In passing Law no. 10287, dated 10.06.2010 and Law no. 10403, dated 24.03.2011 the Albanian Parliament ratified the tax treaty on avoidance of double taxation of income and its amendment, signed by the Republic of Albania and the Federal Republic of Germany (“the DTT”).

The DTT is effective as of January 1, 2012. The main provisions of the DTT consist of the following:

• a construction site, installation project or supervisory activity in connection therewith constitutes a permanent establishment if it lasts longer than 9 months in each 12 month period beginning or ending in the concerned year;
• the withholding tax on dividends shall not exceed: (i) 5 percent of the gross amount if the beneficial owner is a company which holds directly at least 25 percent of the capital of the company paying the dividends and (ii) 15 percent in any other case (for dividends paid from an Albanian company, the withholding tax shall be 10 percent, which is the tax rate fixed for these payments by the Albanian law);
• no tax shall be levied on interest paid on a loan guaranteed by the Republic of Germany or Republic of Albania or paid to the Republic of Germany, Deutsche Bundesbank and KfW or to the Republic of Albania and Central Bank of Albania, while in the other cases, the withholding tax on interests shall be no more than 5 percent;
• the withholding tax on royalties shall not exceed 5 percent of the gross amount;
• as regards capital gains, the DTT differs from the OECD Model Tax Treaty in introducing an additional paragraph 6 providing that, where an individual was a resident of a Contracting State for a period of 5 years or more and has become a resident of the other Contracting State, the first-mentioned State can tax under its domestic law the increased value of shares in a company resident in the first-mentioned State for the period of residency of that individual in the first-mentioned State (in such case, the increased value of capital taxed in the first-mentioned State shall not be included in the determination of the subsequent increased value by the other State);
• for independent personal services – income derived by a resident of a Contracting State may also be taxed in the other Contracting State in case the individual has a fixed base regularly available to him/her in the other Contracting State or if stays in the other Contracting State for a period amounting to or exceeding 183 days in any 12 month period commencing or ending in the calendar year concerned (in such cases the other State may tax only the income that is attributable to the fixed base or derives from his/her activities performed in the other State);
• income of artists and sportsmen in a Contracting State where the visit to that State is financed (entirely or mainly) from public funds of the other State or by an organisation which in that other State is recognised as a charitable organisation may be taxed only in the Contracting State of which the individual is a resident.