credit for the tax paid abroad, or exempts that income from domestic taxation. In both cases, the final result is that the taxpayer does not pay tax twice on the same income. The new guidance clearly presents these principles, making them understandable for its users.
Permanent Set (PS)
One of the most important contributions of the guidance is the detailed explanation of the concept of “permanent establishment” according to Article 5 of the Model. OECD (also reflected in Article 5 of Law No. 29/2023 “For Income Tax”The permanent establishment is the key point that determines whether a nonresident business has a sufficient economic presence in Albania to be taxed here on the profits attributable to that presence. The guidance emphasizes that a company resident in another state can be taxed in Albania only if it has a permanent establishment in Albania and only on the income attributable to that establishment. The classic definition of a PE is “a fixed place of business, through which a foreign entity carries on its activities permanently in the other state.”.
This could be an office, branch, factory, workshop, construction site (for a determined period of time), etc. The instruction gives concrete examples: e.g., an Italian company performing maintenance services for medical equipment for a hospital in Albania, having regular staff and a warehouse of equipment on the hospital premises, will be considered to have established a permanent establishment in Albania. This implies that the profit attributable to the activity in Albania (e.g., services rendered to the hospital) will be taxed in Albania, while the rest of the foreign company's profit remains taxable only in its country of residence (Italy).
The OECD's concept protects both the Albanian tax administration (from foreign businesses operating here without registration) and foreign businesses (from unjustified taxation if their activity in Albania is peripheral or temporary). The guidance requires taxpayers to carefully assess their physical or economic presence in foreign countries to understand whether it constitutes a permanent establishment or not – a decision that then determines where profits will be taxed.
Besides these key concepts, Instruction no. 11 It also addresses other general issues such as: definitions of terms frequently used in agreements (e.g., “person,” “entity,” “competent authority”), how different categories of income are treated (employment income, pensions, capital gains, etc., according to specific articles of the model agreements), as well as references to the Albanian Model Agreement for the Avoidance of Double Taxation. The latter (Albanian Model) is included in Annex 1 of the instruction as a guiding document for negotiators when Albania concludes new agreements. The model is primarily based on the OECD Model, with necessary adaptations for the Albanian context.
With these basic principles and definitions, the guidance aims to provide both tax authorities and businesses and their advisors with a unified theoretical framework for consistently interpreting tax treaties. This is particularly important because, in the absence of guidance, the terms of the agreements could be interpreted differently by various taxpayers, leading to uncertainty and the risk of non-compliance.
Implementation Procedures for Agreements and Required Documentation
Beyond definitions, Instruction no. 11/2024 set out the concrete procedures that taxpayers must follow to implement a double taxation avoidance agreement in practice. The main focus here is on taxpayers resident in Albania (e.g., Albanian businesses) who conduct transactions with non-residents (foreign businesses or individuals) and wish to benefit from the tax reliefs provided by an Albanian DTTA with their country. The procedures ensure that the tax relief (e.g., non-payment of withholding tax or application of a reduced rate according to the agreement) is granted only when the conditions are met and is proven with regular and complete documentation.
The instruction provides that the taxpayer resident in Albania has the primary responsibility for the correct application of the treaty and must notify the Albanian tax administration in any case where he has applied the provisions of a double taxation agreement. This is done by submitting (electronically uploading) a package of supporting documents within specified deadlines. According to Article 115(3) of Law No. 9920/2008 “For Tax Procedures”The documentation must be submitted within the calendar year following the year in which the taxable transactions under the agreement were carried out. This means, for example, that for payments made during 2024 under an MSHTD, the documents must be submitted by December 31, 2025.
