Withholding taxes in the Balkans vary significantly by country, and they typically apply to payments made to non-residents on income types like dividends, interest, royalties, and service fees. This article aims to provide an overview of withholding taxes in several Western Balkan countries, specifically in Albania, North Macedonia, Kosovo, and Montenegro. It is designed to offer readers, including those considering relocation or investment, a comprehensive and insightful understanding of withholding taxes and benefits available in each of these countries.
Overview of Withholding Taxes
Albania
Dividends
Dividends paid by an Albanian company to non-residents are subject to an 8% withholding tax, though a lower rate may apply under an applicable tax treaty.
Interests
Interest payments from Albanian residents to non-residents are subject to a 15% withholding tax, which may be reduced if an applicable tax treaty provides a lower rate.
Royalties
Royalties paid by Albanian residents to non-residents are subject to a 15% withholding tax, with the possibility of a lower rate if an applicable tax treaty allows.
To read more about Albania click here.
North Macedonia
Dividends
In North Macedonia, dividends paid to non-residents are taxed at a 10% withholding rate. Dividend income includes any profit earned from shares or similar ownership rights in a company where the profit isn’t being used to cover debts. It also includes profit from other corporate rights that are treated similarly to share income for tax purposes in the country where the distributing company is based.
If the foreign recipient of the dividend is from a country that has a double tax treaty with North Macedonia, this withholding tax rate may be reduced.
Interests
In North Macedonia, interest payments to non-residents are subject to a 10% withholding tax. This tax applies to income earned from any debt claims, which means any funds owed, whether or not they are backed by a mortgage or linked to the debtor’s profits. It covers income from bonds or other securities (including bonuses attached to them) and income from loans.
However, if the recipient is from a country that has a double tax treaty with North Macedonia, this 10% withholding tax may be reduced.
Royalties
In North Macedonia, royalties paid to non-residents are subject to a 10% withholding tax. This tax applies to payments for the use of intellectual property rights, which include things like copyrights on literature, art, or scientific works, as well as cinematography, software, patents, trademarks, designs, models, plans, trade secrets, and “know-how” (specialized knowledge or expertise).
If the recipient of the royalties’ lives in a country that has a double tax treaty with North Macedonia, this withholding tax rate may be lowered.
To read more about North Macedonia click here
Kosovo
Dividends
Dividends are exempted from withholding tax.
Interests
Interest payments to non-resident corporations are subject to a 10% withholding tax. However, interest on loans from Central Bank of Kosovo-licensed financial institutions to their clients is exempt from withholding tax.
Royalties
Royalties paid to non-resident corporations are subject to a 10% withholding tax.
To read more about Kosovo click here.
Montenegro
Dividends
Payments of dividends and profit shares to non-resident legal entities are subject to a 15% withholding tax in Montenegro unless a double tax treaty specifies a lower rate or exempts the payment from withholding tax.
Interests
Interest payments to non-resident legal entities are subject to a 15% withholding tax in Montenegro unless a double tax treaty provides for a lower rate or exempts the payment from withholding tax.
Royalties
Payments of royalties and other intellectual property rights to non-resident legal entities are subject to a 15% withholding tax in Montenegro unless a double tax treaty specifies a lower rate or exempts the payment from withholding tax.
To read more about Montenegro click here.
Summarized Comparable Study on Withholding Taxes in Albania, North Macedonia, Kosovo and Montenegro
|
Albania
|
North Macedonia
|
Kosovo |
Montenegro |
Dividends |
8% |
10% |
N/A |
15% |
Interests |
15% |
10% |
10% |
15% |
Royalties |
15% |
10% |
10% |
15% |
To read more about the above Balkan Countries click here.
Why Consider Western Balkan Countries to Invest?
The withholding tax rates of dividends, interests, and royalties in Western Balkans countries are relatively low. These can be more favorable in their rates than those in other countries; hence, western Balkan countries are a good option for investors.
Various Western Balkans countries have signed double taxation treaties with various countries. These can help reduce withholding tax rates on the payments made to foreign investors, and thus make it financially worth investing. Economies within the Western Balkans are growing, with tourism, energy, and agriculture being some of the sectors showing great potential for investment. It also boasts a favorable taxation environment, making prospects for returns quite good.
If you are considering Albania, North Macedonia, Kosovo, or Montenegro to live and/or conduct your business, it is advisable to consult with a professional on investment opportunities that best suit your needs. Our firm specializes in international taxation, and our team is ready to assist with any related matters. If needed, we can connect you with top professionals to support your business activities in Albania. Please feel free to contact us.
