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Protocol to Tax Treaty Between Albania and Kosovo has Entered into Force — Orbitax Tax News & Alerts

The amending protocol to the 2014 income and capital tax treaty between Albania and Kosovo entered into force on 16 March 2021. The protocol, signed 2 October 2020, is the first to amend the treaty and includes the following changes:

  • The preamble is replaced in line with BEPS standards;
  • Article 1 (Persons Covered) is amended with the addition of the provision that, for the purpose of the treaty, income derived from or through an entity or convention that is treated as partially or wholly fiscally transparent under the tax laws of each Contracting State shall be deemed to be income of a resident of a Contracting State, but only to the extent that income is treated, for tax purposes by that State, as the income of a resident of that State;
  • Article 10 (Dividends) is amended with new withholding tax provisions, including that the withholding tax rate is 5% if the beneficial owner is a company that directly holds at least 25% of the paying company's capital over a 365-day period that includes the date of payment; otherwise, 8% (changes in ownership directly resulting from a corporate reorganization are not considered in calculating the 365-day period);
  • Article 12 (Royalties) is amended, including new withholding tax provisions with a withholding tax rate of 10%, as well as new provisions regarding royalty income attributed to a permanent establishment;
  • Article 25 (Exchange of Information) is amended with additional provisions regarding the collection of information by a Contracting State following a request by the other State; and
  • A new Article 26/1 (Entitlement to Benefits) is added, which provides that a benefit under the treaty shall not be granted in respect of an item of income or capital, if it is reasonable to conclude, considering all relevant facts and circumstances, that the acquisition of this benefit was one of the essential purposes of any convention or transaction that resulted directly or indirectly in that benefit, unless it is determined that the granting of this benefit under those circumstances would be in compliance with the object and purpose of the relevant provisions of the treaty.

The protocol applies from 1 January 2022.