The Law “On Tax Procedures” also provides for an administrative fine if the taxpayer fails to submit the documentation for implementing the MSHTD within the prescribed deadline. Currently, this fine is relatively modest (e.g., around 10,000 lekë for failure to notify on time), but the main risk is not so much the fine as the possibility of losing the right to relief. If the documents are missing, the administration may not recognize the preferential treatment and may demand the full tax as if the agreement had never been implemented. Therefore, it is vital that companies comply with these deadlines and requirements. The guidance makes it clear that notifications are classified by risk by a dedicated structure within the General Directorate of Taxes. Low-risk notifications (e.g., routine cases with proper documentation) are handled more simply, while those with higher risk (e.g., very large amounts, complex structures, offshore locations, etc.) are subject to in-depth analysis and may be subject to subsequent audits. This risk-focused approach is in line with best practices, as it concentrates the administration's resources where potential abuses exist, while routine cases are simply monitored minimally.
Deri në krijimin e plotë të modulit elektronik për këtë proces, administrata tatimore ka pranuar edhe dorëzimin e dokumentacionit në formë hardcopy (letër) ose me e-mail. Udhëzimi parashikoi një periudhë tranzitore ku formulari i aplikimit (Aneksi 2) mund të dorëzohej i nënshkruar në letër, derisa të mundësohej plotësisht formulari online (i ashtuquajturi “Aneksi 4”). Me zhvillimet e fundit, pritet që e gjithë procedura të kryhet 100% online, çka do të thotë eliminim i dokumenteve në letër dhe thjeshtëzim burokracie.
Also, the guidance (at point 4) describes the procedure for issuing the tax residency certificate to taxpayers resident in Albania who need one to prove their status in other states. This is the other side of the coin: when an Albanian business has income in a foreign country and wants to apply the treaty there (to avoid double taxation), it is usually required to submit a certificate of residence issued by the Albanian authorities. The guidance stipulates that the General Directorate of Taxes issues residence certificates for natural or legal persons resident in Albania within a specified timeframe after the applicant submits the application and supporting documents. The certificate, signed and stamped by the DPT, enables the taxpayer to prove their status as a resident of Albania to foreign authorities and thus claim the benefits of the relevant double taxation treaty. This procedure is purely administrative but very important, and in practice the DPT has proven efficient in issuing them, often within a few days.
In conclusion, section 11 of the guidance procedures establishes a clear framework of action: an Albanian taxpayer who wishes to avoid double taxation must follow the “declare and document” rules. This increases legal certainty for businesses (they know exactly what is required of them) and at the same time gives the administration the tools to monitor and control compliance, without hindering the flow of business with lengthy approval procedures.
Latest Changes: Directive No. 15 (07.08.2025) and Justification
As mentioned, basic instruction no. 11 has undergone a supplementary change in July 2025. Instruction No. 15, dated July 8, 2025. was approved with the aim of further improving and clarifying certain implementation procedures of the MSHTD. This normative act is titled “On an amendment to the Minister of Finance's Instruction no. 11, dated 23.7.2024...”, implying that it does not entirely replace the existing instruction, but modifies or adds specific points to it. What are these changes, in essence, and why were they made? Below we present the main points:
Extension of the transitional period and transition to the electronic system
One of the main reasons for the change was the practical situation with the electronic tax system. Instruction no. 11 foresaw the transition to online declaration of documentation, but by mid-2025, the electronic portal still did not have a fully functional module for this purpose. As a solution, Instruction no. 15 confirmed that procedures for applying for MSHTD facilities will continue as before until the electronic system is fully operational. In other words, taxpayers must continue to submit the form (Annex 2) and supporting documents in the specified manner (even if this means uploading scans or physical submission) without waiting for a fully automated process. The goal was to avoid a vacuum or confusion: so that businesses do not stop implementing agreements due to uncertainty about the declaration method.
Formalization of the new electronic form (Annex 4)
The change also paved the way for the introduction of a special electronic form (provisionally named Annex 4). This form is expected to eventually replace the current form (Annex 2) once e-filing is ready. Instruction no. 15 authorizes the tax administration to transition to the new format without needing another instruction, thus legally incorporating it in advance. This will allow for a faster transition towards fully digital filing. Once this module is activated, taxpayers are expected to simply fill in all information online (essentially replacing the submission of PDF documents with filling in fields on the tax portal). This innovation will significantly ease the workload for both businesses and the DPT itself (fewer documents to verify manually and the possibility of automatic data processing and analysis).
