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Page 1: Tonucci & Partners, Law Firmfiaalbania.al/wp-content/uploads/2014/10/Business_Guide... · 2019. 3. 20. · PRESENTATION of Tonucci & Partners, Law Firm PREAMBLE 1. INTRODUCTION Country,

Professional Experience in Albania since 1995

Tonucci & Partners, Law Firm

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Tonucci & Partners, Law Firm

Business GuideALBANIA 2014

Professional Experience in Albania since 1995

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PRESENTATION of Tonucci & Partners, Law FirmPREAMBLE

1. INTRODUCTION Country, People, Government, Currency and Other 1.1 Legislation

- General Overview- Sources of Law- Judicial System

1.2 Economic Overview

2. ALBANIA IN THE 2.1 Towards the European UnionINTERNATIONAL - Stabilisation and Association AgreementAND EUROPEAN - Instrument of Pre-Accession Assistance (IPA)PROSPECTIVE - Judicial System

2.2 Albania and the NATO2.3 Albania and the WTO - World Trade Organization2.4 International Standards Certification2.5 Competition and Antitrust - Albanian Competition Authority2.6 Import and Export Regulations2.7 Custom Tariffs2.8 EU Customs Legislation concerning Albanian Products2.9 Pan European Corridor VIII2.10 T.A.P.- Trans Adriatic Pipeline

3. INCENTIVES 3.1 Legal FrameworkAND ADVANTAGES 3.2 Types of InvestmentsFOR FOREIGN 3.3 IndustriesINVESTMENTS - Agribusiness

- Manufacturing, commerce and services- Garments Manufacture- Shoes Manufacture and Leather Processing- Telecommunications- Tourism- Commercial Centers

3.4 Albanian Investment Development Agency (AIDA) 3.5 Best Practices and Incentives

- Tax Exemptions- Subsidized leases for state properties- Site Availability- Labor Costs and Productivity Benefits

3.6 Areas of Economic Interest- Industrial Parks- Free Zones

3.7 Constitutional and Legal Guarantees 3.8 Dispute Resolution

4. DOING BUSINESS 4.1 Legal FrameworkIN ALBANIA 4.2 Commercial Companies

- Sole Proprietorship (Tregtari)- General Partnership (Shoqeri Kolektive)- Limited Partnership (Shoqeri Komandite)- Limited Liability Companies (Sh.p.k.)- Joint Stock Companies (Sh.a.)- Branches and Representative Offices- Joint Ventures (Shoqeri e thjeshte)

4.3 Commercial Companies Registration (QKR – CNR)- Documentation Required by the National Registration Center - Registration of Branches or Representative Offices

4.4 Typical Costs to Establish a Commercial Company

5. PUBLIC PRIVATE 5.1 Appalti pubblici e GarePARTNERSHIPS (P.P.P.), 5.2 Concessioni e PPPCONCESSIONS AND PUBLIC PROCUREMENTS

pag. 9

pag. 30

pag. 14

pag. 35

pag. 20

INDICE

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6. ENERGY, UTILITIES, 6.1 EnergyOIL AND MINERAL - General OverviewRESOURCES 6.2 Legal Framework

- Competent Authority- General Regime for Production and Distribution of Electricity- Types of Licenses for Electricity

6.3 Oil and Minerals Resources

7. REAL ESTATE 7.1 Public PropertyAND PROPERTY LAW 7.2 Real Estate Registration

7.3 Compensation of Former Expropriations 7.4 Kyoto Protocol in Albania

8. ENVIRONMENTAL 8.1 Legal FrameworkPROTECTION 8.2 Environmental Permits

8.3 Clean development mechanism (protocollo di Kyoto)

9. BANKING, FINANCIAL 9.1 Legal Framework and Principal Banking Groups Operating in AlbaniaSYSTEM AND 9.2 Bank of Albania (BoA)INSURANCE 9.3 Albanian Deposit Insurance Agency

9.4 Foreign Exchange Transactions9.5 Albanian Financial Supervisory Authority(AFSA)

9.5.1 Insurance Market

10. TAX 10.1 Legal Framework – Albanian Tax System10.2 Taxation of Legal Entities10.3 Small Entrepreneurship Tax10.4 Taxation of Individuals10.5 Value-Added Tax (VAT)10.6 Excise Tax10.7 Other Taxes 10.8 National Taxes10.9 Local Taxes and Fees 10.10 Social Security Contributions10.11 International Agreements on Double Taxation10.12 Accounting, Budget and Audit Control

11. EMPLOYEMENT 11.1 PreambleAND LABOUR LAW 11.2 Legal Framework

11.3 Types of Employment Agreements 11.4 Probationary Period11.5 Termination of Employment Agreements11.6 Trade Unions and Collective Agreements11.7 Employment Tax and Social Insurance11.8 Foreign Workers in Albania

12. INTELLECTUAL 12.1 Legal FrameworkPROPERTY 12.2 Law on Copyright

12.3 Free Use12.4 Copyright Office12.5 Law on Industrial Property12.6 Industrial Property Office12.7 International Agreements in the Domain of Intellectual

13. PERSONAL DATAPROTECTION

14. NON–PROFIT ORGANIZATIONS AND FOUNDATIONS

pag. 46

pag. 38

pag. 50

pag. 54

pag. 59

pag. 72

pag. 76

pag. 78

pag. 67

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TIRANA

Torre Drin (2nd floor)Rruga Abdi ToptaniTirana (Albania)

Tel: +355 (0) 4 2250711/2Fax: +355 (0) 4 2250713Email: [email protected] Web: www.tonucci.com

Tonucci & Partners in Albania

Tonucci & Partners Albania is an independent lawfirm which started its professional activity in Albaniain 1995. Tonucci & Partners has both Albanian and expatriatelawyers based full-time in Albania. As such Tonucci &Partners combines the firm’s leading internationalexperience with local expertise, language skills andknowledge of local market practices.Through its alliance and network, Tonucci & Partnersprovides its clients with direct access to local marketexpertise on a global basis.

Tonucci & Partners in Albania is a leading Albanian lawfirm with both local and international backgrounds andexpertise, a law firm with skilled local and foreign lawyers basedfull-time in Albania in order to provide clients withprompt, reliable and high-quality professional legalservices of the highest international standards.Our lawyers have outstanding background andprofessional experience and are able to work andcorrespond in Albanian, English, Italian, French,German and Spanish.

TONUCCI & PARTNERSLaw Firm

Other offices:ItalyRomeMilanPaduaFlorencePrato

RomaniaBucharest

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Tonucci & Partners, Law firm - Business Guide Albania 2014

Professional Experience in Albania since 1995The E.U. PHARE Commission and the Albanian Government appointed Tonucci & Partnersas legal advisor and coordinator on the reform and development of economic legislationin Albania.

Tonucci & Partners was chosen by the World Bank to serve as sole legal advisor to theAlbanian Government in the privatization of leading state-owned companies active instrategic sectors, including Armo and Albpetrol (energy & oil), Albkrom and Albaker(minerals) and AMC and Albtelecom (telecommunications).

Furthermore, Tonucci & Partners has actively participated in the drafting of significantAlbanian legislation, including the Albanian Constitution of 1998 and the Albanian CustomCode.

Lawyers from the Tirana office of Tonucci & Partners regularly advise foreign Embassiesin Albania, and have assisted OSCE (Organization for Security and Co-operation inEurope) in several projects on legislative reforms in Albania; the Delegation of the EuropeanCommission to Albania and local representations of the international financial institutionson ad hoc basis.

Tonucci & Partners Albania is proud to be an active member of the F.I.A.A. (ForeignInvestors Association in Albania), C.C.I.A. (Italian Chamber of Commerce in Albania),AM.CHAM. (American Chamber of Commerce in Albania), A.B.C.C.I. (Albanian BritishChamber of Commerce and Industry). It is as well an active member of the Board ofDirectors of C.C.I.A. (Italian Chamber of Commerce in Albania) and also served as memberof the Board of Directors of F.I.A.A.

