Dividends in AlbaniaCurrent Rules and the Proposed Increase to 15%

A company can have cash in its bank account without having profits it can lawfully distribute. And a dividend can create a tax obligation before the shareholder receives the money. Both points matter as Albania considers increasing dividend tax from 8% to 15%.

For founders, family businesses and international investors, extracting profits requires more than comparing headline rates. The company’s tax position, its distributable reserves, the shareholder’s status and the timing of the distribution must be considered together.

1. How dividend tax works today

Law No. 29/2023, “On Income Tax”, currently sets an 8% domestic rate for dividends. The rate appears in the provisions on investment income, corporate income and withholding tax. Normally, the Albanian company distributing the dividend must withhold the tax, declare it and pay it to the tax administration. A qualifying exemption or tax treaty can change that treatment.

The tax is calculated on the gross dividend, without a deduction for the shareholder’s expenses. A dividend is not a deductible business expense for the distributing company: it is an allocation of profits after the company’s own tax position has been determined.

For example, a gross dividend of ALL 1,000,000 produces ALL 80,000 of Albanian dividend tax and ALL 920,000 for the shareholder at the current 8% rate, assuming no exemption or treaty reduction. That calculation says nothing about any further tax in the shareholder’s country of residence.

The company’s corporate tax and the shareholder’s dividend tax are separate layers. Eligible entities with annual gross income of up to ALL 14 million may benefit from the transitional 0% income-tax rate through 31 December 2029 under Article 69. That relief does not itself exempt their shareholders’ dividends. Eligibility, the relevant year and any special regime must be checked.

This article concerns distributions by companies, particularly Albanian limited liability companies (sh.p.k.). Withdrawals by a sole trader are not company dividends and require a different analysis.

Law No. 29/2023, Articles 24(3), 41, 50(1)(d), 56–59 and 69(1)(dh): [1].

2. What the government proposes for 2027

The official parliamentary draft would replace the current 8% dividend rate with 15% through coordinated amendments to Articles 24, 41 and 59 of the Income Tax Law. The draft’s commencement clause provides for entry into force 15 days after publication in the Official Gazette, with effects from 1 January 2027.

Those are proposed commencement arrangements. Submission to Parliament and a ministerial announcement do not, by themselves, change the rate in force. The Ministry of Finance continued to describe the increase as a proposal in its presentation of 2 November 2026.

The parliamentary version is particularly important because it differs from earlier circulating material. It amends the dividend sentence in Article 41 while retaining the standard 15% corporate income-tax rate. It also contains the proposed clarification on disguised distributions discussed below. Accordingly, this article uses the deposited bill, rather than the earlier version, for its analysis.

The explanatory memorandum links the proposed dividend increase to aligning the treatment of investment income, reducing opportunities to substitute distributions for remuneration, and encouraging reinvestment. These are the government’s stated policy objectives; they do not remove the need to test each transaction against the actual legislation.

Parliamentary bill, Articles 1, 3(2), 5, 6 and 8; official memorandum and Ministry presentation: [4]–[7].

3. What would the increase cost?

A declared gross dividend of ALL 1 million

Keeping the dividend amount constant makes the immediate shareholder impact clear:

The difference is ALL 70,000 for every ALL 1 million of gross dividend. This is a seven-percentage-point rate increase. It should not be described as merely a 7% increase in the amount of tax.

Company tax and dividend tax together

For a company subject to the standard 15% corporate income-tax rate, dividend tax applies to the profit remaining after corporate tax. The rates are therefore not simply added together.

In this example, the combined burden would rise from 21.8% to 27.75% of the original profit. Where the company lawfully qualifies for 0% corporate tax, the corresponding Albanian burden on fully distributed profits would instead be 8% under current law and 15% under the proposal, on the same simplifying assumptions.

Tridens calculations using the rates in current law and the deposited bill: [1] [4].

4. Before paying: is the profit distributable?

A positive bank balance is not evidence of distributable profit. It may include customer advances, borrowed funds, unpaid taxes or cash needed to meet suppliers and employees. Before deciding a distribution, reconcile the accounts, prior losses, reserves, existing dividend liabilities and the company’s cash requirements.

