SECTION 1: Market outlook
1.1 What is the outlook for US investment into your
jurisdiction over the next 12 months, given the new US
administration's protectionist focus?
The outlook for US investment into Albania over the next 12
months is not promising, not because of the new US
administration's protectionist focus but due to domestic
reforms that still need time to show results.
1.2 Are there any industries in particular that you think
are more likely to be affected by the US's new economic
The petroleum industry in Albania is more likely than other
sectors to be affected by the US administration's new economic
SECTION 2: Approving foreign investments
2.1 Explain the foreign investment approval process and
Foreign investment is governed by several laws and
regulations; the most significant are the Albanian Constitution
and Law 7764 On Foreign Investments dated November 2 1993, as
amended (Law on Foreign Investments).
According to the Law on Foreign Investments, there are no
specific approval processes and timetables to be followed in
general by the foreign investors.
The constitution guarantees fundamental rights, such as
private ownership, freedom of economic activity, free market
economy, anti-monopolistic protection, free repatriation of
capital and profits, and equal treatment of foreign and
domestic investments and investors.
Law 10303, dated July 15 2010, established the Albanian
Investment Development Agency (Aida), which is the designated
national investment promotion agency.
The following tasks are assigned to Aida: to facilitate and
support direct investment in Albania; to increase the
competitiveness of small and medium-sized enterprises; to
promote and support exports of goods and services. It conducts
activities to improve the business climate, helping private
companies at all stages of their economic activity, as well as
intermediating with investors and state authorities. Aida may
be a valuable resource for potential investors looking to
invest in Albania.
2.2 Are there any investment restrictions in specially
regulated sectors and is the government entitled to any special
rights in these sectors?
There are no investment restrictions in any type of sectors
in Albania; on the contrary, under the Law on Foreign
Investments, foreign investors are granted the same treatment
as nationals and do not require any additional licence or
approval to invest in the country. Foreign investors are free
to establish legal presence, subsidiaries, representative
offices, and branches to the same extent as any domestic
business may and the foreign investor shall not be subjected to
less favourable treatment in terms of taxes.
According to some recent legal amendments, under article
8(a) of the Law on Foreign Investments, the Council of
Ministers may grant special state protection to a foreign
investment in the case that the investment is performed in
public infrastructure or tourism, energy and agriculture on the
basis of a state concession contract; or on immovable property
granted by Albanian government; or on an immovable property
upon which the foreign investor has acquired proprietary
rights. The latter is on the basis of documents or public acts
lawfully issued by a competent state body or public entity, and
where an investor performs or plans to perform an investment
for a value not less than €10 million ($11.75
2.3 Which authority oversees competition clearance and give
a brief overview of the merger clearance process?
The Albanian Competition Authority (ACA) is established by
the Competition Law, and is composed of a commission of five
members and a secretariat. The Competition Commission is the
decision making body.
The Competition Law requires mandatory notification of all
transactions that result in a 'concentration of undertakings'
and which meet the relevant thresholds independently of whether
such transaction is by way of a merger, an acquisition or a
public takeover. Any joint-venture (JV) that performs the
function of an independent economic unit is also subject to the
Competition Law. More specifically, a concentration under the
Competition Law shall be deemed to arise where a change of
control on a lasting basis results from:
- the merger of two or more previously independent
undertakings or parts of undertakings; or
- the acquisition by one or more persons already
controlling at least one undertaking, or by one or more
undertakings, whether by purchase of securities or assets,
contract or by any other means, of direct or indirect control
of the whole or parts of one or more other undertakings.
The creation of a JV shall not be deemed to be a JV if the
scope of the JV is the coordination of competing activities
between two or more independent undertakings.
Concentrations require notification with the Competition
Authority if in the last financial year preceding the
concentration some relevant legal conditions are met.
The deadline for notification is 30 calendar days from the
date of the conclusion of an agreement for merger, acquisition
of control, creation of a JV or submission of a public bid for
acquisition or exchange. A filing shall be made on the basis of
the main signed transaction agreement. There are no specific
rules referring to memoranda of understanding (MoUs), good
faith intentions etc. The period starts to run from the next
day of the agreement.
