Transfer Pricing in Albania

The legal framework

Albania's transfer pricing regime was rebuilt rather than amended with effect from 1 January 2024. Law no. 29/2023 on Income Tax replaced Law no. 8438/1998, placing the rules in Articles 32 to 39 and the arm's length standard, the market principle in the Albanian text, at Article 44. Instruction of the Minister of Finance no. 29 of 16 November 2023 replaced Instruction no. 16/2014 and APA Instruction no. 9/2015, merging both into a single instrument of 39 sections and five annexes — sections 1 to 15 on transfer pricing, 16 to 39 on advance pricing agreements. Anyone working from the OECD's December 2021 country profile, or from the General Directorate of Taxation's own website, is working from a repealed framework.

Two features of scope decide most engagements. Article 32(2) makes the regime cross-border only: it catches transactions between an Albanian resident and a non-resident related party, dealings between two non-residents attributed to an Albanian permanent establishment, transactions between two Albanian residents where the transaction is attributed to one resident's foreign permanent establishment, and, irrespective of relatedness, transactions with residents of listed jurisdictions — a list that does exist, published at Annex 1 to Instruction 29/2023 under section 3.6. Purely domestic related-party dealings otherwise sit outside the regime. Article 32(1) permits taxable profit to be increased where conditions are not arm's length and, on its face, provides no downward self-adjustment: a taxpayer that has overpriced inbound purchases should not expect the statute to hand back the difference.

Relatedness turns on management, control or ownership affecting the tax base directly or indirectly, with a 50 per cent line for voting, management, dividend-distribution or capital rights (Article 3(13), not Article 4 as some summaries have it). Section 3.2 of the instruction adds control of the composition of the board and control of business decisions, and section 3.4 places the burden of proving relatedness on the tax administration. The OECD Guidelines inform interpretation without governing it: section 2 of Instruction 29/2023 adopts their principles, then provides that Albanian law prevails in any conflict.

Methods, comparables and benchmarking

Article 34(1) puts the five OECD methods in the statute, on a most-appropriate-method basis with no hierarchy. A sixth route exists but is expensive: a taxpayer using anything else must prove no listed method can reasonably be applied and that its alternative is arm's length. Article 34(3) confirms a single method suffices. Article 34(4) is the examination rule and is worth citing to an inspector — where the taxpayer has priced using a compliant method, the examination proceeds on that method — but it is not an unqualified protection. Section 9.3 of the instruction allows the administration to depart from the taxpayer's method where it proves that method is not the most appropriate one. The point to hold onto is that the burden of that proof sits on the administration.

Article 33 sets the familiar five-factor comparability test, and Article 35 permits aggregation of closely linked or continuous transactions that cannot reliably be tested separately.

Article 36 is where Albanian practice diverges from habit. The statutory market range is the full set of results from comparable uncontrolled transactions, not a narrowed band. No adjustment may be made where the tested result sits inside it; where it falls outside, the adjustment goes to the median unless either side shows another point is justified. Nothing requires an interquartile range. Practitioners use one and the DPT does not appear to object, but a taxpayer arguing a point in the range is arguing convention, not statute.

Albania has effectively no pool of independent local comparables. The instruction directs taxpayers to internal comparables first and, under section 7.3, accepts foreign sets in their absence provided geographic and other differences are analysed and adjusted. The 2023 instruction states no express domestic-over-foreign preference — that proposition comes from the 2021 OECD profile, written under the repealed 2014 instruction, and should not be repeated as current law. In practice the position is pan-European or regional screens documented against the section 7.3 gateway. The tested party must be the less complex party without valuable intangibles (sections 10.1 to 10.2); a foreign tested party is accepted under section 10.3 where the method is an approved and most appropriate one, the selection followed section 10, and sufficient information on that party is made available to the tax authorities. The three-yearly refresh of an external search is not a general concession: section 15.5 confines it to taxpayers whose total controlled transactions fall below ALL 50 million, and then only absent material change. Above that threshold it does not apply, and no provision imposes an annual financial-data update either.

Documentation: what the DPT expects

The file is not filed with the return. Article 37(1) requires the taxpayer to hold documentation demonstrating compliance with the market principle and to produce it within 45 days of a request, up from 30 days under repealed Article 36/5 of Law 8438/1998. Section 15.2 of the instruction imposes no contemporaneity requirement, contrary to a common reading; what it does is more valuable. Documentation prepared under the instruction and produced inside the 45 days exempts the taxpayer from the penalty in Article 115/1(3) of Law no. 9920/2008, while expressly preserving the administration's power to adjust under Article 32(1). Building the file to the 31 March return date remains the sensible discipline, but it is a practice point rather than a statutory one.