Clarifications of deadlines for specific cases
Since Directive no. 11 came into effect in the second half of 2024, the need arose to clarify some transitional situations. For example, for invoices issued before the directive came into effect (e.g., December 2023) but paid later, how should one proceed? With the amendment made, it was stipulated that invoices dated up to 12.31.2023 are treated according to old procedures (repealed Directive no. 6/2004), while only new invoices (from 01.01.2024) are subject to the new rules. This clarification was necessary to avoid ambiguities and disputes between taxpayers and inspectors regarding the interpretation of transitional provisions.
Consolidation of the legal framework with other fiscal changes
During the 2024-2025 period, new laws have also come into effect (e.g., the new Law no. 29/2023 “For Income Tax”which replaced the law of the year 1998Instruction no. 15 makes several legal reference changes within the text to align with the terminology and articles of the new law. For example, if the 2024 instruction referred to the old article on permanent establishment, it now refers to Article 5 of the new Law 29/2023. These are technical but important modifications for the coherence of the legal framework.
Update of the list of agreements and annexes
Instruction No. 11 itself had an Annex attached, which was a list of tax agreements in force. With the entry into force of new agreements (e.g., with Kosovo – signed in October 2022 and ratified in 2023), it was necessary to include these in the annex list as well. Instruction No. 15 reflected the most updated list of MSHTD (Double Taxation Agreements), adding the new agreements that came into force during 2022-2025 (e.g., with Kosovo, the United Arab Emirates, Egypt, Israel, etc., which we will discuss in the following section). In this way, the users of the instruction (tax inspectors and subjects) have all the countries with which Albania has active tax treaties in one place.
In general, the changes made with Instruction no. 15/2025 do not overturn the basic philosophy of the process, but enrich it and make it more practical. They are a direct response to situations that arose in the first months of the implementation of the original instruction. This shows a dynamic approach from the Ministry of Finance and the State Procurement Office: after noticing the need for further clarifications in the field, they reacted with regulatory changes. Another benefit of this latest change is the increased confidence in businesses that the authorities are monitoring the implementation and are ready to further perfect the framework, which encourages better compliance with the rules.
Finally, it is worth mentioning that Directive No. 15/2025 takes effect immediately upon publication in the Official Gazette, just like any other directive, and its effects are retroactive (i.e., for all declarations after July 2025). Notifications made before this date (under the rules of the original guidance) will continue to be handled according to the provisions in force at the time of submission, while after the amendments take effect, any notification or procedure will be carried out under the new unified framework. With this, the regulatory framework for implementing MSHTDs can be considered complete and stabilized (at least until future changes dictated by necessity or international developments).
The Implementation of Double Taxation Agreements in Albania: Experiences and Lessons
How has the implementation of MSHTDs worked in Albania so far? What challenges has it encountered, and what has been lacking?
To answer this question, we need to take a brief historical look. Albania signed its first double taxation avoidance agreements in the 1990s and early 2000s, as part of the country's opening to foreign investment. To implement them, Instruction no. 6 was issued in 2004, which, for its time, created a basic mechanism. That instruction stipulated that the General Directorate of Taxes (GDT) was the competent authority for interpreting the agreements and outlined some procedures (at that time, mainly manual).
However, two decades of practice revealed several key shortcomings:
Slow and bureaucratic procedures
Under the old rules, Albanian businesses often had to apply in advance to the tax administration for approval to benefit from preferential treaty rates. This involved physically submitting residence certificates and other documents to tax offices, which then had to be reviewed by officials and approved. In practice, this took time and often caused delays. Some businesses preferred not to take the initiative to apply for relief at all, choosing the safer route of paying the full tax (to then deal with refunds or credits, which was also complicated). Therefore, the relief was theoretically available, but in practice it was utilized less than expected due to procedural barriers.