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Tonucci & Partners, Law firm - Business Guide Albania 2014

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Areas of practice

Tonucci & Partners Albania Clients range from small and medium size companies to largemultinationals, financial institutions, banks, Governmental institutions and agencies and otherstate-owned organizations and companies which turn to Tonucci & Partners for advice on legalissues concerning their Albanian activities and/or international operations and transactions.

We acknowledge that today’s clients may need more than just purely advice. Our firm is notonly a general practice law firm, we also provide a variety of business consulting services aimedto facilitate the smooth entry of foreign entrepreneurs into the Albanian market and vice-versa.At Tonucci & Partners we believe in high quality, problem solving and cost effective approach,and our aim is to satisfy our Clients and help them achieve their objectives and increase theirbusiness.

Tonucci & Partners develops close relationships with its clients and assists them in every aspectof their business in Albania providing a full range of legal services in the areas of:› Corporate and commercial law;› Mergers & acquisitions and privatizations;› Banking and finance;› Foreign investments and EU funds and financing (I.P.A.);› Energy, power, utilities and natural resources;› Real estate, construction and infrastructures;› Public procurements, tenders, concessions and administrative law;› Intellectual property;› Telecommunications, multimedia and information technology;› Competition law;› Environmental;› Employment and immigration;› Tax and› Litigation and arbitration.

International Financial Law Review (IFLR 1000) – the guide to the world’s leadingfinancial law firms - has reconfirmed Tonucci & Partners as a top tier law firm (tier 1) inAlbania in finance and commercial law.

Additionally, Chambers and Partners, your guide to the world’s best lawyers - the leadinginternational legal directory, regularly ranks Tonucci & Partners among the best firms in

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Albania in the areas of corporate and commercial, dispute resolution, intellectual property andreal estate.Among the recent awards, it is reported the assignment of Corporate Finance Law Awardin Albania - 2014 (Client Choice) by Legal’s Finest 200 and furthermore on the occasionof the Corporate International Global Awards, Tonucci & Partners has been awarded ofboth “Private Equity Law, Studio dell’anno (2012) in Albania” and “Employment Law, Studiodell’anno (2012) in Albania” awards.Moreover, in 2013, Tonucci & Partners received from Acquisition Internationional, the“Finance Award – International Law Firm of the Year – Italy (2013)”.Furthermore Tonucci & Partners – Italy – has been awarded by I.L.O. International LawOffice - London, UK) the 2012 Law Firm of the Year – Client Choice award.

The lawyers of Tonucci & Partners contribute regularly to:

G.L.G. – Global Legal Group(International Comparative Legal Guide to Environmental, Labour, Commercial Law andArbitration);

Doing Business Guide(a co-publication of IFC – World Bank);

I.B.A. - International Bar Association(the world leading organization of international legal practitioners, bar associations andlaw societies);

I.L.O. - International Law Office(a publishing company delivering legal analysis and publications globally)

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Tonucci & Partners, Law firm - Business Guide Albania 2014Tonucci & Partners, Law firm - Business Guide Albania 2014

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Preamble

In 2014, Tonucci & Partners celebrates the 20th anniversary of its professional activityin Albania.

Since 1995 our law firm has been the gateway of foreign investors in Albania.

This fifteenth edition of the Business Guide – is principally addressed to investors andeconomic operators interested in evaluating business opportunities in Albania as a firstreference source of legal and socio-economic information. On our website at: http://www.tonucci.it/eng/news_events/publications_tirana_2012.phpare also available the newsletters and publications about the updated legislation and relevantissues.

This Business Guide Albania 2014 – English and Italian version – is also available, in pdfformat, at: http://www.tonucci.it/eng/offices/offices_tirana.php

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1/ Introduction

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1.1 LEGISLATIONGeneral Overview Albanian legislation is often drafted with the assistance of EU and US agencies and generally reflects principlesconsistent with Western democracies and free market economies. In the last two decades Albania has beenundergoing several legislative reforms, which has resulted in a large amount of approved legislation. This trend willlikely continue in the future as Albania is preparing for EU membership.

Sources of LawThe sources of law in Albania are the Constitution, ratified international conventions, acts of Parliament and thedecisions of the Council of Ministers. Acts adopted by local governments extend only within the territory of theirjurisdiction. Acts adopted by Ministers and other government institutions apply only within their area of jurisdiction.

CountryThe Republic of Albania, situated in South Eastern Europe south-west of the Balkan Peninsula, is bordered byMontenegro and Kosovo to the north and northeast, by Macedonia (FYROM) to the east, by Greece to the southand southeast, and by the Adriatic and Ionian Seas to the west. The territory of Albania occupies an area of 28,748km2 (roughly the size of Belgium) of which over three-quarters are mountains and hills, while the coastal area isflat and extends for about 600 km. Albania has a typically Mediterranean climate, with cool, wet winters and warm,dry summers. Tirana (population approximately 800,000 inhabitants) is the capital of Albania and the centre of business andfinancial activity. The country is divided in 12 districts and its other major cities are Shkodra, Durrës, Vlora, Fierand Elbasan.

PeopleAlbania has a population of 2.8 million inhabitants which consists mainly of ethnic Albanians (98%). The remaindersare of Greek, Macedonian, Gypsy, Roma and other descent. Albania has a relatively young population. The averageage is 31.5 years.

ReligionEstimates of religious allegiance indicate the presence of three principal religions in Albania, namely Islam (66%of the population, mostly belonging to the Sunni sect), Orthodox (22%, including both Greek Orthodox and theautocephalous Albanian Orthodox Church) and Roman Catholic (12%). Albania is renowned for the tolerant andpeaceful co-existence of its religious communities.

LanguageThe official language is Albanian, which is written in Latin script and has 36 letters. Due to Albania’s proximity toItaly, many Albanians speak Italian. English is becoming increasingly spoken, while Greek is more widespread insouthern Albania.

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INTRODUCTIO

NTonucci & Partners, Law firm - Business Guide Albania 2014

Judicial System

The Albanian judicial system is composed of:

(i) 22 Civil and Criminal Courts of First Instance;

(ii) 6 Administrative Courts of First Instance;

(iii) 1 “Serious Crimes” First Instance Court;

(iv) 8 Civil and Criminal Courts of Appeal;

(v) 1 Administrative Court of Appeal;

(vi) 1 “Serious Crimes” Appeal Court;

(vii) Supreme Court;

(viii) Constitutional Court

Albania is a member of the Council of Europe and a party to the European Convention on Human Rights.Consequently, the Albanian government may be held liable in front of the European Court of Human Rights. As amember of the United Nations, Albania is a party to the Statute of the International Court of Justice. Albania hasratified the Rome Statute of the International Criminal Court and is also a party to the European Convention onInternational Commercial Arbitration.

GovernmentAlbania is a parliamentary republic. The President of the Republic, currently H.E. Bujar Nishani, is appointed bythe Parliament for a five-year term and may be re-elected only once. Since 2013, the Prime Minister is H. E. EdiRama.

CurrencyThe Albanian currency is the Lek (ALL), although U.S. Dollars (USD) and Euros (€) are frequently used in businesstransactions. The average exchange rates as at August 2014 are:

› EURO 1 = ALL 139,2› USD 1 = ALL 105,8› GPB 1 = ALL 175

The use of foreign currency as a means of payment is permitted. There are no constraints on trading with hardcurrency.

All commercial banks licensed by the Central Bank of Albania may carry out foreign payments. The Bank ofAlbania, which is responsible for managing the foreign currency reserves is also active in performing internationalpayments. Every citizen or foreign person may own an unlimited number of accounts in any currency and in anybank in the country.

Albania observes Central European Time (GMT +1) during the fall and winter months and Daylight Savings Time(GMT +2) from March through October.

Albanians celebrate Independence Day (November 28) as their National Holiday.