The ACA must decide whether to clear the transaction or to
commence an in-depth investigation within two months of receipt
of the notification. The period of two months shall begin on
the first working day following the confirmation by the ACA of
the acknowledgement of receipt of a proper notification; or, if
the information to be supplied with the notification is
incomplete, on the day following the receipt of the complete
The ACA may, however, extend this deadline by a further
specific legal term if the participating parties commit to
undertake to remedy any adverse effects of the merger to obtain
Based on the Instruction on Simplified Procedures for the
Review of Concentrations, the ACA may decide to clear a
transaction within a specific legal deadline in the following
a) An acquisition between undertakings on
condition that none of the participating undertakings shall be
engaged in the same business activity for the same product and
b) An acquisition between undertakings if
both the following conditions are simultaneously met:
i The combined market share of all the parties dealing with
the same business activity in the same product or geographic
market (horizontal relationship) is less than 15%.
ii Individual or combined market shares of
all parties in the concentration dealing with business
activities in a product market which is an upstream or
downstream market of a product market in which any other party
in the concentration is engaged (vertical relationship) is less
c) An acquisition where both the following conditions are
i The combined market share of all the parties in the
concentration being in a horizontal relationship is less than
ii The delta of the Herfindahl-Hirschman Index (a measure of
market concentration) resulting from the concentration is under
The ACA may always apply the standard review periods if it
judges that the concentration deserves closer investigation. On
the other hand, the ACA may select not to apply the simplified
review period even in those cases when clearly there are no
market overlaps but the markets concerned are considered
Where the ACA commences an in-depth investigation, it has an
additional period to decide whether to unconditionally clear
the concentration or to clear it subject to conditions or to
prohibit the concentration.
If the ACA does not decide within the set deadlines (either
for the preliminary phase or the in-depth phase), the
Competition Law provides for the 'silence-is-consent-rule,'
unless the ACA extends or suspends the above-mentioned time
Notification fee (to obtain notification forms):
- ALL7,500 ($66.5) for undertakings that
acquire control with a domestic total turnover of ALL200
million to ALL1 billion;
- ALL15,000 for undertakings that acquire
control with a domestic total turnover of above ALL1
- ALL250,000 for undertakings that acquire
control with a domestic total turnover of ALL200 million to
- ALL500,000 for undertakings that acquire
control with a domestic total turnover of above ALL1
2.4 Are there further approval requirements that foreign
investors should be aware of?
Foreign investors are entitled to the same rights as
Albanian investors. Furthermore, according to the Law on
Foreign Investments, all foreign investments have equal and
unbiased treatment protection and security.
SECTION 3: Investment techniques
3.1 What are the most common legal entities used for US
investment in your jurisdiction?
Any entity intending to carry out an economic activity in
Albania is required to have a legal presence in Albania in the
form of a newly established and registered Albanian legal
entity or in the form of a branch of a foreign company. Law
9901, dated April 14 2008, On Entrepreneurs and Commercial
Companies, as amended (the Albanian Company Law), Law 131/2015,
dated November 26 2015 On the National Business Centre and Law
9723, dated May 3 2007 On the business registration, as
amended, provide the rules for the registration of such legal
presence at the National Business Centre (NBC).
The subsidiary shall be deemed to be a separate entity,
taking one of the forms provided for by the Albanian Company
Law. Regardless of the chosen commercial form, the subsidiary
shall have a determined name, object of activity, legal seat
(registered office) pursuant to lease or ownership title, and
management (a sole or more managers). The business forms
typically used that are provided for under the Albanian Company
Law are: general partnership; limited partnership; limited
liability company (LLC); or joint stock company (JSC).
General and limited partnerships are rarely used in
practice, whereas LLCs (SHPK) and JSCs (SHA) are the most
frequently used forms of business.
The LLC is the most commonly chosen and appropriate legal
form for conducting business in Albania. In principle, its
shareholders are not responsible for the company's obligations,
and they are personally liable for losses only to the extent of
their unpaid capital contribution (there are some exceptions).
The initial capital for incorporating this type of legal entity
is ALL100. The LLC may also have only one sole shareholder, in
which case all the resolutions of the company must be
registered in the register of resolutions of the company.