Lack of computerization
Until recently, communication with the tax administration in this regard has been traditional (on paper). There was no online platform where the entire process could be carried out. This not only made the process slow but also brought uncertainty (e.g., documents could easily be missing or “lost” in correspondence). The lack of a centralized database with applied cases made it difficult for the DPT to conduct general analyses on the use of agreements.
Failure to comply and inconsistent interpretation
Many small and medium-sized businesses were not fully aware of the existence or use of tax treaties. There were instances where a company paid withholding tax on an offshore payment, even though a treaty existed that eliminated or reduced that tax, simply because it did not know the procedure to follow. On the other hand, there were also cases of subjective or inconsistent interpretations by different tax inspectors due to the lack of detailed legal guidance. Prior to Directive no. 11, there was no official commentary in Albanian on the terms of the treaties – models were usually consulted. OECD apple United Nations, but not every professional had sufficient access or knowledge about them. This created room for misinterpretations. For example, the concept of “residence” or “permanent establishment” could be misunderstood, leading to either non-benefit when it should have been, or unjustified benefit.
The Importance of Double Taxation Agreements for Albanian Businesses with International Activity
For Albanian businesses operating beyond borders – whether by exporting goods or services, investing in foreign subsidiaries, or receiving investments and financing from abroad – double taxation avoidance agreements are vital. They provide a protective “umbrella” against double taxation, as well as a clear legal framework for how and where each type of income will be taxed. Below we list some of the main reasons why DTAAs are important:
Elimination of double taxation
This is the basic function. Without treaties, an Albanian company that, for example, earns income in another country (e.g., dividends from a subsidiary in Kosovo, or profit from a contract in Germany) would be taxed in both the other country and Albania for the same amount. This can make the investment or transaction economically unprofitable. Thanks to Double Taxation Treaties (DTTs), countries agree on how to share the tax: either one country waives the tax, or both reduce the burden and share it between them.
For example, in many agreements, dividends paid by a subsidiary in country A to a parent company in country B are taxed at a reduced rate (e.g., 5%) in country A (compared to the domestic rate, e.g., 15%), and then country B either exempts or credits the parent company for the 5%tax paid abroad. In this case, the parent company in total pays tax only once (effectively that 5% ), instead of paying 15% abroad + 15% domestically (which would lead to ~28% effectively if the agreement were not in place). In this way, the tax cost is significantly reduced and the investment's profitability is increased.
Increasing the international competitiveness of Albanian businesses
An Albanian business that knows its profits from abroad will either be credited in Albania or exempted, can offer more competitive prices or develop more aggressive expansion strategies. If, for example, an Albanian engineering company knows that the services it will export to country X will not be taxed twice, it can enter that market with more confidence and offer rates that reflect only the tax of one country. Conversely, tax uncertainty would make it calculate a “security premium,” i.e., a higher price, which could penalize it in international tenders.
Attraction of foreign investments and partnerships
When foreign investors evaluate a country, they also pay attention to that country's network of tax agreements. Since the 1990s, Albania has entered into agreements with most major investors (such as Italy, Greece, Turkey, EU countries, etc.), making it more attractive to them. This is because an investor, for example from France, knows that his profit in Albania will not be taxed twice (once in Albania and then again in France), but only once – depending on the case, either only in Albania with a credit in France, or with a low rate here and the rest there. This avoidance of double taxation is often formalized in investment agreements: the investor demands guarantees that they will have the protection of the MSHTD for repatriating profits, paying interest, etc. Thus, MSHTDs encourage capital inflows into the country by allaying fears of excessive taxation.
Preventing international tax evasion
It is worth noting that these agreements not only aim to avoid double taxation but also to prevent tax evasion (this is also stated in their titles). Specific provisions within them (such as the information exchange clause) allow tax administrations to cooperate in catching those who attempt to hide income across borders. For honest businesses, this is certainly a positive development as it creates a level playing field where dishonest competitors have less room to avoid taxes. In recent years, especially with global initiatives such as BEPS The OECD/G20 Base Erosion and Profit Shifting (BEPS) project also views tax treaties as a tool against aggressive tax planning. Albania, through its participation in the BEPS Forums and ratification of the Multilateral Convention,MLI) in 2020, has shown its commitment in this regard (more on this in the recommendations section).