Tonucci & Partners, Law firm - Business Guide Albania 2014

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1.2 Economic OverviewAlbania is one of Europe’s developing countries. The government has been pursuing full integration into theEuro–Atlantic community for several years. In June 2006, Albania signed a Stabilization and AssociationAgreement with the European Union as the first step towards EU membership, as well as a free tradeagreement giving Albanians duty–free access to key EU markets and opening the country to imports. In April2009, Albania also achieved full membership to NATO.

Starting from December 16, 2010, Albanian citizens holding a biometric passport may freely travel in theSchengen area, without need of a visa.

Despite the global economic slowdown, Albania has been able to maintain relatively sound macroeconomicstability and it has acted to enhance its business and investment environment.

The Albanian GDP growth, which stood in the last year at a rate exceeding 5% per year, marked a sharpslowdown starting from 2009 with the deepening of the global financial crisis.

Nevertheless, data related to 2013 indicate a GDP growth of +0.7%; a public debt estimated at approximately63% of the GDP and an inflation rate at 2.2%.

The Central Bank of Albania and EBRD – European Bank for Reconstruction and Development, for 2014,estimate a growth rate of the Albanian economy approximately of 2.1 %.

According to the World Investment Report of UNCTAD (United Nations Conference on Trade andDevelopment), for 2013 the foreign direct investments (FDI – Foreign Direct Investments) received by Albaniaamount at approximately 1.3 billion dollars, corresponding to the 10% of the GDP.

Albania’s financial sector has grown rapidly and credit is generally allocated on market terms. The bankingsystem is increasingly dominated by foreign banks, which account for about 90 percent of total assets. Thishas led to more competition and better availability of services. Supervisory regulations have been strengthenedto preserve financial stability. In response to the global financial crisis, the Central Bank of Albania has actedto increase liquidity and maintain public confidence. ,The Albanian banking system having no significant direct exposure has been able to resist the global financialshock of the recent years.According to INSTAT (Albanian National Authority on Statistics), in the fourth quarter of 2013 goods havebeen imported for a total value of approximately 104 million Euros. Positive increases were also recordedconcerning Albanian exports whic in the fourth quarter of 2013 have reached a value equal to 46.2 millionEuros, corresponding to an increase of 11.5% over the same period of the last year, and of 23% over thesame period in 2009,

Albania is ranked on the 95th position on the global competitiveness ranking, according to the World EconomicForum 2013-2014 Report, published on September 2013. This report examines all data produced by thepublic and private institutions and the factors that determine the productivity of a country, and is based onapproximately one hundred indicators divided in different categories including: macroeconomic data,institutions, infrastructure, environment, health care, education system, labor sector, financial sector andinnovation.

According to the 2013 Index of Economic Freedom (published by the Heritage Foundation and The Wall

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NTonucci & Partners, Law firm - Business Guide Albania 2014

Street Journal), Albania’s economic freedom is the 58th freest in the world.

Based on Doing Business 2013 report published by the World Bank regarding the ease of doing business, Albaniais ranked on the 90th position out of 189 countries.

Lastly, it should be noted that the Albanian economy continues to benefit from remittances of numerous emigrants,scattered in the United States and mostly in Europe, particularly in Italy and Greece. These remittances, in fact,contribute substantially to cover the commercial deficit.

Tonucci & Partners, Law firm - Business Guide Albania 2014

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Albania in theinternational andeuropean prospective

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ALBANIA IN TH

E INTERNATIO

NAL AND EUROPEAN PROSPECTIVE

Tonucci & Partners, Law firm - Business Guide Albania 2014

2.1 Towards the European Union Stabilization and Association Agreement (SAA) SAA came into force on April 1, 2009, following its ratification by the 25 EU member states which constituted the EUat the time the SAA was signed, and by the Albanian Parliament. The ratification process was concluded and completedwith the ratification by the Greek Parliament on January 15, 2009. This gave Albania the opportunity to submit itsapplication for E.U. Candidate Country Status. On June 24, 2014 was granted the status of E.U Candidate Country to Albania.The general framework of the SAA rests on four pillars: 1) political dialogue and regional cooperation; 2) tradeprovisions relating to the progressive liberalization of exchanges with the purpose to establish a free trade area; 3)community freedoms and 4) cooperation in priority areas, especially in the area of justice and home affairs. Starting from December 2010, the Albanian citizens holding a biometric passport may freely travel in the Schengenarea.

Instrument for European Union Pre-Accession Assistance (I.P.A.)The (IPA) - Instrument for Pre-Accession Assistance - (substituting the pervious PHARE, ISPA, SAPARD, CARDS)offers rationalized assistance to countries aspiring to join the European Union for the period 2007-2013 on the basisof the lessons learned from previous external assistance and pre-accession instruments (“IPA I”: budget ofapproximately 11.5 billion Euros).For the current period (“IPA II”:2014-2020), the budget amounts to approximately 11.7 billion Euros.The aim of the IPA is therefore to enhance the efficiency and coherence of aid by means of a single framework. Thistool aims basically to promote the progressive approach of the beneficiary countries to the European legislation andto promote the adoption of the acquis communautaire for accession to the EU. This framework incorporates the previous pre-accession and stabilization and association assistance to candidatecountries and potential candidate countries while respecting their specific features and the processes in which theyare engaged. The IPA is intended as a flexible instrument and therefore provides assistance which depends on theprogress made by the beneficiary countries and their needs as shown in the European Commission’s evaluations andannual strategy papers. Its main aim is to support institution-building and the rule of law, human rights, including fundamental freedoms, minorityrights, gender equality and non-discrimination, administrative and economic reforms, economic and social development,reconciliation and reconstruction, and regional and cross-border cooperation.

The beneficiary countries are divided into two categories, depending on their status as either candidate countries underthe accession process or potential candidate countries under the stabilization and association process, namely:› Candidate countries (Annex I to the Regulation): Turkey, the former Yugoslav Republic of Macedonia (FYRoM) ,Montenegro, Serbia and starting from June 24, 2014 even Albania;› Potential candidate countries (Annex II to the Regulation): Bosnia - Herzegovina and Kosovo as defined by theUnited Nations Security Council (Resolution 1244).

To ensure targeted, effective and coherent action, the IPA is made up of five components, each covering prioritiesdefined according to the needs of the beneficiary countries. Two components concern all beneficiary countries and therefore also Albania:› IPA Component I: Transition Assistance and Institution Building: is the first component (support for transitionand consolidation of the institutions) related to the financing capacity, institutional-building and development; and› IPA Component II: Cross – Border Cooperation: is the second component ( support of the cross-bordercooperation), aimed at supporting beneficiary countries in the area of cross-border cooperation among them, withthe Member States or within the framework of cross-border or inter-regional actions.

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The other three IPA components intended for the candidate countries are:› The “regional development”: III component, aimed at supporting the countries' preparations for theimplementation of the EU’s cohesion policy, and in particular for the European Regional Development Fund andthe Cohesion Fund;› The “human resources development”: IV component, which concerns preparation for cohesion policy and theEuropean Social Fund;› The “rural development”: V component, which concerns preparation for the common agricultural policy andrelated policies and for the European Agricultural Fund for Rural Development (EAFRD).

Through IPA instruments (I and II component as above mentioned), Albania received in the last three years 2011-2013 funds equal to Euro 284,2 million, of which 95,3 million only during 2013, divided as follows: Euro 84,6million for the 1st Component and Euro 10,6 million for the 2nd Component (source: European Commission).

The IPA is based on strategic multi-annual planning established in accordance with the broad political guidelinesset out in the European Commission’s enlargement package, which now includes a Multi-annual Indicative FinancialFramework (MIFF). The MIFF takes the form of a table presenting the European Commission's intentions for the allocation of funds forthe three forthcoming years, broken down by beneficiary and by component, on the basis of the needs and theadministrative and management capacity of the country concerned and its compliance with the Copenhagen criteria.The strategic planning introduced under the IPA is made up of multi-annual indicative planning documents, with theMIFF constituting the reference framework. They are established for each beneficiary country and cover the mainintervention areas envisaged for that country. As regards action on the ground, annual or multi-annual programs, depending on the component and based on theindicative planning documents, are adopted by the European Commission. They are implemented in three ways: by centralized, decentralized or shared management.

