Albania - Interest

Article 11. Interest

1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.

2. However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that State, but if the recipient of the interest is the beneficial owner of the interest the tax so charged shall not exceed:

a. 5 percent of the gross amount of interest, in the case of interest arising in a Contracting State and paid on a loan granted by a bank or any other financial institution of the other Contracting State, including investment banks and savings banks, and insurance companies; and

b. 10 percent of the gross amount of the interest in all other cases.

3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State and paid to a resident of the other Contracting State who is the beneficial owner thereof shall be taxable only in that other State if the payer or the recipient of the interest is the Government of a Contracting State, a political subdivision or local authority thereof or the central bank of a Contracting State, or if the interest is paid in respect of a loan granted, approved, guaranteed or insured, directly or indirectly, by the Government of a Contracting State, the central bank of a Contracting State or any agency or instrumentality (including a financial institution) owned or controlled by the Government of a Contracting State.

4. The competent authorities of the Contracting States shall by mutual agreement settle the mode of application of paragraph 2.

5. The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, whether or not carrying a right to participate in the debtor's profits, and in particular income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article.

6. The provisions of paragraph 1 shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment. In such case the provisions of Article 7 or Article 14 as the case may be shall apply.

7. Interest shall be deemed to arise in a Contracting State when the payer is a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment or a fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or a fixed base is situated.

8. Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest, having regard to the debt-claim for which it is paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Convention.

Protocol:

VII Ad Article 5, 7, 10, 11, 12, 13, 15, 21, 22, 24

It is understood that a fixed place of business of an enterprise through which the business is wholly or partly carried on means a fixed place of business through which an enterprise of a Contracting State, wholly or partly, carries on business in the other Contracting State.

XIII Ad Articles 10, 11 and 12

Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Articles 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent authority of the State having levied the tax, within a period of three years after the expiration of the calendar year in which the tax has been levied.