(September 10, 2015)
On September 9, 2015 on the website of the Swiss Federal Department of Finance a press release announcing that on that same day Switzerland and Albania signed a protocol amending their existing DTA with respect to taxes on income and capital was published.
Although signed, the Protocol has not yet entered into force. For the Protocol to enter into force, the respective ratification procedures have to have been finalized in both countries.
Below we will discuss a selection of the regulations included in the recently signed Protocol of which we think they might interest our readers.
Under the Protocol Subparagraph a) of Paragraph 3 of Article 2 ("Taxes covered") shall be replaced by the following:
a) in Albania:
(i) the income taxes (tatimet mbi te ardhurat), including corporate profits tax (duke perfshire tatimin mbi fitimin e shoqerive), personal income tax (tatimin mbi te ardhura personale) and capital gains tax from the alienation of the movable or immovable property (tatimin e te ardhurave nga kapitali ose nga tjetersimi I pasurive te luajshme dhe te paluajtshme);
(ii) the tax on small business activities (tatimi i aktiviteteve te biznesit te vogel); and
(iii) the property tax (taksimi mbi pasurine);
(hereinafter referred to as “Albanian Tax”);
Under the Protocol Paragraph 1 of Article 4 ("Resident") of the Convention shall be deleted and replaced by the following paragraph:
“For the purposes of this Convention, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein.”
Under the Protocol several amendments are made to Article 11 (“Interest”) of which we find the replacement of the renumbered Paragraph 6 by a new Paragraph 6 the most interesting. The new Paragraph 6 of Article 11 reads as follows:
“Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.”
Under the Protocol a new Paragraph 5 is added to Article 12 (“Royalties”). This newly to be added Paragraph 5 reads as follows:
“Royalties shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment or fixed base, then such royalties shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.”
Under the Protocol also an amendment is made to Article 24 (“Non-discrimination”).
Under the Protocol also 2 paragraphs regarding arbitration are added to Article 25 (“Mutual agreement procedure”). These 2 paragraphs (Paragraph 5 and 6) read as follows:
5. Where,
a) under paragraph 1, a person has presented a case to the competent authority of a Contracting State on the basis that the actions of one or both of the Contracting States have resulted for that person in taxation not in accordance with the provisions of this Convention, and
b) the competent authorities are unable to reach an agreement to resolve that case pursuant to paragraph 2 within three years from the presentation of the case to the competent authority of the other Contracting State, any unresolved issues arising from the case shall be submitted to arbitration if the person so requests. Unless a person directly affected by the case does not accept the mutual agreement that implements the arbitration decision or the competent authorities and the persons directly affected by the case agree on a different solution within six months after the decision has been communicated to them, the arbitration decision shall be binding on both States and shall be implemented notwithstanding any time limits in the domestic laws of these States. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of this paragraph.
6. The Contracting States may release to the arbitration board, established under the provisions of Paragraph 5, such information as is necessary for carrying out the arbitration procedure. The members of the arbitration board shall be subject to the limitations of disclosure described in Paragraph 2 of Article 26 with respect to the information so released.
Furthermore under the Protocol a new Article 26 (“Exchange of information”) is added.
The Protocol furthermore arranges that amendments are made to the existing Protocol.
Click here to be forwarded to the full text of the PROTOCOL BETWEEN THE SWISS FEDERAL COUNCIL AND THE COUNCIL OF MINISTERS OF THE REPUBLIC OF ALBANIA AMENDING THE CONVENTION OF 12 NOVEMBER 1999 BETWEEN THE SWISS CONFEDERATION AND THE REPUBLIC OF ALBANIA FOR THE AVOIDANCE OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL as available on the website of the Swiss Federal Department of Finance, which will open in a new window.
Click here to be forwarded to the text of the existing Swiss – Albanian DTA (stemming from 1999) as available on the website of the Swiss Government, which will open in a new window.
Are you looking for an other DTA? Then check our section DTAs & TIEAs, which is a very efficient way to locate numerous DTAs.
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