Assistance under the IPA can take, inter alia, the following forms:› Investment, procurement contracts or subsidies;› Administrative cooperation, involving experts sent from the Member States;› Action by the EU acting in the exclusive interest of the beneficiary country;› Measures to support the implementation process and management of the programs;› Budget support (granted exceptionally and subject to supervision).

In terms of funds and IPA, as part of series of events called "Italy - Albania 2010: Two Nations, a Sea, a Friendship",the Italian Embassy in Tirana (www.ambtirana.esteri.it), has taken care of the organization and promotion of theInternational Conference on the IPA, titled "The Italian support for the Albanian integration in the EU: a strategicpartnership between Albania, Italy and the European Commission", which was held on May 19th, 2010 in Tiranaand attended as guests and speakers Albanian Prime Minister and several Ministers of the Albanian Governmentin office, the head of the Delegation of the European Union to Albania, Ambassador of Italy in Albania, the Ministryof Italian Regional Affairs, President of ICE Institute of Foreign Trade, experts and representatives of the ItalianRegions and the law firm Tonucci & Partners.

2.2 Albania and the NATONATO–Albania relations date back to 1992, when Albania joined the North Atlantic Cooperation Council(renamed the Euro–Atlantic Partnership Council in 1997). In April 2008, Albania was invited to start accessiontalks with members of the Alliance. The accession protocols were signed on July 9, 2008. Albania officiallybecame a NATO member on April 1, 2009.

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2.3 Albania and the World Trade Organization (WTO)Albania became the 138th member of the World Trade Organization on September 8, 2000. Albania has agreedto assume its WTO obligations upon accession. In addition, it signed on to the multilateral agreements ongovernment procurement and on trade in civil aircraft. Albania's accession package included market–accesscommitments on goods and services.

2.4 International Standards Certification In Albania it is now necessary to conform and adapt to international standards of certification. There are severalorganizations working in Albania in this area. Their goal is to provide assistance to businesses seeking recognition ofcompliance with different national and international standards, in particular: quality management (ISO 9001),environmental management (ISO 14001), Food Safety (ISO 22000 and ISO 22005) health and safety (OHSAS18001).

2.5 Competition and Antitrust – Albanian Competition AuthorityArticle 11 of the Albanian Constitution determines that Albanian economic system is based on market economy andfreedom of economic enterprise. Competition is an essential element of the market economy and the Albanianlegislation is intended to preserve the market economy and protects the freedom of economic enterprise. The legal framework of reference on this subject matter is Law No. 9121 dated July 28th 2003, as amended.

The Albanian Competition Authority (www.caa.gov.al) which is composed of the Commission and the GeneralSecretariat is in charge of upholding competition law. The Albanian Competition Authority has the duty to startpreliminary and in-depth investigations on specific markets or enterprises; adopt interim measures, request informationand also seize documents and materials from them, organize hearings and impose measures or fines. The AlbanianCompetition Authority may also authorize concentrations and exempt agreements from prohibitions in accordance withAlbanian competition law.

The Albanian Competition Authority has analogous powers and functions of the relevant EU authorities and is inspired,as part of its activities, the general principles of Community. In particular, the Albanian Competition Authority carriesout the assessment regarding anti-competitive agreements, abuse of dominant position and mergers. The fines appliedby the Albanian Competition Authority for violations of the Albanian competition law vary from up to a maximum of ALL5 million for legal entities and from 1% to 10% of the annual turnover in the preceding financial year. Decisions taken by the Albanian Competition Authority may be appealed before the Tirana District Court.

2.6 Import and export Both exports and imports have grown very rapidly during recent years. The main products exported are thoseagricultural, , fishery products, spirits and unprocessed tobacco. The EU, and in particular Italy, is Albania’s main trade partner.Even trade with South Eastern European countries is now increasing following the introduction of bilateral free tradeagreements.The Albanian legal framework on imports and exports of goods is based on Law 8449 “On Customs Code of theRepublic of Albania” as amended, enacted by the Parliament on 27 January 1999 and entered into force on 15 May1999. This law set forth 17 basic principles regulating the customs area.The Customs Code has been drafted based on the European Council Regulation EEC n.2913/92, dated October 12,1992.The above legislation has been reformed by Law No. 102/2014 dated 31 July 2014 “On Customs Code of the

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Republic of Albania”, which does not abrogate in its entirety the previous legislation. The Law No, 102/2014 dated31 July 2014 “On Customs Code of the Republic of Albania” will enter into force partly immediately, partly from 1January 2014 and partlially in June 2017. The new framework has been adapted with the Community legislation insubject.

2.7 Custom tariffsThe Albanian Government signed a FTA with the EU as part of its Stabilization and Association Agreementnegotiations. The agreement foresees a duty–free regime for almost 90% of agricultural and industrial products.Tariffs are applied to all the products listed. Tonucci & Partners has been the advisor to the Albanian Government forthe adoption of the Customs Code of the Republic of Albania, which is currently being updated.Tariff law is a crucial part of customs legislation. It is updated frequently in line with international practice and alsodomestic liberalization policies. The tariff level in Albania is being continuously liberalized. The basic levels (MFNlevels applied in Albania) are four: 0%, 2%, 10% and 15%. The rate of 15% is applied on products such as textiles,jewelry and certain food products. The lowest duty rate of 0%is applied mainly to humanitarian aid and wasteprocessing equipment.

2.8 EU Customs legislation concerning albanian productsOn December 1, 2006, Albania and EU started to enforce the Interim Agreement on Free Trade entered into betweenthem. Under this agreement, Albania and the EU have established an asymmetric approach with regard to the market,opening for both industrial and agricultural goods. As a result, Albania has a five year period to abolish all custom tariffsfor industrial goods and shall apply a more relaxed liberalization in the field of agricultural products, while the EU willensure a rapid opening of its market for industrial and agricultural goods originating from Albania.

Albania has abolished custom duties on industrial products entirely, with the exception of a very limited number ofsensitive products of greater consumption. For these sensitive products, custom duties have been reduced by 20percentage points of the MFN (most favorite nation), and starting from December 1, 2010 customs duties for thesesensitive products are zero. All other commitments regarding tariffs and other aspects of trade in agricultural productshave been accomplished and fully reflect the stipulations and liberalization form set forth in the Interim Agreement.These include e.g.: (i) full abolition of custom duties on certain agricultural products, processed agricultural productsas well as fishery products; (ii) tariff reduction in two periods for those products listed in the Interim Agreement; and(iii) imports within the established quotas without custom duties.

The EU has eliminated all custom duties on industrial products and most of agricultural products, except for selectedproducts, such as sugar (custom quotas), processed fresh agricultural products (to which the EU continues to applya combined regime of import duties), and certain types of sweet water fish or canned fish. Nevertheless, pursuant tothe European Community Declaration on exceptional trade measures, Albania is granted the right to exploit the exportspreferential benefits, which result from the Interim Agreement on Free Trade and from EC Regulation No.2007/2000.According to this Regulation, custom duties on exported unprocessed agricultural products will be entirely abolishedby the EU, which implies that Albania can benefit from a more liberal trade regime.

2.9 Pan european Corridor VIII The development of TEN-T trans-European networks started in 1994 with the Maastricht and Amsterdam treaties,which lay the legal foundations for their financial support. The European Commission aimed at accomplishing trans-European networks as identified in the EU decisionNo.1692/96, which established the guidelines for developing TEN-T networks and relevant road, rail, sea and airinfrastructures of European interest. The European Commission, during three different pan-European conferences,

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undersigned the Memoranda of Understanding relevant to ten pan-European corridors. Pan-European corridorswere thus conceived in order to create proximity among TEN-T trans-European networks and their enlargementtowards the East, taking into account major historical and on-going flows.