In a JSC the capital is divided into shares. The
shareholders are not responsible for the company's obligations
and they are liable for losses only to the extent of their
unpaid capital contribution (with some exceptions).
The required capital contribution is at least ALL3.5 million
for companies with private offer and ALL10 million for
companies with public offer. JSCs have a more complex
organisational structure compared to other types of companies
and are typically a mandatory form of company for sectors such
3.2 What are the key requirements for establishment and
operation of these legal entities?
The registration of a subsidiary in the form of LLC or JSC
is made through the National Business Centre (NBC) and by law,
if all the documents filed will be complete, registration
should take place within 24 hours as of the date of
application. In practice, this may take up to three days if
there is any clarification required from the NBC personnel with
respect to the documents. Registration with the NBC constitutes
registration with the tax authorities and equipment with the
fiscal VAT certificate, i.e. the entity as of that moment can
start to issue invoices.
All foreign documents required for registration must be duly
notarised and apostilled.
All the documents noted above before submission for
registration must be accompanied with a certified translation
in the Albanian language.
The organisational structure of both legal entities is
briefly described below:
The governing bodies of an LLC are:
1. General assembly
- change of the denomination of the company,
change of seat or activity;
- increase or decrease of the share capital
of the company;
- sale or transfer of shares to third
- dissolution and liquidation of the
- appointment or discharge of
administrator(s)/managing directors of the company;
- approval of balance-sheet;
- appointment of the chartered accountant of
the company; and
- any other change of the company bylaws,
2. Managing directors (MDs)
The daily management is performed by MD(s) appointed by the
general assembly. According to the current Albanian Company Law
MDs may not be appointed for more than five years but their
term is renewable. The MDs represent the company before third
parties and they may appoint other persons to act on the
Under article 95 of the Albanian Company Law, a director of
the mother company cannot simultaneously be the director of its
The appointment of an auditor is only obligatory in the case
of a LLC if at the closing of the accounting period (financial
year) the company exceeds the following thresholds: the total
of the balance sheet assets for the financial year in question
is equal to, or more than ALL50 million; the total turnover of
the financial year in question is equal to, or more than ALL100
million; or it has on average 30 employees during the financial
year in question.
The organisational structure of a JSC is as follows:
- The general assembly; and
- Either, the managing council as a single
management organ that comprises both supervisory and
management functions (one tier system); or the supervisory
board and the MD(s) (two tier system). In the latter, the
supervisory and the management functions are divided between
these two organs.
In the latter case, MDs may be appointed either by the
general assembly or by the supervisory board.
In a JSC, the managing council (in the one tier system) and
the supervisory board (in the two tier system) should have no
fewer than three and no more than 21 members. They cannot be
appointed for a period exceeding three years – their
mandate being renewable without limitation.
The initial capital must be fully subscribed to before the
registration of the company with the NBC. At the same time, at
least one quarter of the nominal value of the shares must be
paid and the remaining unpaid capital must be paid in one or
more instalments, according to the decision of the management
organs of the JSC. As for the shares contributed in kind, they
must be fully subscribed and paid in before registering with
the relevant authority (NBC). Contributions in services are not
SECTION 4: Dispute resolution
4.1 How effective are local courts' enforcement and dispute
resolution proceedings, and what should US investors be
particularly aware of?
According to the Law on Foreign Investments, all foreign
investors are entitled to submit disputes to an Albanian court
or to the Arbitration Court in Tirana. In the event of a
dispute arising between a foreign investor and either a private
Albanian party or the Albanian government, the dispute may be
submitted for resolution to a previously agreed dispute
resolution procedure. If such procedure has not been specified,
the foreign investor may submit the dispute to an authorised
court or arbitrator as provided by Albanian law.
According to the Albanian Private International Law, foreign
investors have the right to choose a foreign dispute resolution
centre. Further, under the laws of the Republic of Albania: the
submission by the foreign investor of any dispute, controversy
or claim arising out of or relating to the business in Albania
to arbitration is a valid submission to arbitration; and the
submission by the foreign investor to the jurisdiction of a
foreign court is a valid and enforceable choice. In addition,
in compliance with the June 10 1958 New York Convention on the
Recognition of Enforcement of Foreign Arbitral Awards, an
arbitral award obtained against Albanian parties working with
US citizens in an arbitration proceeding and/or a judgement
obtained against Albanian or third parties located in Albania
from the foreign court will be enforced by the courts in the
Republic of Albania, without re-examination or re-litigation of
the matters, unless the foreign arbitral award or foreign court
judgement violates basic principles of Albanian Law.
