FOREIGN COMPANY WITH BRANCH IN ALBANIA

Efth. G. Navridis

Which is the current Commercial Law governing business organizations in Albania?

The Law no 9901 “On Entrepreneurs and Commercial Companies”, which entered into force on 21/05/2008, is based on commercial legislation implemented in Germany, Italy and Great Britain.

This Law regulates the status of entrepreneurs, the founding and managing of companies, the rights and obligations of founders, partners, members, and shareholders, companies’ reorganization and liquidation.The Commercial Law constitutes the main body of legislation for business organizations aiming to make the Albanian legislation consistent with the legislation of other European countries and the “acquis communautaire”.

Which is the current Commercial Law governing business organizations in Albania?

The Law no 9901 “On Entrepreneurs and Commercial Companies”, which entered into force on 21/05/2008, is based on commercial legislation implemented in Germany, Italy and Great Britain. This Law regulates the status of entrepreneurs, the founding and managing of companies, the rights and obligations of founders, partners, members, and shareholders, companies’ reorganization and liquidation.The Commercial Law constitutes the main body of legislation for business organizations aiming to make the Albanian legislation consistent with the legislation of other European countries and the “acquis communautaire”.

Which types of Business Entities are allowed for the foreign company’s branch in Albania?

According to Law no. 9723/2007, the branch of a foreign company in Albania must be registered in the National Registration Center as one of the following types of business Entities:

Sole Entrepreneur

• General / Unlimited Partnership
• Limited Partnership
• Limited Liability Company
• Joint Stock Company
• Joint Venture

What is the National Registration Center?

The National Registration Center is the sole authority responsible for business registration in Albania. It operates as an one-stop-shop for all business registration needs, including tax registration at the national and municipal level, registration for social security and health insurance, as well as with the Labor Inspectorate. It operates on the law no. 9723, “On the National Registration Center”, approved on 03/05/2007. It was drafted with the assistance of the Millennium Challenge Albania project, administered by USAID and is in full compliance with international standards and relevant EU directives.

Is the registration in National Registration Center obligatory for a foreign company’s branch and, if so, in which law is that based?

Under the Commercial Law, if a foreign investor wishes to operate in Albania through a branch or representative office, the branch or representative office must be registered in the NRC.

Which documents are necessary for a foreign company’s branch in order to be registered in the NRC?

For the registration of a branch or representative office in NRC the following documents are required:

a) Application form (standard form) filled-in and filed by the representative of the branch/ representative office or of the parent company or by a person authorized upon power of attorney issued by either of the abovementioned persons;

b) Articles of incorporation and bylaws of parent company and all amendments;

c) Recent extract of the Chamber of Commerce of the country where the parent company is located, issued no more than 90 days from the date of application, which reflects:

registration of the parent company in the Commercial Register of the country of origin;

the fact that the company is not subject to dissolution or bankruptcy;

the composition of the managing bodies of the company;

d) Resolution of parent company’s board of directors or of any other body of the company authorized under the bylaws, for the establishment of the branch or representative office in Albania and appointment of the legal representative (Manager) of the branch or representative office in Albania;

e) Financial statements of the last financial year of the parent company and the auditor’s report.

What are the service fees at NRC?

All applications at NRC have the same fee of 100 ALL

What are the allowances made by the Albanian Law for legal representatives?

Under the Commercial Law, the branch or representative office should have a legal representative empowered by the head office to administer the office.

How is a foreign company’s branch treated for tax purposes?

For tax purposes, in general, the branch is treated similarly to an Albanian entity. The tax system includes basically personal income tax, profit tax, tax on real estate, value added tax (VAT) and excise tax. The tax year is the calendar year. Corporations conducting business in Albania are subject to a corporate income tax (profit tax) at a rate of 10%. The rate of VAT is 20%. No VAT is paid for activities referring to exports of goods and international transport and telecommunications. Exceptionally, there is a cut-rated VAT of 10% for medicaments and medical services. For real estate property owned by individuals and legal entities, the Albanian law makes allowances for taxation consisted of the tax on building and the tax on agricultural land.

Which are the Double Taxation Avoidance Treaties in force in Albania?