International tax dispute resolution
Agreements often include a procedure called a Mutual Understanding Procedure (Mutual Agreement Procedure), where the tax authorities of both countries consult to resolve specific cases of double taxation that may arise or the interpretation of the treaty. For businesses, this means that if they find themselves in a situation where it appears that both countries are claiming tax, they have a diplomatic-legal mechanism for resolution without resorting to private arbitration.
PS: If a person is considered a resident of both countries, the authorities of those countries can agree on where that person should be considered a primary resident according to the treaty rules, resolving dilemmas. This ensures that businesses do not fall victim to “ping-pong” between two administrations, but rather have a unified voice regarding their obligations.
In the Albanian context, the importance of MSHTDs is also seen in the profile of companies that use them. It is mainly large and medium-sized businesses that have cross-border transactions – such as manufacturing companies that export, construction/infrastructure companies that receive consulting from foreign specialists, banks connected to international groups (e.g., paying interest and dividends abroad), IT companies that receive cloud services from abroad, etc. For all of these, applying the treaties can save considerable amounts of money. But even for certain individuals, e.g., Albanian professionals working as freelancers for clients abroad, agreements can avoid double taxation of their personal income.
A typical case: an Albanian consultant works 4-5 months a year in an EU country; the treaty may stipulate that if they do not exceed 183 days there and their salary is not paid by a resident of that country, they are not taxed there – thus, they are only taxed in Albania as a resident, avoiding double taxation).
Another aspect is that double taxation agreements are closely linked to economic and diplomatic relations. Albania has prioritized negotiations with states with which it has the highest trade exchanges or mutual investment interest. This is why, for example, the treaties with Italy, Greece, Turkey, North Macedonia, Kosovo, etc., are among the earliest. In fact, the agreement with Kosovo had long been a request of the business community, but was finalized relatively late (signed in 2022, entered into force in 2023). – however, now that it is in force, it is expected to give a positive boost to bilateral trade and investments between the two countries. An Albanian investor who opens a company in Kosovo now knows that his profits will not be taxed twice, and vice versa for Kosovars in Albania. Likewise, the new agreement with the United Arab Emirates (entered into force in 2019) was important for encouraging Emirati investments in strategic sectors in Albania (e.g., the Port of Durrës, energy, tourism).
In conclusion, Double Taxation Treaties are a necessary financial infrastructure for businesses in a globalized world. They reduce the cost of doing international business, increase legal certainty, and strengthen cooperation between countries. For a small country like Albania, which wants to attract foreign capital and encourage its own companies to broaden their horizons, these agreements are both a competitive advantage and a necessity.
Current Panorama: Updated List of Albania's Tax Agreements
Since 1993, when the first tax agreement (with Poland) was ratified, Albania has continuously expanded its network of treaties. Currently (2025), our country has over 40 double taxation avoidance treaties ratified and in force with states from around the world. boot.
Europe (BE and the Balkans)
Albania has Social Security Agreements with almost all major European countries. These include Italy (in force since 2000), Greece (2001), Germany (2012), France (signed in 2021, already ratified), Great Britain (2014), Austria (1993), Switzerland (2000), Sweden (2004), Norway (2009), Finland (ratified ~2018), Denmark (no direct agreement to date), Belgium (recently entered into force ~2022), Netherlands (1999), Spain (2011), Portugal (still without a bilateral agreement), Poland (1995).l, Romania (1995), Hungary (1996), Bulgaria (1999), Croatia (1999), Slovenia (2005), Slovakia (2016), Czechia (1997), Moldova (2005), and the former Yugoslav countries: Serbia and Montenegro (inherited agreement dating from 2004, which continues to be applied with each state after independence), North Macedonia (1999), Bosnia and Herzegovina (ratified and entered into force ~2022), and most recently Kosovo (2023). These European agreements cover the vast majority of Albania's trade and investment exchanges. Few exceptions remain (e.g., there is an agreement with Ireland, but also with Iceland; meanwhile, there are no tax treaties with very small countries like San Marino or Liechtenstein, but these have limited practical impact).
