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New tax treaty bans profit shifting to countries with lower tax rates than 9%

2025-09-23 20:19:55, Ekonomi CNA

"The new international agreement gives Albania the right to tax the difference when companies try to transfer profits to jurisdictions with tax rates below 9%, increasing transparency and certainty for domestic businesses."

The Minister of Finance, Mr. Petrit Malaj, signed today in Paris with the Deputy Secretary-General of the Organization for Economic Co-operation and Development (OECD), Ms. Fabrizia Lapecorella, the "Multilateral Convention to Facilitate the Implementation of the Second Pillar Subject Tax Rule" (STTR MLI), according to the official announcement.

The signing of this Convention is part of the measures within the framework of the international BEPS project, of which Albania has been a part since 2019.

The STTR is an integral part of the consensus reached by the Comprehensive Framework of the International BEPS Project, for Pillar 2 solutions on global rules against tax base erosion, which aim to address the tax challenges arising from the digitalization of the economy.

During his speech, the Minister of Finance stated that Albania will be able to fulfill its commitments more efficiently, given that the main goal of the Convention is to help increase the transparency and integrity of the international tax system.

The Ministry of Finance will continue to be committed to promoting tax justice, increasing revenues, preventing profit shifting, and ensuring fiscal sustainability, for the benefit of a better business climate, the finance ministry's announcement concludes.

How is profit transfer regulated?

The Pillar Two Subject to Tax Rule (STTR) is an international treaty-based provision that aims to guarantee a minimum level of taxation for cross-border payments within multinational groups.

This rule applies to a certain group of payments, such as interest, service fees, royalties or other payments between branches and subsidiaries of the same group, when these are made from one country to another.

If payments to the beneficiary in the country of residence are taxed at a rate lower than 9% profit tax, then the source country - ie the country from which the payment is made, gains the right to tax this income up to the minimum level of 9%.

This means that a company operating in Albania will not be able to shift its profits to a subsidiary in another jurisdiction where the profit tax is lower than 9%, with the aim of avoiding tax liabilities. On the contrary, Albania, as the source country of payment, will have the right to apply the tax difference until it reaches the minimum level.

This mechanism is part of the global BEPS (Base Erosion and Profit Shifting) package, which aims to prevent tax base erosion practices and artificial profit shifting, ensuring greater fiscal justice and fair competition among businesses.

For businesses, this creates a more transparent playing field and greater predictability, reducing unfair advantages that arise from exploiting jurisdictions with very low taxes./ Monitor