4.2 Does your jurisdiction have a bilateral investment
protection treaty with the US and is that commonly used by
On June 10 1992, the Republic of Albania and the US entered
into an agreement concerning economic, technical and related
assistance. This agreement sets forth a framework concerning
economic, technical and related assistance which may be
provided by the US government, subject to the applicable US
laws and regulations.
The US signed a bilateral investment treaty in 1995, which
entered into force in January 1998. The bilateral investment
treaty (BIT) with Albania is based on the view that an open
investment policy contributes to economic growth. This Treaty
aims to assist Albania in its efforts to develop its economy by
creating conditions more favourable for US private investment
and thus strengthen the development of its private sector.
There is no free trade agreement or bilateral tax treaty
between the two countries.
4.3 Do local courts respect foreign judgments and are
international arbitration awards enforceable?
Albania is a signatory to the 1958 New York Convention and
the Geneva Convention of 1961. The ratifying law provides that
Albania is committed to recognise and enforce any international
arbitration award concerning a dispute relating to foreign
investment. Albanian legislation provides for the possibility
of entering a clause into a contract indicating the steps to be
taken to resolve disputes. If this clause has been inserted,
the foreign investor may turn to a court or arbitrator, as
required by Albanian law.
In addition, Albania is a member state to the International
Centre for the Settlement of Investment Disputes (ICSID
Convention). Disputes concerning unequal treatment or
expropriation of foreign investment by the Government of
Albania may also be submitted to ICSID, as determined by the
Convention on the Settlement of Investment Disputes, adopted in
Washington in 1965.
Under Albanian law, every international arbitration decision
is final and irrevocable for the parties to the dispute. There
is recognition and enforcement procedure to follow for the
enforcement of a final award in Albania, but such does not
require the discussion of the merits of the dispute, simply
procedural issues to be reviewed.
SECTION 5: Forex controls and local operations
5.1 What foreign currency or exchange restrictions should
foreign investors be aware of?
There are no foreign currency or exchange restrictions,
however the Albanian foreign exchange control regime is
regulated by Regulation 70, dated September 30 2009 of the
Supervisory Council of the Bank of Albania On Foreign Exchange
Activities, as amended (the FX Regulation). The FX Regulation
is applied to all transactions between residents and
non-residents exercising foreign means of payment and to
unilateral transfers of assets from and into the Republic of
Pursuant to the FX Regulation, foreign exchange transactions
represent transactions and/or transfers among residents and
non-residents or vice-versa, which are mainly composed of
capital transactions and transfers, and current transactions
Except for required documentation, which is duly verified by
an Albanian licensed entity, no further authorisation or
approval is required to transfer the hard currencies abroad.
The FX Regulation provides that transfers carried out between
residents and non-residents, and which are recorded in the
current account of the balance of payments, may be carried out
in freely convertible currency units. Current transfers and
transactions between residents and non-residents are conducted
freely after having submitted a number of required
The FX Regulation provides that in addition to the
requirements provided by such regulation, in respect of
outbound payment transactions, the rules set out by
international agreements ratified by the Republic of Albania,
inter-bank bilateral and multilateral agreements where Bank of
Albania is a party, as well as banking custom, shall be
SECTION 6: Tax implications
6.1 Are there tax structures and/or favourable intermediary
tax jurisdictions that are particularly useful for US investors
into the country?
Albania is a signatory to 41 Double Tax Treaty (DTT)
agreements and, therefore, any of the relevant countries that
have entered into a DTT with Albania could be used as a
favourable intermediary tax jurisdiction by the US investors in
6.2 Has your jurisdiction benefited from the recent trend
of US companies pursuing inversion structures? If yes, do you
believe this will be threatened under the new
As far as we understand, Albania has not benefited notably
from the trend of US companies pursuing inversion structures.