North and South America
It is worth noting that Albania does not yet have a tax agreement with the United States of America. Although there have been discussions and mutual desire, a treaty with the USA has not materialized (the USA generally enters into tax treaties carefully and with few smaller countries). Nevertheless, American investments in Albania (e.g., in the banking or energy sectors) are often structured through European branches of American corporations, thus utilizing the agreements Albania has with European countries. As for North American countries, Albania signed an agreement with Canada in 2021, but it has not yet entered into force (pending ratification by the Canadian side). We do not have bilateral tax agreements with Latin American countries, which reflects the limited economic exchanges with them.
Asia and Oceania
Albania has a considerable number of treaties in Asia. Among the most important are those with China (1994, renegotiated in 2011), with Turkey (1997), with India (2013, still not in force until recently due to procedures – ratified by Albania in 2013, and entered into force after the exchange of notes in 2014), with Japan (no agreement yet, but an Investment Protection Treaty has been signed which indirectly adds fiscal discipline), with South Korea (2006), with Malaysia (1995), with Singapore (2012), with the United Arab Emirates (2014, entered into force in 2014), with Kuwait (2014), with Qatar (2013), with Saudi Arabia (2019), with Israel (2021), with Azerbaijan (2010) and Georgia (2012). These treaties are particularly helpful in the hydrocarbon trade sector (e.g., investors from the Middle East) and in fostering economic cooperation with emerging Asian countries. Among the Asia-Pacific region countries, Australia and New Zealand remain without an agreement with Albania, but the impact of this gap is currently small.
Africa
The main agreement on this continent is with Egypt (2010, entered into force in 2011). Egypt is a moderate trading partner, but the agreement is of geostrategic importance. There are no treaties yet with other African countries (e.g., South Africa, Nigeria), although future investment opportunities may make initiating them desirable.
The full list of countries with which Albania has MSHTD can also be found on the official website of Tatimeve.
For ease of reference, we list them here by country name (in alphabetical order): Saudi Arabia, Austria, Azerbaijan, Belgium, Bosnia and Herzegovina, Bulgaria, Great Britain (and Northern Ireland), Czech Republic, Egypt, United Arab Emirates, Estonia, Finland, France, Greece, Hungary, Netherlands, India, Ireland, Italy, Israel, China, South Korea, Croatia, Kosovo, Kuwait, Latvia, Luxembourg, North Macedonia, Montenegro (with Serbia), Malaysia, Malta, Moldova, Norway, Poland, Qatar, Romania, Russia, Singapore, Slovakia, Slovenia, Spain, Sweden, Turkey, Germany. This list is updated periodically as new treaties come into force. We currently count 43 ratified and in-force agreements (with Israel being the 43rd to enter into force at the end of 2021), while there are also several signed agreements awaiting the completion of procedures (e.g., Canada, the United Arab Emirates – the new one for income tax, etc.).
Albanian businesses can now operate in most major countries without fear of double taxation. Likewise, a foreigner investing in Albania from these countries knows that his profits will be treated according to the agreed-upon rules. For the Albanian tax administration, the challenge is to properly administer this network, because each agreement has its own features (e.g., the agreed withholding tax rates vary: with one country it is 51%, with another 10%, in some cases dividends may be taxed in both countries, in others not, etc.). The new guidance also helps here, because through the Annex listing the agreements it provides some key information (such as the ratification law number, the date of entry into force, and in many cases the caps on withholding tax provided for interest, dividends, and royalties).
