Page 6 - Central and Eastern European Transfer Pricing Review

6 | CEE Transfer Pricing Review

of shifting the burden of proof to the the CUP method. In case CUP cannot under the Albanian Law On Tax
tax authorities. By preparing transfer be applied in practice, other alternative Procedures, there is a potential penalty
pricing documentation, taxpayers may methods like resale price method and which arises in case of incorrect
mitigate the risk of additional tax and cost plus method can be used, or in completion of a tax return. In practice it is
administrative penalty liabilities. case of complex business situations not clear whether this penalty may apply
that can create practical diffculties in in case of a transfer pricing review as
To satisfy the requirement and/or applying these methods, or when there there are no practical cases in which tax
obtain the benefts, are there any are no suffcient data available to apply authorities may have initiated a transfer
requirements on when the transfer one of the abovementioned methods, pricing review. This penalty varies from
pricing study must be prepared and then other methods as presented in the 5 percent to 25 percent of the assessed
submitted? 1995 Transfer Pricing Instruction of the additional tax liability.
No specifc requirements exist. OECD can be used.
To what extent are transfer pricing
When a transfer pricing study is If there is no priority of methods, is penalties enforced?
prepared, should its content follow there a best method rule? No relevant practice has been observed.
Chapter V of the OECD Guidelines? Not applicable.
Although Albania is not a member of the What defenses are available with
OECD, according to the current wording Transfer pricing audit respect to penalties?
of the local regulations, the Albanian tax Normal procedures of administrative
authorities should follow the guidelines and penalties appeal and court appeal apply also in
as published in the OECD commentary When the tax authority requests case of transfer pricing adjustments.
of 1995. a taxpayer s transfer pricing
documentation, how long does What trends are being observed
Does the tax authority require an the taxpayer have to submit its currently?
advisor/tax practitioner to have documentation? Recently the Albanian tax authorities
specifc designation in order to are becoming more aware of transfer
prepare or submit a transfer pricing No particular transfer pricing pricing issues and, in general, more often
study? documentation is specifed by law, transfer pricing questions arise during
therefore no particular terms apply.
No. their tax audits or during double tax
If an adjustment is proposed by the treaty application requests.
Transfer pricing methods tax authority, are dispute resolution
options available to the taxpayer Special considerations
Are transfer pricing methods outside of competent authority?
outlined in Chapter II of the OECD Adjustments assessed by the tax Are secret comparables used by tax
Guidelines acceptable? authorities?
authorities must be applied and then
Yes, however please note that only the taxpayer has an option to appeal to In practice tax authorities may use
the traditional methods are prescribed the second instance degree procedure comparables which are not publicly
by the regulation, i.e. the comparable with the tax authorities, or fnally to the available.
uncontrolled price method (CUP), resale administrative court.
price method and cost plus method. Is there a preference, or
If an adjustment is sustained, can requirement, by the tax authorities
Is there a priority among the penalties be assessed? If so, what for local comparables in a
acceptable methods? rates are applied and under what benchmarking set?
The primary method to be used by the conditions? Yes, the Albanian tax authorities show
Albanian tax authorities when evaluating No specifc penalties are defned in the preference for local comparables in a
the price of a transaction between Albanian Tax Law for underpayment of benchmark set.
related parties should be, if possible, tax due to transfer pricing. However,

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