Empowering the branches and the subsidiaries of multinational companies operating in Albania
The new legislation on Transfer Pricing, reflects the principles of the European Union legal framework and in the same time alleviates the local branches and subsidiaries of multinational companies involved in transactions with related parties, while maintaining their local performance and profits.
With the aim of providing relevant information and advice for addressing the issues related to the newly introduced legislation on Transfer Pricing, Deloitte Albania welcomed the representatives from local branches and subsidiaries of multinational companies in its first event “Transfer Pricing challenges: Are you ready?”. The participants were introduced with the local and regional expertise of Deloitte Albania in the field of Transfer Pricing, along with the specific explanations from the representatives of the Ministry of Finance and the General Tax Directorate.
With the introduction of the new Transfer Pricing legislation, multinational companies operating in Albania now have a powerful mechanism for maintaining their performance and profits . “An increasing trend of payments from Albanian companies towards foreign companies under the frame of management and technical services have been noticed in the recent years. Due to the lack of regulations, neither the tax authorities, nor the local companies have been capable of stopping or handling anything regarding these payments. Now, the new Transfer Pricing Legislation enables the monitoring and documentation of these payments in line with the market principle and not imposing any additional burden to the performance of the local companies and the Albanian state” – declared Olindo Shehu, Tax and Legal Partner of Deloitte Albania and Kosova.
Allocated costs, management fees, service fees, technical fees and many other transactions are the usual costs being invoiced towards the branches and subsidiaries of the multinational companies in Albania by the parent companies and other related parties. Transfer Pricing legislation is the legal basis that enables the CFOs and CEOs of these branches and subsidiaries to maintain under control such costs, while maintaining their performance, before it is weakened by the usually overcharged costs by their related parties.
Olindo Shehu believes that the enforcement of this legislation will be a challenge for the tax administration, but also for the Albanian taxpayers. Transfer Pricing is one of the most sophisticated legislation frameworks on international level and the lack of the basic knowledge, the comparative information and the experience of the main actors in charge of its implementation might be some of the obstacles that will prevent the effective enforcement of this legislation. “Enforcement of Transfer Pricing legislation will not only help the subsidiaries of the multinational companies operating in Albania, but will also serve as a mechanism for monitoring the flows of capital being transferred abroad. Therefore, the taxable profits of these companies might result in higher profits of Albanian source that would remain in Albania. This would become a key reason for a greater economic stability and additional revenues for the state budget with no need for increasing the tax rates and without imposing any burden to the performance of the local companies. ” – Olindo Shehu added.
Taking into consideration the importance of this legislation and the commitment for its enforcement from the Tax Administration and the Ministry of Finance, Deloitte Albania has created a dedicated team for the services related to Transfer Pricing, assisted by the best experts of this field in the region. This team has already started assisting and advising the branches and subsidiaries of the multinational companies operating in Albania by acting as the trusted partners regarding Transfer Pricing with the aim of maintaining the local performance and complying with the local legislation as well.