Corridor VIII has been approved in Crete in 1994 and confirmed in Helsinki in 1997. Although its cost wasconsidered low, Corridor VIII has been subject to very slow developments, due to lack of investments. Amemorandum of understanding signed in Bari (Italy), which added to this artery the gateways of Bari, Brindisi (Italy)and Vlora (Albania), increased the interest of the Italian Government, which therefore decided to finance importantparts of the project.

Corridor VIII links the Adriatic-Ionian regions with the Balkan regions and Black Sea countries. From an economicpoint of view, with the trans-European networks the European Commission aims to realize an enhanced territorialaccess to EU countries and thus develop increased mobility of people and goods following the Single Marketobjectives and the principles of sustainable mobility. From a transportation point of view, Corridor VIII is a multi-modaltransport system along the East-West axis comprising sea and river ports, airports, multi-modal ports, roads andrailways, for a total extension of approximately 1,270 kilometers of railways and 960 kilometers of roads. Its mainroute follows the Bari – Brindisi – Durres – Tirana – Skopje – Burgas – Varna axis. There are also branches leadingto Greece and, through Corridor IV, to Turkey.

2.10 T.A.P. - Trans Adriatic PipelineThe Trans Adriatic Pipeline (TAP) supports the European Union’s strategic goal of securing future energy supplies.TAP, whose length is estimated to be 870km, will transport natural gas from Shah Deniz field in Azerbaijan, viaGreece and Albania, and across the Adriatic Sea to the south of Italy, and further to Western Europe.The project is designed to expand transportation capacity from 10 to 20 bcm per year, depending on supply anddemand.TAP’s shareholders, BP, Socar, Statoil, Fluxys, Total, E.ON and Swiss Axpo, are leader companies in the energysector. Some of the shareholders are also partners of the Shah Deniz Consortium, owner of the gas resources thatwill be transported by TAP, and Statoil and E.ON are global leader companies in the engineering and gas sector.Furthermore, TAP will permit the construction of gas storage facilities in Albania in order to ensure the necessarysecurity of supply for the European market in case of operational interruptions.TAP will also promote economic development and create new work positions during its construction, and will be theonly “Southern Gas Corridor” that will not depend on public money (source: http://www.trans-adriatic-pipeline.com).On June 28, 2013 the Shah Deniz Consortium (SDC), operator of the Azeri field of Shah Deniz, officially notifiedthe Albanian authorities about the decision to entrust to TAP Trans Adriatic Pipeline, and not to the rival Nabucco,the transportation of the natural gas produced in their field to Europe.On 17 December 2013 the Shah Deniz Consortium announced its final investment decision (FID) regarding the 2ndPhase of the Project “The development of the gas field of Shah Deniz in the Caspian Sea, offshore Azerbaijan”.

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To increase foreign direct investment, the Government of Albania intensified its efforts to implement a number offiscal and legislative reforms to improve the business climate. These reforms, together with the signing of the Stabilization and Association Agreement in June 2006 and theaccession to NATO are contributed to the increase of foreign direct investment in Albania. In recent years investor interest increased in a wide range of sectors, with energy production, cement production,mining, oil and industrial parks heading the list.

Interest in investing in Albania has recently hit an all-time high. Investors are aware that Albania is one of Europe’slast real estate hotspots and offers some of the lowest property and business set-up prices in Europe along withhigh capital returns. It is part of the fast growing economies of South Eastern Europe and has a very favorable geographic position.The costs of doing business in Albania are very competitive, both in terms of labor and general overhead costs.One of Albania’s main strengths is a low cost labor environment, high in quality and motivation, with high levels oflanguage skills and adaptability, hosted in a tolerant and progressive environment.

3.1 Legal framework The legal framework to encourage investment is already in place. Law No.7764 “On Foreign Investments”, dated2 November 1993, as amended by Law No. 10316 dated December 16th 2010, was designed to create afavorable investment climate for foreign investors in the country. This law offers considerable guarantees to all foreigners (either individuals or legal entities) willing to invest inAlbania. These include:

› No prior government authorization is needed and no sector is closed to foreign investment.› There is no limitation on the percentage share of foreign participation in companies: 100% foreign-ownedcompanies can be set up.› Foreign investments cannot be expropriated or nationalized, directly or indirectly, with exception of exceptionalcircumstances justifying a public interest and as defined by law.› Foreign investors have the right to repatriate all funds and contributions in kind of their investments in Albania.› Most favorable treatment for investors according to international agreements is also provided under Albanianlaw.

There are limited exceptions to this liberal investment regime, most of which apply to broadcasting, health servicesand legal services. Restrictions on the purchase of real estate are also notable: agricultural land cannot bepurchased by foreigners but may be rented for up to 99 years.

Investors in Albania are entitled to judicial protection of legal rights related to their investments. Parties to adispute may agree to arbitration before the ICSID – International Center for Settlement of Investment Disputes(https://icsid.worldbank.org) Foreign investors also have the right to submit disputes to an Albanian court.Provisions regarding domestic and international commercial arbitration are incorporated into the Albanian Codeof Civil Procedure.

In accordance with the Law No. 10316/2010 , by decision of the Council of Ministers, the Albanian State may (notto be considered a right of the foreign investor) grant special protection to certain foreign investments carried out:› in the infrastructure sector;› based on a state concession;› regarding properties in possession of the State;› regarding properties – provided that the foreigner has acquired the rights to the property on the basis of a

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public valid documents issued by competent Albanian state authorities; or› in all cases if the value of the foreign investment in Albania exceeds Euro 10 millions.

The above specification provides maximum protection that the state would replace the full rights of the foreigninvestor in all the disputes already in place with third parties, with the assistance of the State Advocacy.

Furthermore, it should be noted that the specific protection mentioned above it is granted for certain cases andmay also include the assumption of obligations arising from a judiciary decision pronounced by a an Albaniandomestic court against the foreign investor.

Law No. 125 “On Concessions and the Public-Private Partnership”, dated 25 April 2013 disciplines the necessaryregulatory framework in order to better stimulate, absorb and facilitate investments in concessions and public-private partnership projects.

Law No.9723 “On the National Registration Center”, dated 3 May 2007, establishes the National RegistrationCenter (QKR) as a new central public institution, which has made the establishment of a business an easy andfast procedure.

Law No.9901 “On entrepreneurs and companies”, dated 14 April 2008, regulates the status of entrepreneurs, theincorporation and management of companies, the rights and obligations of founders, partners, members andshareholders, and company reorganization and liquidation. Notably, statutory provisions requiring disclosure ofinformation on a company website may be satisfied by establishing an effective link to the registered informationabout the company on file with the National Registration Centre.

The Albanian tax system does not discriminate against foreign investors. Similarly, legislation on the publicprocurements makes little distinction between foreign and domestic firms.

3.2 Types of investments According to the law on foreign investments, any of the following is a “foreign investor”: (a) an individual citizenof a foreign country; (b) a natural person citizen of the Republic of Albania but domiciled in another country; (c) alegal entity incorporated or organized according to the laws of a foreign country, which directly or indirectly seeksto carry out or is carrying out an investment in the territory of the Republic of Albania in accordance with its laws,or has carried out an investment in accordance with laws that have taken effect since 31 July 1990 to date.

According to the same law, a foreign investment is any type of investment in the territory of the Republic of Albaniaunder the direct or indirect ownership of a foreign investor which consists of: (a) movable or immovable assets,tangible or intangible assets or any other kind of possession; (b) a company, stock shares in a company and anyform of participation in a company; (c) loans, financial obligations or obligations in an activity that has economicvalue and that is connected with an investment; (d) intellectual property, including literary, artistic, scientific,technological, audio recording, invention, industrial designs, semiconductor mask works, know-how; and (e) aright given by law or contract and a license or authorization given in accordance with the law.