From a business perspective, what matters is that Albanian businesses find an effective treaty in place in almost every country where they decide to expand their activities. This even extends to relatively distant countries like Singapore or Qatar, which indicates that Albanian fiscal policy has been quite active internationally. Practical advice for any entrepreneur: before starting an international operation (e.g., opening a branch abroad or entering into a service contract with a foreign partner), they should check for the existence of a Double Taxation Agreement (DTA) with that country and familiarize themselves with its content. This allows them to plan their taxes as efficiently as possible and benefit from the facilities offered by the treaty (e.g., obtaining the necessary certificates from the outset). Fortunately, this content is now easily accessible thanks to official publications and guides like this blog or documents from the Ministry of Finance and Economy.
Albanian Legal Framework: Hierarchy of Laws and Relationship with Tax Agreements
To fully understand the application of Double Taxation Conventions, it is necessary to examine the position they occupy within the hierarchy of legal sources in Albania. The main question here is: what happens when a provision of domestic tax law conflicts with a provision of a bilateral tax agreement? The short answer is that the provisions of the agreement take precedence over those of domestic law, provided that the agreement has been ratified by law by the Parliament of Albania.
This stems primarily from Article 122 of the Constitution of Albania, which provides that ratified international agreements become part of the domestic legal order and prevail over ordinary laws when there is a conflict. In the case of tax treaties, this means that even if the domestic law on income tax or tax procedures provides otherwise, the rules of the treaty apply (to the extent that the matter falls within the treaty's scope). Instruction No. 11 emphasizes this by stating that the MSHTDs are an integral part of Albanian tax legislation and should be read in harmony with it. In fact, the very fact that the directive gives priority to the treaty's criteria over those of domestic laws for issues such as residency or taxation confirms this principle. For example, if the Albanian procedural law states that a person who stays more than 183 days is a resident, whereas a particular treaty has more specific rules (for example, it also requires having a permanent home), the treaty procedure will be followed to determine residency in resolving a conflict situation.
From a practical standpoint, the new Law “On Income Tax” (No. 29/2023) has incorporated several provisions that refer to tax treaties. For example, in the final provisions there may be a clause stating that “The provisions of this law shall be applied in accordance with the international tax treaties to which the Republic of Albania is a party.” The Law “On Tax Procedures” (No. 9920/2008) also contains references (such as Article 115) that the procedures for addressing double taxation are governed by applicable directives and agreements. This shows that domestic Albanian legislation has formally recognized the primacy of treaties, creating a harmonized environment. In the event of any gap, the Constitution itself and the law ratifying the treaty would have remedial force – each treaty is ratified by a special law (e.g. Law No. 43/2023 for the ratification of the MSHTD with State X) and enjoys a status equal to other laws, but is special (lex specialis) in relation to them.
An important aspect of the legal hierarchy is also the issue of interpretation. Tax laws often refer to comments on international models to understand the terms of the agreements. In Albania, although not formally written into law, the practice followed by tax authorities and advisors is to use the OECD Model Commentary as an interpretive guide for treaties (so long as the particular treaty is based on the OECD Model, which most are). This ensures that the interpretation in Albania does not deviate from that of the other contracting party. Guidance No. 11, by summarizing a substantial part of that commentary in Albanian, has in fact “narrowed” the interpretive gap between the parties – the Albanian taxpayer, when reading the guidance's explanations of a treaty article, is effectively reading a version of the OECD Commentary adapted for Albania.
Regarding substantive law versus treaty, an important rule is the “most favorable clause.” Albanian law often stipulates that, in the presence of tax treaties, the taxpayer has the right to choose the application of the provision that grants them the most favorable treatment – whether it's the treaty or domestic law. In most cases, the treaty is more favorable (e.g., it lowers the withholding tax rate), but there are rare instances where domestic law may have become more liberal (e.g., Albania currently has a 0% tax rate% for reinvested dividends, which some old treaties do not foresee such a scenario; however, the taxpayer can apply the 0% rate% of domestic law). In these situations, the administration tends to recognize the taxpayer's right to apply the lower rate. The general principle: no one should be taxed more heavily than the most favorable law between the treaty and national legislation provides.