Albania does not operate three-tier documentation with separate master file thresholds, despite the boxes ticked in its 2021 OECD profile. It requires one file, and section 15.4 accepts documentation in master file and local file format under the EU Code of Conduct as satisfying it. That helps groups running a European programme but creates no standalone master file obligation. Section 15.3 sets the content: business and group structure, the controlled transactions and their comparability factors, the method and financial indicator with reasons, the search process including rejected comparables and adjustments, supporting economic analysis, any APAs, and a conclusion. The file may be in Albanian or English, but the administration may demand a legalised Albanian translation at the taxpayer's cost. That translation runs on its own clock: section 15.6 gives a fresh 45 days from the request for translation, a separate and later trigger from the documentation request. Arranging a translation route in advance is still sound practice; it is not the cliff edge some summaries describe.

Disclosure runs through the Annual Controlled Transactions Notice, due by 31 March with the corporate income tax return and filed with the regional tax directorate of registration where aggregate controlled transactions exceed ALL 50 million — roughly EUR 535,000 to 540,000 at August 2026 rates, not EUR 50 million as several secondary summaries state, and not the EUR 480,000 to 500,000 produced by conversions at the 2023-2024 lek rate. Related-party loan balances count toward the threshold and income may not be netted against expenses. The notice goes on the Annex 2 form, by hand with the financial statements or electronically.

Audits, penalties and the enforcement climate

The arithmetic of an Albanian adjustment is milder than the commentary suggests. Additional profit is taxed at 15 per cent, and Article 115/1(2) of Law no. 9920/2008 routes transfer pricing adjustments to the ordinary late-payment charge in Article 114: 0.06 per cent per day, capped at 365 days, so a maximum of roughly 21.9 per cent of the additional tax. Claims that adjustments attract a 50 to 100 per cent surcharge are wrong: the 100 per cent figure in Article 116 is a conduct-based evasion penalty requiring concealment or falsified documents.

Article 115/1(3) does the real work. A taxpayer that has prepared documentation under Instruction 29/2023 and produced it within the 45-day window pays the additional tax and interest only, with no fines. It does not prevent an adjustment — section 15.2 says so in terms — but it converts an audit from a penalty exposure into a pricing argument. Against that, the late-filing fine for the annual notice is ALL 10,000 for each month of delay, uncapped in the text.

Assessment rights lapse five years after the return filing date under Article 73, with extensions tied to appeal, audit and criminal outcomes, and records must be kept for five years. Transfer pricing is a growing audit focus within a self-assessment system whose specialist resource is concentrated in the Large Taxpayers Directorate. One procedural point is worth checking on any assessment: under the practice established with the 2014 instruction, an adjustment required written confirmation from the General Tax Director, not the audit team alone. Establish whether that sign-off was obtained.

Dispute resolution and advance certainty

Albania is a pay-to-appeal jurisdiction, and that shapes everything downstream. An assessment must be appealed in writing to the Tax Appeals Directorate within 30 calendar days, and under Article 107 the appeal is not examined until the assessed tax is paid or a bank guarantee of at least six months is posted, excluding fines and late-payment interest. The appeal body must decide within 60 days, failing which the taxpayer may go directly to court under Article 109(2), and a decision may be challenged within 30 calendar days in the Administrative Court of First Instance, then the Administrative Court of Appeal and the Supreme Court's Administrative College. Reported Albanian transfer pricing case law is thin and largely procedural. The leading decision is Albania vs "Albanian Chrome" shpk (High Court, February 2013, Case No. 00-2013-465), which annulled a chrome-ore transfer pricing assessment as absolutely invalid because the tax authority had not obtained the required Transfer Pricing Commission approval. In Albania vs Energji Ashta sh.p.k. (High Court, administrative college, September 2021, Case No. 00-2021-1426) the court set aside an assessment denying deduction of a 2 per cent intra-group loan guarantee commission paid to EVN AG and Verbund AG on a EUR 140 million hydropower facility.

