In principle, the subject intending to carry out an economic activity in Albania, is required to have a legal presence in Albania in the form of a newly established and registered Albanian legal entity or in the form of a branch of a foreign company.
The Law no. 9901 “On Entrepreneurs and Commercial Companies” (Company Law) and the Law “On the National Business Centre” provide for the rules on the registration of such legal presence at the National Business Centre (NBC).
Companies can exercise any activity that is not prohibited by law. The scope of activity does not have to be specified unless specification is required under special industry legislation such as banks, energy, telecoms, insurance, etc.
There are limitations regarding the nationality of shareholders or management of an Albanian incorporated entity.
Establishment of a commercial company
Regardless of the chosen commercial form, commercial companies must all have a determined name, object of activity, legal seat (registered address) pursuant to lease or ownership title, and management (composed by a sole or more managers). The rules on management and shareholders’ meetings rights and obligations should be set out in the Articles of Association of the company.
The business forms that are provided for under the Albanian Company Law are as follows:
General and Limited Partnerships are rarely used in practice, whereas limited liability companies (SHPK) and joint stock companies (SHA) are the most frequently used forms of businesses encountered in Albania.
Limited liability company
Limited Liability Companies (LLC) are the most commonly chosen legal form for conducting business in Albania. Its shareholders are not responsible for the company’s obligations, and they are personally liable for losses only to the extent of their unpaid capital contribution. The initial capital for incorporating this type of legal entity is 100 ALL (approximately EUR 1). The LLC may also have only one sole shareholder, in which case all the resolutions of the company must be registered in the register of resolutions of the company.
The governing bodies of a limited liability company are: (i) the Shareholders’ Assembly (or Sole Shareholder) and (ii) the Managing Directors. The latter are entrusted with the daily management of the company and are appointed by the shareholders’ meeting. There are no nationality restrictions for the managing directors, however directors of a parent company may not become the directors of its controlled subsidiary at the same time.
The appointment of an auditor is only obligatory in the case of a LLC if at the end/closing of the accounting period (financial year) the company exceeds certain turnover, employee and asset value thresholds.
Joint stock company
In a Joint Stock Company (JSC) the capital is divided into shares. The shareholders are not responsible for the company’s obligations and they are liable for losses only to the extent of their unpaid capital contribution. The required capital contribution is at least 3,500,000 ALL (approx. EUR 28,600), for companies with private offer, and 10,000,000 ALL (approx. EUR 81,800) for companies with public offer. JSC have a more complex organizational structure compared to other types of companies, and are typically a mandatory form of company for sectors such as insurance companies or banks.
The organizational structure of a JSC is as follows:
The initial capital must be fully subscribed before the registration of the company with the NBC and at least one quarter of the nominal value of the shares must be paid and the remaining unpaid capital must be paid in one or more installments according to the decision of the management organs of the JSC. As for the shares contributed in kind they must be fully subscribed and paid in before the registration with the relevant authority (NBC) is carried out. Contributions in services are not permitted.
General Partnership is a form of commercial company that is rarely used in practice. Its main distinguishing feature is the fact that the responsibility of partners for debts of the company is unlimited. The administration of a General Partnership is carried out by all partners, unless otherwise specified in the Articles of Association of the company. Each partner can also represent the company against third parties, unless otherwise decided in the Articles. The minimum capital of collective companies is not defined.
This is another company form that does not see much of practical use. The company consists is one or more unlimited partners and one or more limited partners having their liability limited up their contribution in the initial capital. The Articles of Association of the company govern the relations between limited and unlimited partners. Unlimited partners in a limited partnership have the same rights and obligations as those of a General Partnership. They conduct the day to day management of the company whilst limited partners are not entitled to participate in the management but can resist actions of the management beyond the ordinary business of the company.
Every individual conducting a business activity independently by means normally used to organize a business activity is qualified under the Company Law as a sole entrepreneur. The sole entrepreneur is obliged to register with the National Business Registration same as any other commercial company form but is subject to less documents and procedures at the time of registration or dissolution.
Establishment of a branch
Branches of foreign companies pursuant to the Company Law are considered as an extension of the commercial activity of the foreign company, in Albania. They have the same legal personality with the foreign company and carry out their activity in the name of the foreign company. For fiscal purposes, they hold their own registration number and pay their own taxes as any other company in Albania.
The branch does not have an assembly or other governing body to adopt decisions on its behalf. It is the relevant organ of the foreign company which determines the business of the branch, though the day to day management of the branch is conducted by one or more administrators appointed by the foreign company.
As opposed to a subsidiary, the liability of the branch, being with no separate legal personality, can be extended to the founding parent company.
Establishment of a representative office
Under the Company Law, Representative Offices are considered as “places of activity of a (foreign) commercial company having the same legal personality of that company”. Their purpose, according to the law is not to generate income but to promote the business of a company, in which respect they could also conclude agreement in the name and on behalf of the foreign company. The Rep Office can also employ local or foreign staff for the purpose of its activity, but it does all for and on behalf of the foreign company.
The Rep Office can have one or more legal representatives authorized to sign in the name of the Rep Office (and ultimately in the name and on behalf of the foreign company). The legal representative’s powers are usually limited to the daily management of the Representative Office’s business, hiring and firing of employees, operations with the bank accounts of the Representative Office.
A Rep Office, as opposed to other forms of business in Albania is not subject to corporate tax given that it is not allowed do generate any income; all the same they are obliged to withhold and pay the income tax on salaries of its employees, pay the social security and health contributions and, also certain annual local taxes.
A non-resident taxpayer may appoint a ‘tax representative’ in Albania without having to establish a legal entity for certain activities or projects regulated under the tax laws. The tax representative is limited to handling matters relating to tax liabilities of its principal in Albania, receive invoices from third parties and pay them accordingly. The tax procedures legislation provides that a tax representatives may be any individual, entrepreneur or legal entity as appointed by the principal. The tax representative may open a bank account in Albania, but it may not hire employees and/or conclude employment agreements for the principal.
Registration with the National Business Center
The registration of a branch, rep office or a commercial company (LLC or JSC) in Albania is made through the National Business Center (NBC) and by law, if all the documents filed will be complete, registration should take place within 24 hours as of the date of application. Registration with NBC constitutes registration with the tax authorities and equipment with the fiscal VAT certificate, i.e. the entity as of that moment can start to issue invoices.
The documents required for the registration of the branch/Rep Office or commercial company (LLC or JSC) are the following:
Notarized documents and those used from public offices must be apostilled or legalized, as applicable. Official documents must be updated and up to 90 days old and foreign language documents must be translated into Albanian (certified translation).