Taxation of cross-border distribution of profits in Albania: Does it approach the scope of the EU Parent-Subsidiary Directive?

32 Pages Posted: 26 Oct 2020 Last revised: 16 Nov 2020

See all articles by Pranvera Shehaj

Pranvera Shehaj

Vienna University of Economics and Business

Date Written: October 25, 2020


Albania journey towards EU membership is governed by the Stabilization and Association Agreement (SAA), signed on June 12th, 2006. This article rises above Albania's obligations for the alignment of its tax legislation with EU standards and acquis, clearly defined in Title VI of the SAA. Unlike any prior analysis of legal and political character published, it aims to analyze the extent to which the Albanian tax legislation comply with one of the most important legislative acts of the EU law, the Parent-Subsidiary Directive, which aims to eliminate double taxation in the distribution of cross-border dividends. Three main conclusions have been drawn: First, Albania seeks to eliminate double taxation arising from cross-border distribution of profits mainly through double tax treaties. Second, in case of inbound dividends, as the State of Residence of the parent company, unless the State of source has a double tax treaty with Albania, Albania’s tax legislation does not exempt or gives a credit for the foreign income tax already levied on the distributed profits. If the State of source has a DTT signed with Albania, Albania tax system follows an asymmetric approach, applying simultaneously the exemption method for the domestic intercompany dividends, but it provides no more than indirect credit for inbound cross-border intercompany dividends. Third, also for outbound dividends, as the State of source, Albania levies a withholding tax only for dividends and distributions of profits paid to non-residents, while it reduces or exempts the withholding tax only if Albania has signed a DTT with the other State. Although, cross-border double taxation is taken into account by Albanian tax legislation, seen in the context of the approximation of Albanian legislation with the EU law on direct taxation, Albania does not comply sufficiently with the objective scope of the Parent-Subsidiary Directive yet. Therefore, future changes in Albania direct tax legislation would line it up with EU objective on the free movement of capital and goods and the removal of obstacles for the internal market.

Keywords: EU Parent-Subsidiary Directive, Dividends, Albania direct taxation, Double taxation, Acquis communautaire

JEL Classification: K34; F23; F53; H25; H77; H73

Suggested Citation

Shehaj, Pranvera, Taxation of cross-border distribution of profits in Albania: Does it approach the scope of the EU Parent-Subsidiary Directive? (October 25, 2020). WU International Taxation Research Paper Series No. 2020-14, Available at SSRN: or

Pranvera Shehaj (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020

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