Albania

Inventory valuation

Inventory is valued at the end of each tax period using the methods stipulated in the Accounting Law, which should be applied systematically. The methods stipulated in the National Accounting Standards for the valuation of inventory at year-end are the average cost and first in first out (FIFO) methods. The accounting method of inventory evaluation cannot be changed more than once in five years.

Capital gains

Generally, capital gains tax (CGT) is not distinct from CIT, and any capital gain is taxed as CIT at the 15% CIT rate. The capital gain is derived from the difference between the sale price and the purchase price of the asset (or the nominal value).

Capital gains, if any, are added to the taxable profit of the company and are taxed together with those profits at the 15% CIT rate. If the seller is a tax resident in a country other than Albania, based on applicable DTTs, the capital gain on sale of shares is generally taxed in the country in which the seller is resident, subject to certain provisions under domestic law and tax treaties.

Changes in the ownership of companies operating in the telecommunication sector, the hydrocarbon/mineral asset exploitation sector, and the financial sector in Albania are taxed in Albania as per the local legislation, and companies should inform the tax authorities within 45 days of the transaction.

Note that the above applies in cases when the Albanian entity has realised an average turnover of ALL 500 million for three consecutive previous years.

The Albanian entity subject to ownership changes is expected to notify the tax authorities regarding the details of the change within 45 days from the moment the ownership change occurred.

The obligation to notify does not apply if the sale of shares results in less than a 10% change in ownership of the Albanian company.

Dividend income

Dividends and other profit distributions received by a resident entity from another resident entity or from a non-resident entity are not subject to CIT for the resident beneficiary of such income. This applies under two conditions: (i) the shareholding is greater than 10% and (ii) the shares have been held for a continuous period of at least 24 months.

Interest income

Interest income is taxed at the rate of 15%.

Royalty income

Royalty income is taxed as ordinary income, at the rate of 15%.

Foreign income

Albanian resident corporations are taxed on their worldwide income. If a DTT is in force, double taxation is avoided either through an exemption or by granting a tax credit up to the amount of the applicable Albanian CIT rate.

Albanian legislation does not contain any provisions under which income earned abroad may be tax deferred.