For an sh.p.k., the starting point is the profit reflected in the financial statements and the decision of the competent corporate body. Unless the statute provides otherwise, distributions follow the shareholders’ respective holdings. A sole shareholder should also record the required corporate decision; sole ownership does not eliminate the company’s separate legal identity.

Article 77 of the Companies Law requires that, after payment of the dividend:

• the company’s assets fully cover its liabilities; and
• it has sufficient liquid assets to meet liabilities falling due within the following 12 months.

The administrators must issue the required solvency certificate confirming these conditions. They cannot properly issue it where the financial position fails the tests. The law also provides for personal liability in connection with prohibited distributions, including negligent certification and specified circumstances in which shareholders receive unlawful dividends.

Joint-stock companies (sh.a.) have their own rules, including legal reserves and the declaration and allocation of dividends. The limited liability company checklist should not be applied to them without checking the relevant provisions.

A useful distribution file includes the approved financial statements, retained-earnings reconciliation, shareholders’ resolution, applicable solvency documentation, gross and net allocations, tax analysis, filings and bank evidence.

Law No. 9901/2008, particularly Articles 76–81, 127–129: [3].

5. Declaration, payment and unpaid dividends

The current rules distinguish the corporate decision, the payment to the shareholder and the company’s tax obligations. Keeping the cash inside the company after declaring a dividend does not postpone dividend tax indefinitely.

Before approving a distribution, the finance team should schedule both the withholding return and the actual tax transfer, including where the dividend itself will be paid in instalments or remain outstanding. Cash should be reserved for the company’s tax obligation even if the shareholders agree to receive their net dividend later.

Income Tax Law, Articles 56–57; General Instruction No. 26, updated, paragraphs 56.1–56.4: [1] [2].

6. Retained profits and the transition into 2027

Profits genuinely retained in the company, without a dividend declaration or another taxable distribution, are different from a dividend that has already been declared but not paid. Retaining profits does not remove corporate income tax, but it generally postpones the separate distribution decision and its dividend-tax consequences.

The deposited bill does not expressly preserve the 8% rate for all profits earned before 2027. Nor does it provide a detailed, dividend-specific transition rule resolving every combination of decision date, payment date and withholding date.

Consequently, the year in which the company earned the profit should not be treated as the sole answer to the rate question. Equally, a resolution dated in 2026 should not be assumed, without further analysis, to secure 8% for every payment or tax obligation arising in 2027.

Businesses considering a year-end distribution should establish the genuine chronology, the applicable tax point, corporate-law compliance and the final enacted provisions. Transactions already completed and taxed should be distinguished from balances that remain unallocated or unpaid. Any reallocation, reversal, set-off or capitalisation also needs its own accounting and tax review.

The practical priority is an evidence-based decision, not a rushed withdrawal. A distribution that leaves the company unable to pay its debts, or a document backdated to obtain a tax result, is not a sound response to a proposed rate increase.

Analysis of current Article 56 and the deposited bill’s Article 8; no specific grandfathering provision identified in that bill: [1] [4].

7. Loans and advances: substance matters

Article 1 of the bill would extend the dividend definition expressly to amounts provided to shareholders as advances, loans or other financing where they are not genuine financial transactions or repayment of existing obligations, but in economic substance represent an indirect distribution of profit.

This is not a statement that every shareholder loan becomes taxable as a dividend. The proposed wording turns on the real nature of the transaction. A loan agreement alone will not settle that question if the surrounding facts show that repayment was never intended.

Review shareholder current accounts and financing arrangements for commercial purpose, approvals, repayment terms, interest where appropriate, the borrower’s ability to repay and the actual repayment history. Distinguish money the company lends to an owner from repayment of a genuine debt that the company owes to that owner. Interest and other associated payments may have their own tax treatment.

Personal expenses paid by the company and unexplained withdrawals should also be reconciled. The existing law already restricts deductions for shareholders’ and administrators’ personal consumption and contains rules relevant to related-party transactions. The proposal does not make undocumented profit extraction safe in the meantime.

Bill, Article 1, and explanatory memorandum; current Income Tax Law, Articles 44 and 50: [4] [5] [1].