Neither Law 29/2023 nor Instruction 29/2023 contains an express secondary adjustment provision, so no deemed dividend, constructive loan or withholding consequence flows from a primary adjustment. The OECD country profile does answer Yes to the secondary adjustment question, but apparently in error: the authority it cites there is point 13 of the repealed 2014 instruction, headed "Corresponding adjustments", which governs corresponding rather than secondary adjustments. Relief from economic double taxation runs through Article 38: a treaty with the adjusting state and an application by the taxpayer, after which the DPT tests the foreign adjustment against the market principle. MAP access is purely treaty-based, with no domestic MAP regulation, and the conditions are set out in Albania's OECD Dispute Resolution Profile, last updated 23 May 2023 — Albania also has a dedicated component in the OECD's 2023 Consolidated Information on Mutual Agreement Procedures and sits within the MAP Statistics dataset. Inclusive Framework membership brings the Action 14 minimum standard.

Advance pricing agreements are available in unilateral, bilateral and multilateral form under Article 39, and Article 39(3) bars adjustment of covered transactions while the terms hold. The gate is high: covered transactions must be expected to exceed EUR 30 million across the term, though the DPT may accept complex or strategically significant cases below that. Fees run ALL 50,000 before pre-filing, then ALL 300,000 unilateral or ALL 1,200,000 bilateral. The term is capped at five years from the year after signature, rollback is unavailable, and an annual compliance report must accompany the return. Uptake has been minimal, which the threshold and fees explain.

Pillar Two, Amount B and stale citations

Albania has not enacted the GloBE rules. As at the start of 2026 there was no income inclusion rule, undertaxed profits rule or qualified domestic minimum top-up tax, and no announcement of one. Its engagement with Pillar Two runs through the Subject to Tax Rule: Albania signed the STTR multilateral instrument, reportedly on 23 September 2025, and Law no. 45/2026, adopted on 23 April 2026, ratifies it across 21 treaties. Read the dates carefully. The early-June 2026 entry into force belongs to the Albanian ratifying law, fifteen days after gazetting, not to the convention, which takes effect for Albania under its own entry-into-force rule once the instrument of ratification is deposited. Sources also conflict: Regfollower gives 20 May gazetting and 4 June in force, Bloomberg Tax 21 May and 5 June. Groups with Albanian outbound interest, royalties and specified service payments to low-taxed related parties should be modelling the STTR, not top-up tax.

On Amount B, Albania appears on the OECD's June 2024 list of covered jurisdictions, and on the qualifying list for the operating expense cross-check, for the five years from 1 January 2025. No Albanian legislation adopting the simplified and streamlined approach has been identified, so covered status should not be read as domestic implementation.

The other live development is administrative. The DPT's public transfer pricing pages still cite Law no. 42/2014 and the 2014 and 2015 instructions, and commercial summaries including tpguidelines.com still quote the 30-day documentation window. The thresholds and the ALL 10,000 monthly fine stated on the DPT pages remain accurate; the legal citations do not. Article 115/1 of the Tax Procedures Law likewise still cross-refers to repealed provisions of Law 8438/1998, a conforming-amendment failure that does not defeat the penalty or the documentation defence but is worth flagging in correspondence.

How practitioners should respond

Four things follow. Treat the 45-day window as a design constraint: the Article 115/1(3) protection, the regime's most valuable feature, is conditional on documentation prepared under Instruction 29/2023 being produced inside it, and a file assembled from scratch on receipt of a request will not meet that standard. Build it to the 31 March return date.

Document the comparables ordering explicitly. Section 7.3 admits foreign comparables only where internal ones are absent, and only with an analysis of geographic and other differences plus adjustments, while the local comparable pool is empty in practice. The defensible position is a written search narrative showing that internal comparables were tested first, that regional screens were used because nothing usable exists locally, and that the differences were considered and adjusted. That costs a paragraph and removes a standard line of challenge. Do not assume the triennial refresh is available: it stops at ALL 50 million of controlled transactions.

Price with the median in mind. The statutory adjustment point is the median of the full comparable set, so a result at the edge of an interquartile range carries more risk here than where the range is codified. If the intended point is not the median, the reasoning belongs in the file before the audit.

Verify the citations. The tax authority's website, several commercial summaries and the OECD profile all still describe the pre-2024 framework, and instruction section numbers should be checked against the gazetted text before use. On financing, arm's length pricing is not sufficient on its own: interest is capped by reference to the Bank of Albania published average rate, and net interest expense above 30 per cent of EBITDA is disallowed regardless of comparables.