Pursuant to the law, foreign investments are treated equally with domestic investments, with the exception of landownership (which is regulated by a special law) and are treated no less favorably than under general norms ofinternational law. Therefore, the rules governing national investments also apply to foreign investments.

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For an example, the Albanian tax system does not discriminate against foreign investors and no distinction is madebetween foreign and domestic investors. The e-taxes reform is progressing and as of January 2008 corporate income tax was reduced from 20% to 15%.In addition, as of May 2009 social insurance contributions payable by employers has been further reduced to16,7%, down from 29% in 2006. Businesses can file their tax returns and social insurance declarationselectronically in 12 cities, including Tirana, and electronic payment of taxes is also possible through certain banks.(For additional information please see below Chapter X – Tax System.)

The Albanian Constitution of 1998 provides that limitations on the freedom of economic activity may be establishedonly by law and justified by public interest and that such limitations may in no case infringe the essence of the rightsand freedoms or exceed the limitations provided in the 1950 European Convention on Human Rights. Accordingly,as indicated above, Law No.7764 provides that foreign investments shall not be expropriated or nationalized,either directly or indirectly, except for public purposes and, in any case, upon payment of a compensationequivalent to the fair market value of the expropriated property. Such compensation should be paid without delayand include interest at the commercial market rate from the date of the expropriation. The compensation is fullytransferable and convertible at the market exchange rate of the date of expropriation. A foreign investor has theright to request an immediate review of an expropriated action or compensation through the appropriate legal oradministrative institutions.

Law on foreign investments also states that “foreign investment in the Republic of Albania is not subject to priorauthorization”, thus repealing legislation previously in force. However, the Albanian legal system requires specialauthorizations and licenses for particular activities, whether or not exercised by foreign investors. The majority ofentrepreneurial activities (including e.g. exchange offices, transportation activities, construction activities, privatemedical services, legal and notary profession, production and sale of pharmaceutical products, bakeries,telecommunication services) require a commercial license to be issued by the competent Ministry.

3.3 IndustriesAccording to AIDA (Albanian Investment Development Agency), the most developed sectors of the Albanianeconomy are: (1) agribusiness, (2) industry, (3) commerce and services.

AgribusinessLaw No. 9817 “On Agriculture and rural development” dated 22 October 2007 sets forth the agriculture policiesin Albania, the related institutional framework and public services, as well as the forms of organization of agriculturaland farming activities.

Albania offers opportunities in agriculture because its favorable climate and low-cost rural labor force. Through thecontinuing use of traditional methods, Albanian fruit, vegetable, meat and dairy products are cultivated using fewartificial additives, chemicals or pesticides. Albania is therefore in a position to become an important producer andexporter of quality organic foods destined for regional, European and North American markets. Albania’s significantforest resources present additional opportunities for foreign investment, particularly for furniture companies withproprietary distribution networks.

The Albanian agribusiness sector is an important part of the Albanian economy contributing some 18% of GDPand employing 55% of the national workforce. Substantial investments have been made in recent years and addedvalue in the sector has increased at a rate of 10-15% per year.

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As a result of the ratification of the Stabilization and Association Agreement signed in June 2006 and enteredinto force in April 2009, Albania is currently applying European rules and standards concerning agriculture.

Manufacturing, Commerce and Services Garments Manufacture Textile and garments manufacturers are the largest employers in the manufacturing sector. Building upon astrong post-war tradition of garments production, since the privatization in 1990s many local firms have createda strong reputation for themselves. At the same time, foreign companies have substantially increased their shareof the sector's output particularly within the export processing regime. Many foreign firms have been operating in Albania for more than a decade and many of them continue to increasethe scope of their operations and hire more staff. Export and import figures, which have both increased in recentyears, are closely related to a re-export regime that sees imports of semi-final products subsequently re-exportedafter several operations in Albania. The main advantages of investing in Albania in the garments sector include: a skilled, adaptable and flexibleworkforce that is available across the country, has experience in the sector, is able to adopt new technologiesand meet international quality standards and can meet short delivery times; lower direct and total labor costs thanmost comparable countries; lower costs of transportation due to the geographic position of Albania, with easyaccess to Italy, Greece and the Balkan markets; and no VAT or custom duties for 100% fashion producers underthe re-export scheme.

Shoe Manufacture and Leather ProcessingAlbania is one of the leading shoe producers and leather processors. Exports of Albanian footwear have doubledin the last few years. Albania is the second largest exporter of shoes to Italy – itself by far the leading exporterof shoes in the world. Albania enjoys an ideal location to export to Italy, Europe and Balkans. Foreign investorsin Albania are also increasingly exporting to non-European countries. With free trade agreements signed with theBalkan countries and the EU, Albania offers unrestricted export opportunities within the region. Quality levels inthe Albanian shoe and leather factories are high, with many companies having ISO9001 certification.

TelecommunicationsThe legal framework is mostly based on Law No. 9918 “On Telecommunications in Albania”, dated May 19th,2008. This law aims to promote competition and efficient infrastructure, as well as to provide the neededequipment in the Albanian territory, based on the principle of neutral technology in the telecommunications sector. Pursuant to the law, individuals and legal persons may supply telecommunications services and establishtelecommunication webs. To operate in this sector it is necessary to obtain an authorization from theTelecommunications and Postal Authority, an independent regulatory authority. Other authorities of particularimportance are the Minister for Innovation and Public Administration, and the National Council of Radio andTelevision.The latest amendments to Law No.9918 introduced with Law No.102, dated 24 October 2012, have completelyunified the domestic legal framework with the Directives of the European Union.Albtelecom Sh.a. is the main operator of fixed line services in Albania. In 2005 the Albanian Government sold 76%of Albtelecom Sh.a. to Calik Enerji Telecommunications, a joint venture between Cetel, a subsidiary of the Calikgroup, and Turk Telekom, for a purchase value of Euro 120 million. The remaining stake, still owned by theAlbanian State is undergoing a privatization procedure.Mobile telecommunication services in Albania are currently provided by four operators: Albanian MobileCommunications – AMC, a subsidiary of the Cosmote group; Vodafone, the well-known U.K. mobile operator;Albtelecom (on February 13, 2013 the merger between Eagle Mobile and Albtelecom was completed); and

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PLUS Communication. Internet providers in Albania include e.g.: Abissnet , Albtelecom, Albania Online SP (Primo), Interalb, ABCom andothers.By Decision of the Council of Ministers no. 466 of 27 February 2013, the Albanian government has approved theNational Plan of Frequencies thus determining the regulatory framework with respect to the administration and tothe use of frequencies in Albania.Besides , With Decision of the Council of Ministers no.468, dated May 30, 2013, the national broadcastingdevelopment plan has been approved.

TourismTourism in Albania is regulated by Law No. 9734 “On tourism”, dated 14 May 2007. Incentives in the tourism sector were introduced in 1993 as part of the law “For Development of Tourism Zones”.They are built around a special status created for tourism sector investors – designated as “promoted persons”– which is awarded by the Ministry of Tourism, Culture, Youth & Sports. Investors holding this status can: (a) beexempted from the custom duties and excise taxes on imported goods; (b) benefit from a 10-year tax incentivethrough exemption from profit tax for 5 years from the time of completion of the development phase of theirinvestment and application of tax at only half the normal rate for 5 years; and (c) benefit from a reduction of profittax up to 40%, if profits are reinvested in Albania.The principal activities that are covered are (i) construction, reconstruction, improvements and extension of existingfacilities, (ii) operation of hotels, motels and tourist villages and (iii) structures that complement tourist resortssuch as restaurants, shops, thermal baths and sport facilities.Law No. 76/2013(amending partially law no. 9734, dated May 14, 2007 “On tourism”) constituted the TouristServices Office at the Ministry of Tourism, aiming to give the tourists that visit Albania all the necessary informationabout their journey.

