Worldwide transfer pricing reference guide 2014

Albania (continued)
Priorities/pricing methods (continued)
The Transfer Pricing Committee should benchmark the prices used in such transactions with comparable uncontrolled prices and, if this
is not possible (e.g., due to lack of appropriate data), resort to the Resale Price or the cost plus method. In case none of the traditional
transaction methods can be applied, due to absence of reliable data on gross margins of comparables, the Committee may apply any one
of the transactional profit methods (Transaction Net Margin or Profit Split).
However, this committee has not yet been established. Moreover, the recent tax procedures law and related administrative guidelines
contradict the aforementioned income tax guidelines by stipulating that the tax authorities may reassess the tax liabilities of a taxpayer,
if the arm’s length standard was not respected when the parties determined the transfer prices. To that end, they can use:
• Internal comparable uncontrolled prices
• External comparable uncontrolled prices
• Customs reference prices
• Data collected by the GDT on the prices used in comparable transactions
Finally, in case there is no data on comparable goods or services prices, the tax authorities may refer to the OECD Guidelines for applying
other methods when reviewing the transfer prices.
As mentioned above, changes are expected in the current approach under the new legislation to be introduced in 2014.
Transfer pricing penalties
The current legislation does not provide for specific penalties in case of transfer pricing adjustments. Therefore, in case of an
adjustment, general tax penalties would apply. Hence, a penalty of 100% would apply on the amount of unpaid tax liability due along
with the amount of reduced declared taxable profit. If before a tax audit is initiated, the taxpayer decides to amend the transfer pricing
position previously taken by filing an amended tax return for the difference between the transfer price and the market price, then the
penalty imposed will be 5% of the unpaid liability for each month of delay, capped at 25%. In both cases, default interest would apply at a
rate of 120% of the interbank interest rate published by the Bank of Albania.
Penalty relief
Currently, no penalty relief is available.
Documentation requirements
The Albanian transfer pricing rules do not impose any transfer pricing documentation requirement on taxpayers. In contrast, the tax
administration bears the burden of proof in the first place, i.e., they are obligated to substantiate on what grounds they consider that the
transfer prices applied are not in line with the arm’s length standard. However, it is recommended to have a defense file available, in case
the tax administration challenges the intercompany transactions as incompatible with the arm’s length standard during a tax audit.
As aforementioned, it is expected that the burden of proof will shift to the taxpayer and the documentation requirements will be imposed
as under the new legislation to be introduced in 2014.
Documentation deadlines
Not applicable.
Statute of limitations on transfer pricing assessments
The statute of limitations on transfer pricing assessments is five years. Transfer pricing is audited in the general course of a corporate
income tax audit.
Worldwide transfer pricing reference guide
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