Many Albanian businesses and professionals today have income that crosses physical borders. An invoice to an Italian supplier, a dividend from a foreign company, a service contract with a German client. In each of these cases, the same question arises. Will this income be taxed once or twice?
The answer depends on double taxation avoidance agreements. Albania has a broad network of such agreements, and how they are applied was recently updated with Instruction No. 11, dated 7/23/2024, as amended by Instruction No. 15, dated 07.08.2025. Those who know these rules can save considerable sums and avoid costly mistakes.
In this article, we will explain what double taxation is, how agreements resolve it, and which countries Albania has agreements with. Additionally, we will look at the step-by-step practical process and why all of this is important for your business.
Read also: Residence of natural persons.
What is double taxation
Double taxation occurs when the same income is taxed twice, by two different countries. This typically affects businesses and individuals with cross-border activities. They are usually tax residents in one country but generate income in another.
There are two main forms. Legal double taxation occurs when the same person is taxed twice on the same income, once in the country of residence and once in the country where the source of income is located. Economic double taxation, on the other hand, occurs when the same income is taxed to two different entities. For example, a company's profit is taxed, and then the dividend distributed to shareholders is taxed again.
A special case is dual residency, when two countries consider the same person to be a tax resident simultaneously. Without a tie-breaker mechanism, that person would be fully taxed in both countries. Agreements lay down clear rules to determine which country has the primary right to tax.
Read also: The meaning of double taxation.
How do treaties solve double taxation
Every country builds its right to tax on two principles. The principle of residence means that a country taxes its residents on income earned anywhere in the world. At the same time, the principle of source means that a country taxes any income earned within its borders, regardless of where the recipient resides. It is precisely when these two principles conflict that double taxation arises.
Agreements resolve this in one of three ways. The source country reduces the withholding tax rate, or the country of residence gives the taxpayer a credit for tax paid abroad, or it exempts that income from domestic taxation altogether. In the end, the result is the same in all three cases. The taxpayer does not pay twice for the same income.
A concept that is often misunderstood is the permanent establishment. A foreign company is taxed in Albania only if it has a stable business presence here, for example an office, branch, factory, or construction site over a certain period. It is also taxed only on the profit attributable to that presence. If the activity in Albania is temporary and peripheral, it does not create a permanent establishment and does not give rise to a tax obligation here.
Albania has signed agreements with which countries
According to the official list According to the General Directorate of Taxes, Albania currently has 45 double taxation avoidance agreements in force. The first agreement, with Poland, entered into force in 1995. The most recent additions are the agreement with Finland, effective from 2024, and the one with Slovakia, effective from 2025.
Partner countries, in alphabetical order, are: Saudi Arabia, Austria, Belgium, Bosnia and Herzegovina, Great Britain and Northern Ireland, Bulgaria, Czech Republic, Egypt, United Arab Emirates, Estonia, Finland, France, Germany, Greece, Netherlands, Hungary, India, Ireland, Iceland, Italy, Israel, Qatar, China, South Korea, Kosovo, Croatia, Kuwait, Latvia, Luxembourg, Malaysia, Malta, North Macedonia, Montenegro, Moldova, Norway, Poland, Romania, Russia, Serbia, Singapore, Slovakia, Slovenia, Spain, Sweden, Turkey, and Switzerland.
There are also important countries with which Albania does not yet have an agreement in force. Among them are the United States of America, Portugal, and Denmark. In these cases, investments are often structured through European branches of corporations, taking advantage of the agreements Albania has with other countries.
The official, always updated list, along with the full texts of each agreement, can be found on the website of the General Directorate of Taxes (https://www.tatime.gov.al/c/6/125/marreveshje-nderkombetare). Before starting an international operation, it is worth checking if an agreement exists with that country and what its provisions are. This is important, because withholding tax rates vary from one agreement to another.
How it is done in practice
The primary responsibility for the correct application of the agreement lies with the taxpayer resident in Albania. They must notify the tax administration of any instance where they have applied the provisions of an agreement. For this purpose, a package of supporting documents must be submitted.
The central document is the tax residency certificate. When an Albanian business pays a foreign partner and wishes to apply the reduced rate of the agreement, it needs the certificate proving the partner's tax residency. Additionally, when an Albanian business has income abroad, the General Directorate of Taxes issues a certificate to it proving its Albanian residency. This usually happens within a few days.
Deadlines are important. Documentation must be submitted within the calendar year following the year in which the transactions were conducted. For payments made during 2024, the deadline was the end of 2025. The penalty for late reporting is relatively small, around 10,000 Lek, but the real risk is greater. Without proper documentation, the administration may not recognize the favorable treatment. Consequently, it may demand the full tax, as if the agreement had not been applied at all.
Instruction No. 15, date 8.7.2025, clarified that the procedure will continue as before until the electronic module is fully operational. In the meantime, when it is activated, the entire process will be carried out online, with less paper documentation and a faster transition to digital declaration.
Read also: Certificate of Residence.
What needs to be taken care of
Three mistakes happen most often. The first is missing the deadline for submitting documentation, which leads to the loss of the right to preferential treatment. The second is misinterpreting concepts, especially residence and permanent establishment, which can lead to either not benefiting when you should have, or benefiting when you shouldn't have. The third is the lack of a residency certificate at the right time.
All of these are avoided with good internal organization. If the transaction is large or complicated, the solution is to seek specialized consultation before the payment is made, not after the deadline has passed.
Why it Matters
For a business with cross-border activities, treaties are not a technical detail; they are direct savings. They reduce tax costs, making the business more competitive when it offers prices abroad. Furthermore, treaties give foreign investors assurance that their profits will not be taxed twice.
Legal certainty is just as important. When you know in advance where and how much each income will be taxed, you can plan calmly and avoid costly surprises. This applies to exporting companies, those that outsource services, and even freelance professionals with foreign clients.
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 notificationsFrequently asked questions
What is double taxation and when does it occur?
Double taxation occurs when the same income is taxed twice, by two different states. It usually affects those who are tax residents in one country, but earn income in another country. Bilateral agreements are the main way to avoid it.
Which businesses are affected by the agreements?
Businesses and individuals who pay invoices to foreign partners, receive dividends or interest from abroad, have foreign subsidiaries, or provide services to clients outside of Albania are subject to this. Freelancers with foreign clients can also benefit.
What documentation is required?
A package of documents is required, with the tax residency certificate at its core, along with the application form. The documents are submitted within the calendar year following the year in which the transactions were carried out. The deadline and format are specified by Instruction No. 15, dated July 8, 2025.
Has Albania made agreements with all EU countries?
The majority, yes, including Italy, Greece, Germany, France, Spain, and Finland. Among the EU countries without an agreement in force are Portugal and Denmark. The full list can be found on the official website of the General Directorate of Taxation.