8. Dividends, salary and genuine business payments

Salary rewards work; dividends reward ownership. Rent, service fees, interest and loan-principal repayments have different legal and tax bases. They are not interchangeable labels for transferring the same amount to an owner.

Remuneration for genuine work may be deductible for the company where it meets the statutory conditions, is properly documented and is processed correctly. It also brings personal income-tax and, where applicable, social and health-insurance obligations. A shareholder who works in or manages the business therefore needs a review of their actual role and applicable obligations, alongside any dividend planning.

A sound comparison uses the company’s total cost and the individual’s net receipt, rather than comparing dividend tax with one payroll percentage. It also considers pension and insurance coverage, the person’s tax residence and whether the company actually obtains a tax saving from a deductible expense. The fiscal bill separately proposes employment-income changes, so a 2027 salary comparison must be refreshed against the final legislation.

Similarly, a related-party management fee requires a real service, appropriate pricing and evidence. A repayment of loan principal requires an existing, substantiated debt. Inventing costs or changing descriptions without changing the underlying facts can create additional liabilities rather than a legitimate saving.

Current Income Tax Law, Articles 12, 24, 44 and 48–50; bill, Article 3(1): [1] [4].

9. Corporate shareholders and international owners

Check the participation exemption

Article 29 provides a participation exemption for qualifying dividends received by a resident entity. Its core conditions include a holding of at least 10% in the distributing entity’s capital or voting rights, as specified in the provision, and an uninterrupted holding period of at least 24 months. The law also sets conditions for provisional relief supported by a tax guarantee where the holding period has not yet been completed.

Article 58(3)(b) links the withholding exemption to the Article 29 conditions. This is not a blanket exemption for every corporate shareholder, and a foreign parent should not assume it qualifies merely because it owns an Albanian subsidiary. The recipient, holding and any Albanian business connection must be analysed against the applicable provisions.

Check the relevant tax treaty

For a shareholder resident abroad, establish whether a tax treaty is in force and applies to that recipient and dividend. Treaty limits can depend on beneficial ownership, the nature and size of the holding, and anti-abuse provisions. Obtain the tax-residence certificate and complete the applicable Albanian relief procedure; citizenship or an overseas bank account is not a substitute.

A treaty ceiling does not increase a lower domestic rate. Conversely, if the domestic rate rises, the available treaty protection may become more significant. Do not assume the same answer for a UK individual, a German parent company or a US shareholder: the treaty position and the owner’s domestic tax rules must be checked separately.

Finally, Albanian withholding may not settle the owner’s worldwide liability. The residence country may tax the dividend, grant a limited credit or apply an exemption under its own conditions. The company’s corporate tax should not automatically be assumed to be a credit available to an individual shareholder abroad.

Income Tax Law, Articles 29 and 58; General Instruction No. 26, paragraph 56.1(e); treaty-application Instruction No. 11/2024 and the relevant treaty: [1] [2] [8].

10. What companies and shareholders should do now

1. Reconcile the amount available. Separate retained earnings from share capital, reserves, shareholder loans and declared dividend liabilities. Identify losses and amounts that cannot lawfully be distributed.
2. Confirm the company’s tax position. Check the actual corporate-tax regime and calculate both current-law and proposed-rate outcomes.
3. Identify each recipient. Record ownership, tax residence, individual or corporate status, participation-exemption conditions and any treaty documentation.
4. Review the distribution decision. Confirm the correct corporate approvals, allocation among shareholders, solvency requirements and cash remaining for the next 12 months where required.
5. Review shareholder balances. Substantiate loans, advances, reimbursements and repayments. Resolve unexplained or purely personal expenditure.
6. Set the dates before moving money. Map the decision, payment, withholding, declaration and transfer deadlines. Obtain specific advice for transactions that cross into 2027.
7. Check the final law before execution. Monitor parliamentary amendments, Official Gazette publication and implementation guidance. Update the calculation and documents if the final rules differ.

For an initial review, assemble the latest financial statements, a retained-earnings schedule, the ownership register, relevant shareholder resolutions, outstanding shareholder-account balances and any tax-residence certificates. These records allow legal and tax advice to address the actual distribution rather than a hypothetical headline rate.

Frequently asked questions

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