Commercial CentersA very important new trend that is fast developing in Albania relates to shopping malls. With the growth of theeconomy and social development, commerce is moving from small shops and boutiques to big shopping malls,established in city centers or outside them.

The largest shopping centers/malls include:

Casa Italia (outside of Tirana, on the way to the Tirana Rinas Airport);

Qendra Tregtare Univers – QTU (www.qtu-al.com) (outside of Tirana, on the way to the Tirana Rinas Airport)

City Park (www.cityparkalbania.com) (outside of Tirana, after the Tirana exit)

European Trade Center – ETC (in the Tirana city centre)

Kristal Center (in Tirana)

Tirana East Gate (currently the largest commercial center development near Tirana, located outside of Tirana on

the way to Elbasan)

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3.4 Albanian Investment Development Agency (AIDA)

www.aida.gov.al

AIDA (Albanian Investment Development Agency) is an agency of the Ministry of Economic Development,Commerce and Entrepreneurship. This agency has been established with the objective to supervise the coherentimplementation of government policy on promoting and attracting foreign investments, assist and accelerate theinflow of foreign investments into the domestic economy, improve the competitiveness of Albanian exporters andhelp foreign investors in identifying the opportunities offered by the investment environment in Albania.

3.5 Best practices and incentivesAlbania is not only a country with considerable natural resources (including petroleum, natural gas, coal, bauxite,chromium, copper, iron ore, nickel, limestone, salt, timber and hydro-electric power) but also a growing economythanks to legal incentives aimed at attracting investors. As mentioned above, Albania offers an equal treatment offoreign and domestic investors, full profit and dividend repatriation (after taxation), repatriation of funds fromliquidated companies, treaties against double taxation with 39 countries (including Italy) and bilateral agreementson the promotion and protection of reciprocal investments with 29 countries.In addition, Albania is geographically a European country and in the near future it will become even politically,given its rapid evolution in the achievement of European standards and due to its current status as a potentialcandidate country for EU accession.

Tax exemptionsUnder the initiative known as “Albania 1 Euro”, aiming to make the country more attractive to foreign investors, theCouncil of Ministers upon proposal of the Ministry of Economic Development, Commerce and Entrepreneurshipmight approve the concession of state-owned properties, such as lands, building etc. at the symbolic price of 1Euro. The industrial, scientific and technological parks can assure supporting services and other fundingmechanisms. Free zones benefit from exemption from custom duties and from VAT. The transfer of ownershiprights on the agricultural land between subjects who are engaged in agricultural activities it is exempted from theincome tax payment. Facilitation measures are provided to employers who employ young people and graduatesfrom 16 to 30 years old. Tariff reductions are provided on the import of materials to be re-exported (inward) andon machinery at the regime of temporary importation .Importers of machinery and equipment can take advantageof a 100% VAT credit for investments over ALL 50 Million or operating in the field of active processing of goodsor in the field of agro-industry.

Subsidized leases for state propertiesInvestors may enter into lease contracts for state properties, such as land or buildings, at rates lower than themarket. In the case of productive activity, the lease rate reduction will be determined considering the value of theinvestment and the number of new job positions created.Based on the Decision of the Council of Ministers no.54, dated February 5, 2014, the Ministry of EconomicDevelopment, Commerce and Entrepreneurship might subscribe lease contracts of state properties of a surfacebigger than 500m2 at the symbolic price of 1 Euro/m2 provided that the following activities are carried out:a) industrial production of an investment value superior than Euro 10 millions;b) “facon” sector.

It is also provided the possibility to subscribe lease contracts of state properties at the symbolic price of 1 Euro/m2for investments superior of Euro 2 millions, and for the development of certain areas, provided that the following

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conditions are fulfilled:a) sport, culture, tourism and cultural heritage activities;b) activities that address and resolve social problems in particular sectors.

Site availability Various sites are currently available under the Albania One Euro Initiative, including the industrial parks listedbelow. These sites range from basic production facilities throughout the country to high quality serviced officespace in the main cities. Industrial sites are generally better priced in Albania than in other Eastern European orBalkan countries. Electricity and water costs are also at or below those of other countries. Factory units areavailable for refurbishment. These units in many cases are government owned and are offered along with attractiveleasing arrangements based upon the number of jobs created.

Labor costs and productivity benefitsThe average monthly gross salary in Albania is around € 260, which is highly competitive on a global level. Wagesin the service sector are higher than the average but still range from approximately one-third to one-fifth the levelof EU countries, which makes them very competitive. Average gross salaries range from € 315 per month forcustomer service employees to just over € 415 for data entry/processing employees and € 500 for accountants.The average gross salary for a manager is at about € 1,000 per month. At this level of service sector wages,incoming investors can realize significant savings on the cost of human resources compared to other EasternEuropean countries. Personnel employed in the Albanian business services sector is considered to deliver goodproductivity rates at low cost.For more information concerning employment and labor law issues, please refer to Chapter XI “Employment andLabor Law”.

3.6 Economic zones The economic zones, including both free zones and industrial parks, comprise any economic activity subject toapplicable laws and with the exception of activities damaging the environment and the Albanian national richness.These activities may be carried out by Albanian or foreign persons (physical and legal) subject to licenses to bereleased by the economic zone administration.

The assets administered as economic zones include public or private property and services/activitiesof national or local interest. An assignment of such assets is accomplished through an agreement by which theadministration of the economic zone (developer) transfers to the operator for a period of up to 35 years the rightto operate and the obligation to manage the assigned asset in exchange for a sum, which will constitute the incomeof the relevant administration. Users can be physical or legal persons while developers and operators must be legalpersons. Developers, operators and users can be Albanian or foreign persons: the law does not discriminateamong them and gives them the same rights and same obligations.

The Law on Economic Zones is highly favorable to investments and it gives tangible incentives to business.Services, products and other goods which are introduced in the economic zones or will be exported to othercountries benefit from custom duties exemption as well as exemption from VAT. These exemptions apply only toeconomic zones which do not have the status of industrial parks.

Industrial ParksAccording to Law No.9789, an industrial park is defined as a precisely determined area where industrial productionand service activities are performed with special incentives, for the purpose of optimizing the human and material

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potential of such area. The creation of an industrial park is based on a joint venture agreement between publicauthorities, economic operators and/or other interested partners. Industrial parks may be managed bycommercial companies set up in accordance with Law No.9789.Until now, the areas declared industrial parks are: Koplik (Shkodër), Elbasan, Vlora, Spitallë (Durrës).

Free zonesAccording to Law No.9789, free zones are expressly delimitated areas with specific customs regime wherecustoms surveillance is limited to the borders of such areas. The setting up of the territorial delimitation of freezones, customs offices and border police points are carried out pursuant to a Government Decision grantedupon submission of a proposal.

Means of transportation, products and other goods are accepted within the free zones, with no restrictionsconcerning the country of origin or destination. Import of goods subject to prohibitions under Albanian laws orunder international agreements to which Albania is a party is nevertheless prohibited.

3.7 Constitutional and legal guarantees The legal framework of foreign investments in Albania is grounded on the 1998 Constitution, which provides thatthe fundamental rights and freedoms contemplated in the Constitution also extend to foreigners, condemningany discrimination based on race, ethnicity, language or economic conditions.