Albania has agreed with several countries“For the Avoidance of DoubleTaxation with respect to Taxes on Income and on Capital”. The aim of those Treaties is income from business profits, international transport, dividends, interest, royalties, dependent and independent personal services, as well as income from real estate to be protected by double taxation. In addition, for some types of income such as dividend and interest, the Treaties set the maximum rate applicable in both contracting states. Tax Treaties in force since 1992 are the following:

1. Treaty with Poland, in effect as of 01/01/1995
2. Treaty with Rumania, in effect as of 01/01/1995
3. Treaty with Malaysia, in effect as of 01/01/1995
4. Treaty with Hungary, in effect as of 01/01/1996
5. Treaty with Turkey, in effect as of 01/01/1997
6. Treaty with the Czech Republic, in effect as of 01/01/1997
7. Treaty with the Russian Federation, in effect as of 01/01/1998
8. Treaty with FYROM, in effect as of 01/01/1999
9. Treaty with Croatia, in effect as of 01/01/1999
10. Treaty with Italy, in effect as of 01/01/2000
11. Treaty with Bulgaria, in effect as of 01/01/2000
12. Treaty with Sweden, in effect as of 01/01/2000
13. Treaty with Norway, in effect as of 01/01/2000
14. Treaty with Greece, in effect as of 01/01/2001
15. Treaty with Malta, in effect as of 01/01/2001
16. Treaty with Switzerland, in effect as of 01/01/2001
17. Treaty with Moldova, in effect as of 01/01/2004
18. Treaty with Belgium, in effect as of 01/01/2005
19. Treaty with China, in effect as of 01/01/2006
20. Treaty with France, in effect as of 01/01/2006
21. Treaty with the Netherlands, in effect as of 01/01/2006
22. Treaty with Egypt, in effect as of 01/01/2006
23. Treaty with UNMIK-Kosovo, in effect as of 01/01/2006
24. Treaty with Serbia in effect as of 01/01/2006
25. Treaty with Montenegro in effect as of 01/01/2006
26. Treaty with Slovenia, in effect as of 01/01/2009
27. Treaty with Austria, in effect as of 01/01/2009
28. Treaty with Latvia, in effect as of 01/01/2009
29. Treaty with South Korea, in effect as of 01/01/2009
30. Treaty with Bosnia and Herzegovina, in effect as of 01/01/2009
31. Treaty with Spain, in effect as of 01/01/2011

Which licenses or permits have to be processed through National Licensing Center and which procedures have to be followed?

After registering in NRC and depending on the subject, the foreign company may need to issue an authorization for operating the branch. Activities requiring a special license are mainly those relating to public health and safety. Those activities are, without limitation, the following:

• Security services for persons, buildings, businesses, etc..
• Production, processing and marketing of food.
• Medical, hospital and ambulance services.
• Production, marketing and sale of drugs.
• Production and processing of tobacco products.
• Building and working with environmental impact.
• Mining and marketing of petroleum and its products.
• Mining and services related to natural resources.
• Legal -notarial services.
• Transport (passenger or not).
• Training and vocational training services.
• Services on fuel and energy sector.
• Fishing, fish farming, breeding and marketing animals.
• Recycling -waste treatment.
• Production and trade in arms, military equipment and dual use goods.

Applications for licensing are usually examined by the competent public authorities, but in some cases, if there is an agreement between the latter and the competent authority, the applications are examined by the National Licensing Center, Especially, construction projects in Albania require also a license from the Ministry of Public Works and Transport. There are three types of permits issued by the National Licensing Center. The first (group 1) refers to licenses issued on request of the person concerned, without need of any other formalities, the second (group 2) is about permits which require the submission of documents provided in the case, while the licensing of the third type (group 3), requires also inspection by the National Licensing Center. Any license issued by central or independent authority, in order to enter into force, must be recorded in the National Register of Licenses held by the NLC.

What is the procedure followed for the assign of public works, services and procurements in Albania? Has a foreign company the right to take part in the tenders held?

E-Procurement System, a web-based application operated by Public Procurement Agency supporting the automation of tendering activities of the various Government of Albania line Ministries and Contract Authorities. It enables secure transactions among Albanian public institutions and the national and international business community, where all invitations to tender for works and procurement of products and services of the public sector financed by national resources and burden the government budget are issued.

The system offers a secure, efficient and transparent preparation and administration of all tender-related documents, removes unnecessary paper work and enables secure data flow throughout the entire process. This “online platform” operates at all stages of the procedure, from the invitation to tender until the assign. All offers are deposited through the E-Procurement System. All invitations to tender for public procurements and works are issued in “Contact Notices” field, where interested parties are able to search them using criteria. There are no restrictions for foreign companies to participate, if they meet the conditions required each time. However, only invitations to tender regarding procedures OPEN INT, RESTRICTED INT, NEGOTIATED WITH NOTICE INT are published in English, as well as in Albanian.

 

*This text was originally published in the volume “Albania Law Digest” (edition of Nomiki Bibliothiki)