{"id":54510,"date":"2026-08-03T13:05:11","date_gmt":"2026-08-03T13:05:11","guid":{"rendered":"https:\/\/alprofitconsult.al\/?page_id=54510"},"modified":"2026-08-03T21:30:14","modified_gmt":"2026-08-03T21:30:14","slug":"price-transfer","status":"publish","type":"page","link":"https:\/\/alprofitconsult.al\/en\/tatime\/tatimi-mbi-fitimin\/transferimi-i-cmimit\/","title":{"rendered":"When are the price transfer rules applied?"},"content":{"rendered":"

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Home Page<\/a><\/span> | Tax legislation<\/a><\/span> | Profit Tax<\/a><\/span> | When are the price transfer rules applied?<\/span><\/span><\/div>\n\n\n

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When a business trades with a related party, the price between them is not simply a private agreement. The law requires that it be the price that two independent parties would have agreed upon under comparable conditions. If it is not, the tax administration has the legal authority to adjust the income or expenses and recalculate the tax.<\/p>\n\n\n\n

This page explains who a related party is, how market price is measured, the five methods recognized by law, how the range and adjustment to the median work, what the file contains, how to proceed when the administration requests it, and which sanctions apply.<\/p>\n\n\n\n

Read also: How is taxable income calculated?<\/a>.<\/p>\n\n\n\n

Short answer<\/h2>\n\n\n\n

Transfer pricing rules apply to controlled transactions, that is, transactions between related parties. The law requires that their terms comply with the arm's-length principle, recognizes five methods to demonstrate this compliance, and when the price falls outside the market range, it adjusts it to the range's median.<\/p>\n\n\n\n

This topic isn't just for large groups. It affects any Albanian company that buys or sells with its parent company, borrows from a partner, pays management fees to a group company, or has two companies under the same owner and trades between them.<\/p>\n\n\n\n

Read also: Global minimum tax and who is affected in 2026<\/a>.<\/p>\n\n\n\n

Who is the bound party?<\/h2>\n\n\n\n

A relationship exists when one party controls the other, or when both are controlled by the same entity, directly or indirectly, through equity participation, voting rights, or the actual exercise of control over decision-making.<\/p>\n\n\n\n

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Please note. The precise definition of a related party, including participation thresholds and instances of indirect control, must be confirmed for the specific case before a decision is made. If you are not sure whether your two companies are related parties, please send us the ownership structure.<\/p>\n<\/blockquote>\n\n\n\n

In daily practice, the most common cases of controlled transactions are the purchase of goods from the parent company abroad, management and brand fees paid within the group, loans between related companies, accounting or IT services provided by a sister company, and the lease of premises belonging to the partner.<\/p>\n\n\n\n

Read also: Tax residency, non-residents and double taxation<\/a>.<\/p>\n\n\n\n

Market principle<\/h2>\n\n\n\n

The market principle requires that the terms of the controlled transaction be compared with the terms of transactions between unrelated parties. It is not only the price that is compared. They compare the characteristics of the goods or services, the functions each party performs, the risks each assumes, the assets each uses, the contractual terms, and the economic market conditions.<\/p>\n\n\n\n

This analysis is called comparability and is the heart of the file. A file that states a margin without explaining the functions and risks of the parties does not protect the business, because it is precisely those functions and risks that determine how much profit belongs to each side.<\/p>\n\n\n\n

Five methods for determining price<\/h2>\n\n\n\n

The law recognizes five methods for proving compliance with the arm's-length principle. The choice is not free. The most appropriate method is selected based on the nature of the transaction and the data available, and the selection is justified in writing.<\/p>\n\n\n\n

Method<\/th>When is it usually used?<\/th><\/tr>
Uncontrolled comparable price<\/td>When there is an identical or very similar transaction between independent parties.<\/td><\/tr>
Resale price<\/td>When the distributor resells the goods without significant transformation.<\/td><\/tr>
Cost plus<\/td>When the producer or service provider works under contract for a related party.<\/td><\/tr>
Net transaction margin<\/td>When there are no price-level comparisons available, but profit indicators are available.<\/td><\/tr>
Profit sharing<\/td>When both parties contribute significantly and inseparably to the creation of value.<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Nomenclatures may vary from one source to another, while the content remains the same. When you choose a method, also record the reasons why the other three methods were not used.<\/p>\n\n\n\n

Range and adjustment in the midrange<\/h2>\n\n\n\n

The result of the analysis is rarely a single number. It is usually a range, constructed from the results of the accepted comparators. When your business indicator falls within the range, no adjustment is made. When it falls outside it, the adjustment is made at the range's median, not at the nearest boundary.<\/p>\n\n\n\n

This discrepancy carries real costs, because the adjustment at the median is usually higher than the adjustment at the range boundary. It's a good reason to check your position within the year, when prices and invoices can still be corrected.<\/p>\n\n\n\n

Calculated example, step by step<\/h2>\n\n\n\n

A manufacturing subsidiary that operates under contract exclusively for its foreign parent company. The chosen method is cost-plus, measured as a margin on total costs.<\/p>\n\n\n\n