Therefore, the related effects will not be threatened by the
6.3 What are the applicable rates of corporate tax and
withholding tax on dividends?
According to the applicable law, the corporate income tax
rate is 15%. The law provides also for a simplified corporate
income tax. For annual turnover of ALL5 million to ALL8 million
the applicable tax rate is five percent, and for annual
turnover between zero and ALL5 million the applicable tax rate
is zero percent. The applicable tax rate for the withholding
tax on dividend is 15%.
6.4 Does the government have any tax incentive schemes in
Regarding entities funded by US government funds, the
Bilateral Agreement entered into between Albania and the US
provides for a number of tax exemptions, guided by the
principle that no US government fund will be used to pay any
type of taxes, either direct or indirect, in the Republic of
Regarding the tax exemptions provided by the Albanian fiscal
legislation, note that the most important tax exemptions are
exemptions related to VAT, including but not limited to VAT on
6.5 Are there any reciprocal tax arrangements between your
jurisdiction and the US? If so, how can they aid
There is no effective DTT between the US and Albania.
However, given that there is no relevant applicable DTT,
according to Albanian tax legislation, any tax paid by US
citizens in the US can be tax credited in Albania to the level
6.6 Do you think that the introduction of new rules and
regulations in the US, such as the Bring Jobs Home Act, is
likely to have an impact on investment into your country?
Given that Albania does not have a considerable presence of
US investors, the Bring Jobs Home Act will not have any impact
on US investment in Albania. Notwithstanding the above, given
that Albania is a beneficiary of Usaid funds, any decrease in
the US aid budget will have an impact, especially in funding
the NGO sector and, as a consequence, in the implementation of
several developing strategies and projects in Albania.
Senior partner, Kalo &
T: +355 4 2233 532
F: +355 4 2224 727
Ardjana Shehi is a senior partner at Kalo &
Associates, Tirana, primarily in the finance and tax
practice. Shehi holds a law degree (LLM) and an MBA.
She has completed various legal training programmes in
foreign institutions, such as the University of
Birmingham and Copenhagen Business School, among
others. Shehi holds a UK CIPD certificate in training
and human resources. With over 25 years of extensive
legal experience, Shehi has excellent knowledge and
experience in providing legal services, analysing legal
frameworks and drafting legislation, and in providing
training to the Albanian legal community, particularly
Shehi has excellent experience in finance, tax and
bankruptcy law. Her clients include many international
organisations and foreign and multinational companies
(Fortune 100 and Fortune 500). These include: the
International Finance Corporation (IFC), Black Sea
Trade and Development Bank (BSTDB), European Bank for
Reconstruction and Development (EBRD), Bechtel
International, Lockheed Martin, Shell, EVN, Cairn,
Vodafone, Ericsson, Philip Morris, IATA and CIT
(Aviation), among others.
Shehi has been a key expert in drafting laws, such
as the Taxpayers' Advocate Law (2016), Renewable Energy
Law (2013), Concession Law (2012), Pension Fund Law and
Investment Fund Law (2009), among others.
Associate, Kalo & Associates
Tel: +355 4 2233 532
Tel: +355 4 2224 727
Irv Vaso is an associate in finance and tax group of
Kalo & Associates, Tirana. He has an LLB and has
further completed a master's degree (LLM) in civil and
corporate law. The primary focus of his practice is on
employment related issues and issues related to
employment tax liabilities, including but not limited
to drafting and reviewing employment and management
service contracts, collective labour agreements with
trade unions, advice related to mandatory social
security and health insurance contributions (which
together with personal income tax are considered as tax
liabilities), termination payments and redundancy
settlements/compromise agreements, employment tax due
diligence, benefit packages, retirement and pension
planning, share options and other share schemes advice,
and Albanian tax residence rules applicable to foreign
employees and expats, etc.
Vaso has excellent relationships with different
ministries and several second-tier public institutions.
Mostly, he liaises between the firm and the relevant
state authorities aiming to receive advanced ruling for
the implementation of Albanian legislation regarding
employment matters and social contributions. In
addition, he covers issues including entry clearance
requirements, residence permit and work permits.