When navigating taxation in Albania, you need to consider issues like double taxation, permanent establishment, withholding tax, and your employee’s personal tax. It’s easy to make missteps when dealing with foreign tax law; these missteps can expose you and your client to serious liability. Outsourcing the administration to a local tax specialist is a valuable step in co-employment risk mitigation.
Personal income tax for your employees in Albania
Depending on your country, your employees’ income may be subject to different taxation in Albania. If your employee fails to comply with local regulations, your company could be liable. Most employees will likely need some sort of guidance to ensure they meet all local income tax requirements.
Withholding tax in Albania
Withholding tax (or “retention tax”) enables governments to collect tax revenues from the economic activities of companies operating within its borders. In an international context, it’s generally imposed on a cross-border income payment from a source in Country A to a resident in Country B. In order to properly budget and plan for an overseas project, it’s important for your company to be aware of what sort of withholding tax you’ll be facing in Albania.
Learn more about withholding tax here (Note: although this information was written with American businesses in mind, the general concepts should apply regardless of your country of origin).
Permanent establishment in Albania
Many international tax treaties with Albania afford greater tax leniency for companies that do not have permanent establishment (PE) in Albania. Small, seemingly inconsequential decisions can establish a “fixed place of business” and create permanent establishment.
It’s worth noting that, in most scenarios, a company working through independent local agents will not be considered to have created permanent establishment. However, it’s important to seek specialist advice to ensure you are legally avoiding PE. Read more about the implications of permanent establishment and how to avoid it.
Outsourcing tax compliance in Albania
There are a number of other tax issues you will need to consider, such as VAT/sales tax, social security costs and payroll tax.
Tax compliance is crucial for your company, but complying with all regulations in a foreign tax system requires an abundance of resources. Many of these resources would be better applied to high value business goals and strategies, perhaps making overseas projects seem too risky or burdensome.
However, you can reduce your company’s liability and retain valuable resources by outsourcing relevant tax duties to a local specialist.
Ensuring tax compliance through a management company
Researching the intricacies of tax law in Albania can be a strenuous undertaking, particularly since some regulations are liable to change. This means your company will need to devote significant resources toward tax compliance during your assignment in Albania.
Outsourcing the administration to a local tax specialist can relieve you of administrative burden and, most importantly, protect your company against any tax-related missteps. A management company provides all of the services of a tax specialist and payroll provider, as well as assuming legal liability for your employees and sponsoring Work Permits.