The hierarchy of legal sources also determines the role of administrative instructions such as No. 11/2024. It must be clarified that an instruction is a sub-legal act; it is not law in itself but is based on tax law and the Constitution. It cannot change agreements but only clarify them. Fortunately, Instruction No. 11 has respected this boundary: it does not create “new rights or obligations” that do not arise from the treaties or laws, but merely proceduralizes the manner of exercising those rights. This makes it legally sustainable – it does not constitute another tier of hierarchy that could cause conflict, but rather serves as a bridge between the treaty and the reality of its implementation.
Finally, it is important to know that tax treaties are ratified by a special law of the Assembly, and if they ever need to be terminated, their repeal is also carried out by parliamentary approval (or by mutual consent for termination). This makes them much stronger than ordinary legislative acts that the Government can amend by proposal. The high degree of difficulty in making changes gives investors long-term certainty: for example, a 51% tax rate on treaty-prescribed interest with a country will remain 51% for many years, regardless of whether the country decides to change its domestic tax rates. This stability is part of the “promise” that one state makes to another and to its investors.
In the Albanian context, it can be said that the domestic legal framework already operates in harmony with international fiscal commitments. The Income Tax Law defines the domestic tax base, the Tax Procedure Law provides the framework for administration and sanctions, and on top of these are the tax treaties as bilateral instruments that prevail when applicable. Instruction No. 11 and its supplementary amendments are the “lubricant” that helps these different legal gears work without friction.
Conclusion
Double tax avoidance agreements are an indispensable instrument in Albania's fiscal arsenal, enabling the integration of our economy into the global economy without facing the barrier of double taxation. Instruction No. No. 11, dated July 23, 2024, most recently amended by Instruction No. 15, dated July 8, 2025, has created a strong bridge between the text of the treaties and their practical application by businesses and the Albanian tax administration. In this blog, we have seen how the guidance explains the fundamental principles (residence, source, elimination of double taxation, permanent establishment) and how it establishes transparent procedures for notifying and documenting cases where a treaty applies. We have examined the latest changes aimed at easing the transition to the electronic system and clarifying any ambiguities, and we have analyzed the experience to date in implementing the DTAAs – identifying the improvements achieved and the areas that still require attention.
Our practical example showed step-by-step how an Albanian business can save on taxes through the treaty, as long as it follows the rules meticulously. The importance of these agreements clearly emerged: for our businesses, they are the pillars that bear the double tax burden, making them more competitive and encouraging investment. The extensive list of countries with which Albania has signed treaties – from Europe, Asia, America to Africa – testifies to our country's commitment to eliminating cross-border fiscal barriers.
However, with power comes responsibility: businesses and professionals must be vigilant to avoid any discrepancies or misinterpretations. We highlighted the main risks (late submission of documents, interpretation errors, intentional abuses, etc.) and provided concrete advice on how to avoid them – from internal organization to seeking specialized advice. This way, the benefits of treaties can be reaped without any negative side effects.
In the long term, we recommended several directions for improvement, such as total digitalization, further simplification where possible, continuous education of all parties, and alignment with international best practices (including meeting EU and OECD standards in this field). Albania has already shown that it is moving in this direction – the ratification of the BEPS multilateral instrument and the inclusion of anti-abuse clauses are strong signals.
Key conclusion: The new Directive No. 11/2024 (amended by No. 15/2025) is a major positive step toward consolidating tax certainty for international investments. It equips businesses and professionals with the proper guidance and tools to navigate the complex waters of international taxation, while simultaneously empowering the Albanian tax administration to oversee and enforce treaties effectively and fairly. For our audience – both entrepreneurs and tax experts – the message is clear: take advantage of the benefits offered by DTAIs, but do so with knowledge, integrity, and procedural care. In this way, businesses will save costs, increase profits, and expand their horizons, while the state ensures that its international agreements are achieving their purpose without being abused. Avoiding double taxation is not just a technical concept – it is a key factor that influences the investment climate and the international success of Albanian businesses, and with the new legal framework, it has become more attainable than ever before.