Generally, a foreign enterprise is considered as having a permanent establishment in Albania if it carries on its operations, wholly or partly, in the country through a fixed place of business in Albania. Fixed place of business includes an administrative office, a branch, a factory, a workshop, a mine, a construction or installation or assembling site. A PE also includes an agent (excluding an independent agent acting in the ordinary course of business) performing any function on behalf of a person in Albania.
However, the following places are not considered as a PE of a foreign entity in Albania:
a) Using facilities for the storage or display of goods or merchandise belonging to the company;
b) Using the stock of goods or merchandise belonging to the company for storage or display;
c) Using an inventory of goods or merchandise belonging to the enterprise for the sole purpose of being processed by another enterprise;
d) Using a fixed place of business for the sole purpose of purchasing merchandise or collecting information for the enterprise.
When a foreign enterprise is deemed to have PE in Albania, income from its activities conducted through the PE will be subject to tax in Albania.
Service PE is not specifically defined under the Albanian tax legislation. However, some Albanian tax treaties (for example, those with China, India, Netherlands, Singapore and the United Arab Emirates)) provide specifically for service PEs, all of which require the physical presence of employee or personnel of the non-resident company for a prescribed period (ranging between 6 and 12 months) in Albania. Certain tax treaties (for example, those with Germany, Malaysia, Russia, Spain and the United Kingdom) do not specifically provide for a Service PE clause.