Exercise $1$

The company CD $2$ sh$.$a$,$ resident in Albania, decides to distribute a dividend in the amount of $600,000$ ALL. The shareholder structure of the company is:

Citizen A$.$B

$20\%$ shares

Resident in Albania

The company "Olive"

$30\%$ shares

Headquartered in Berat

The company "Roma" Srl

$50\%$ shares

Headquartered in Italy

Calculate the withholding tax that should be kept and paid by the CD$2$ company as tax on the dividend, for each of the shareholders. Between Albania and Italy there is an Agreement for double elimination. Can the parties benefit from the Agreement in this situation? If yes, describe the procedures.

Solution

The CD$2$ company distributes dividends in the respective values:

$-$ Citizen A$.$B has a dividend: $20\%$ x $600,000=120,000$ ALL, Tax on the dividend $8\%$ x $120,000=9,600$ ALL.

$-$ The Olive Company has a dividend: $30\%$ x $600,000=$ ALL $180,000,$ No tax is paid on the dividend.

$-$ The Roma srl company has a dividend: $50\%$ x $600,000=300,000$ ALL.

Since the Agreement for the Elimination of Double Taxation is in force between Albania and Italy, this Agreement prevails over the domestic Law. As a result, before taxation, we must refer to the Agreement, in the chapter on the dividend. The agreement may entitle Roma srl to pay in Italy the tax on this income or to benefit from a reduced tax rate in Albania. For this reason, the Roma Company srl initiates the standard procedures between the two tax administrations of Italy and Albania, for the implementation of the Agreement and to benefit from its facilitating terms.