Step 1. The total annual costs are 80,000,000 lek.<\/p>\n\n\n\n

Step 2. The revenues invoiced by the parent company are 81,600,000 lek, giving a 2.01% margin over costs and a profit of 1,600,000 lek.<\/p>\n\n\n\n

Step 3. The comparability analysis yields four independent producers with margins of 3.5%, 4.5%, 5.5%, and 6.5%. The range goes from 3.5% to 6.5%, and the median is (4.5% + 5.5%) \/ 2 = 5.0%.<\/p>\n\n\n\n

Step 4. The declared margin, 2.01 TP3T, falls within the range. The adjustment is made at the midpoint, i.e., 5.01 TP3T.<\/p>\n\n\n\n

Step 5. The profit to be declared is 80,000,000 \u00d7 5.0% = 4,000,000 lek\u00eb. The declared profit is 1,600,000 lek. The adjustment is 4,000,000 \u2013 1,600,000 = 2,400,000 lek.<\/p>\n\n\n\n

Step 6. The additional tax is 2,400,000 \u00d7 151 TP3T = 360,000 lek, excluding any possible penalties.<\/p>\n\n\n\n

Element<\/th>Value<\/th><\/tr>
Total costs<\/td>80,000,000 lek<\/td><\/tr>
Declared margin<\/td>2.0%<\/td><\/tr>
Declared profit<\/td>1,600,000 lek<\/td><\/tr>
Market range<\/td>3.51 TP3T to 6.51 TP3T<\/td><\/tr>
Median<\/td>5.0%<\/td><\/tr>
Profit by median<\/td>4,000,000 lek<\/td><\/tr>
Base adjustment<\/td>2,400,000 lek<\/td><\/tr>
Additional tax 15%<\/td>360,000 lek<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Note that the company had no intention of hiding profit. It simply invoiced at the margin specified by the group, and that is enough for a tax adjustment of 360,000 lek.<\/p>\n\n\n\n

Read also: Profit tax rates and thresholds<\/a>.<\/p>\n\n\n\n

Price Transfer File<\/h2>\n\n\n\n

The file is the documentation that proves controlled transactions comply with the arm's-length principle. It is not automatically submitted with the return, but is prepared and kept ready, because when the tax administration requests it, the deadline for submission is 45 days.<\/p>\n\n\n\n

Twenty-five days seems like a long time only from a distance. If the file starts to be built on the day the request is made, you have to find comparables, reconstruct past years' functions and risks, and gather contracts that are sometimes not even written down. For this reason, the file is prepared together with year-end closing.<\/p>\n\n\n\n

\u2714 Description of the group, the ownership structure, and decision-making
\u2714 Description of the activities of the Albanian company, including its functions, risks, and assets.
\u2714 List of controlled transactions, with values and parties
\u2714 Contracts or agreements that govern each transaction
\u2714 Comparability analysis, accepted and rejected comparators, with reasons
\u2714 Selected method, rationale for the selection, and range calculation
\u2714 Financial statements and segment data used<\/p>\n\n\n\n

Annual Report of Controlled Transactions<\/h2>\n\n\n\n

In addition to the dossier, there is also an annual report of controlled transactions, which is filed by taxpayers who exceed the specified thresholds.<\/p>\n\n\n\n

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The threshold at which the obligation for annual notification arises and the deadline for submission must be confirmed before you rely on a figure. Send us the annual value of your transactions with related parties, and we will provide you with the specific obligation.<\/p>\n<\/blockquote>\n\n\n\n

Corresponding adjustments<\/h2>\n\n\n\n

When the administration adjusts the price on one side of a transaction, the system's logic requires that the other side not be taxed twice on the same profit. The law provides for corresponding adjustments precisely for this purpose, and when the other party is in a country with which Albania has a double taxation avoidance agreement, the agreement's mechanisms also apply.<\/p>\n\n\n\n

Read also: Double taxation treaties and certificate of residence<\/a>.<\/p>\n\n\n\n

Preliminary price agreement<\/h2>\n\n\n\n

For recurring transactions of significant value, the law provides for a prior agreement with the tax administration, under which the method and terms are approved in advance, and the business operates with the assurance that no adjustment will follow.<\/p>\n\n\n\n

It's a tool for major cases, because the process requires time and preparation. When transactions with the group are the core of your business model, it's worth evaluating.<\/p>\n\n\n\n

Read also: Albania ratifies the OECD STTR Convention<\/a>.<\/p>\n\n\n\n

Sanctions<\/h2>\n\n\n\n
Violation<\/th>The sanction<\/th><\/tr>
Failure to submit the documentation for the transfer of the price<\/td>10,000 lek\u00eb per month of delay; does not apply if the file has been submitted.<\/td><\/tr>
Base adjustment after inspection<\/td>Additional obligation, plus the penalties for an inaccurate statement under procedural law.<\/td><\/tr>
Failure to notify a change of ownership in the cases provided for<\/td>Special sanctions under procedural law<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

The monthly sanction of 10,000 lek\u00eb isn't the figure that hurts. The damage lies in the adjustment of the base, because it's multiplied by the years under audit. A wrong margin maintained for four years is corrected all at once over those four years.<\/p>\n\n\n\n

Read also: Tax audit, fines, and appeal<\/a>.<\/p>\n\n\n\n

The mistakes we see<\/h2>\n\n\n\n