In 1993 Albania passed a new foreign investments law that greatly liberalized foreign investments and provideda number of basic guarantees and protections for foreign investors. Law No.7764 “On Foreign Investment” parallels World Bank guidelines and addresses the admission, treatment,expropriation and settlement of disputes concerning foreign direct investment. Under Law No.7764, foreign investments are liberally defined and are permitted and treated on conditions noless favorable than those that apply to domestic investments in similar circumstances, excluding the ownershipof land, which is regulated by a special law. Law No.7764, in line with the 1998 Constitution, also provides that foreign investments will not be expropriatedor nationalized, either directly or indirectly, except for public purposes and upon payment of compensationequivalent to the fair market value of the expropriated property.The Law no.7764 was amended by the Law n.10316 of 16 December 2010, which recognizes for the first timethe European Companies. In addition, it regulates a new type of protection for investors and foreign investment,called the special state protection, already dealt with in the previous chapters.Additionally, Albania has been a member of the Convention on Multilateral Investment Guarantee Agency (MIGA)since October 15th, 1991. MIGA provides investment guarantees against certain commercial risks (e.g. politicalrisk insurance) to eligible foreign investors for qualified investments in developing member countries. Along withthe MIGA Convention, Albania has signed the New York Convention of 1958 on the recognition and enforcementof foreign arbitral awards and the Geneva Convention on the execution of foreign arbitral awards. The OverseasPrivate Investment Corporation (OPIC), a US-government sponsored entity, can make available insurance andproject finance resources to US investors in Albania. OPIC’s three main activities are risk insurance, projectfinance and investment funds.

3.8 Dispute resolution Investors in Albania are entitled to judicial protection of the rights related to their investments. Parties to adispute may agree to submit claims for consideration by an arbitration institution. Foreign investors also havethe right to submit disputes to an Albanian court or to the Arbitration Court in Tirana. Provisions on domestic

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and international commercial arbitration are incorporated in the Code of Civil Procedure.

The Law on Foreign Investments defines a foreign investment dispute to mean any disagreement pertaining to aforeign investment in Albania and it allows the foreign investor to contract for the dispute resolution procedure ofchoice. In the event of a dispute arising between a foreign investor and either a private Albanian party or anybranch of the Albanian Government, the dispute may be submitted for resolution to a previously agreed disputeresolution procedure. If such procedure has not been specified, the foreign investor may submit the dispute to anauthorized court or arbitrator as provided by Albanian law.

Arbitration is also a recognized form of conflict resolution in Albania.Through Law No.8012, dated October 18th,1995, Albania ratified the international convention “On the reconciliation and arbitration in OSCE”. As a result, many disputes between the Government and international companies or organizations, or betweenprivate companies, are currently resolved through arbitration.

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DOING BUSINESS IN ALBANIA

4.1 Legal framework The Albanian legislation, and in particular the Law no. 9901 of 14 April 2008 "On enterpreneuers and commercialcompanies" includes the possibility of setting up commercial companies in Albania such as limited liabilitycompanies (Shoqëri me përgjegjësi të kufizuar - Sh.pk) joint stock companies (Shoqeri Aksionare - Sh.A) as wellas the possibility of setting up branches and representative offices of foreign companies, for which must be takenthe same procedures for registration to the Register of Companies of the Republic of Albania (QKR-NCR).UnderAlbanian law, an investor may set up several types of legal entities, including sole proprietorships, partnerships,limited partnerships, limited liability companies and joint stock companies. In addition, it is possible to establish abranch office of a foreign company.

Law no. 9901 establishes the basic legal framework for commercial companies. It is modeled after portions ofrelevant French, Italian, German and British laws and has as its main purposes the promotion and encouragementof the development of private enterprises in Albania and the approximation of the Albanian legislation to commerciallaws of the European Union countries. Law 9901 does not apply to non-profit legal entities (associations andfoundations), whose legal framework is based on Law No.8788, dated 7 May 2001 “On Non Profit Organizations”,which will be further presented in Chapter 14 of this Business Guide.

4.2 Commercial companies In order to perform a business activity in Albania, a foreign investor may choose to (i) set up a locally incorporatedcompany (general partnership, limited partnership, limited liability company, joint stock company); (ii) establish abranch or representative office; or(iii) establish joint ventures.

Sole Proprietorship (Tregtari)A sole proprietorship is the simplest way of operating a business in Albania. To form a sole proprietorship a foreigninvestor must be first registered as a physical person or under a business name at QKR-NCR. This isaccomplished by submitting a simple application in which the investor sets forth his/her data, address in Albania,proposed business activity and specimen of the sole proprietors’ signature. This application and an identificationdocument are submitted to the NRC of the district where the business will be conducted. Following theregistration, the investor shall then register with the tax authorities. A sole proprietor incurs unlimited liability forthe debts of his/her business.

General Partnerships(Shoqëri kolektive)In a general partnership, all partners are jointly and severally liable, without limitation, for the obligations of thepartnership. Creditors of a general partnership at first have to claim against the partnership as a whole and onlyif they fail in this process they may afterwards turn and claim against a partner.

There is no minimum capital required to form an Albanian general partnership. As it is typically the case withgeneral partnerships, the Albanian general partnership is a mutual agency relationship where each of the partnershas authority to bind the partnership toward the third parties without notice. Unless the contrary is stipulated inthe bylaws filed with the NRC, all of the partners are considered as administrators of the partnership.

The partnership is dissolved upon expiry of the period laid down, by a decision of the shareholders, bankruptcy ,court order and failure to exercise commercial activity for two consecutive years. Notwithstanding the foregoing,there are circumstances where continuity can be provided in the partnership bylaws. The partnership must fileannual financial reports.

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Limited Partnerships(Shoqëri komandite)A limited partnership has general and limited partners. In a limited partnership, limited partners are liable for theobligations of the partnership only to the extent of their investment while general partners have unlimited liabilityfor the obligations of the partnership.

Law No.9901 sets forth special provisions defining the rights and obligations of limited partners. These provisionsspecify that limited partners are entitled to receive financial reports at least twice a year. However, limited partnersmay not participate in the administration of the entity. If a limited partner takes part in the management of thepartnership, he or she may incur unlimited liability. The articles of incorporation of a limited partnership shouldspecify the total amount or value of the contributions of the partners and the percentage of the participation of thepartners in the profits of the company.

In contrast to general partnerships, the death of a partner does not immediately dissolve a limited partnership.

Limited Liability Companies (Shoqëri me përgjegjësi të kufizuar – Sh.p.k.)A limited liability company (Sh.p.k.) is the most common legal entity chosen by entrepreneurs entering the Albanianmarket. It is flexible and appropriate to a starting business.

A limited liability company requires a minimum initial capital of only ALL 100 (approximately USD 0.99 or EUR 0.72).It can be established by one or more partners, natural persons or legal entities who are responsible only to the extentof their contributions to the company’s social capital. Contributions can be in cash or any other assets, althoughcontribution in the form of services is not allowed.

Decisions regarding the overall management of the company are taken by the shareholders general assembly andday-to-day management is performed by directors appointed by the shareholders general assembly. Directors arenot required to hold an interest in the company. The law requires annual financial reports to be prepared. Limitedliability companies with income which is above a certain threshold are required to appoint certified public accountantsto prepare financial reports.

Limited liability companies may be transformed into partnerships or joint stock companies upon decision of themajority of three fourths of the shareholders general assembly provided that the last two annual financial statementshave been approved.

Major strategic decisions are generally taken by the general meeting of shareholders, which convenes at regularand extraordinary shareholders general meetings. The company’s bylaws may be amended only by decision takenat an extraordinary meeting. The corporate governance of a joint stock company may follow one of two systems:monistic (single board) or dualistic (dual board). Under the monistic system, the Board of Directors anddirectors/administrators perform supervising and management functions. Under the dualistic system, in additionto the Board of Directors and directors/administrators, a Supervisory Board is established: the Supervisory Boardperforms supervising functions while the Board of Directors is in charge of management decisions in accordancewith company’s bylaws. The law also provides for a third body to be established in joint stock companies: theCouncil of Supervisors The Council of Supervisors performs additional supervisory functions over the abovebodies.

A joint stock company may issue different classes of shares, subject to the limitation that all shareholders shall havethe right to vote according to their respective shares at general assembly meetings.

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Branches and Representative OfficesInstead of setting up an Albanian commercial company, a foreign investor may prefer to establish a branch orrepresentative office of a foreign company in Albania. Branches and representative offices have the same legalpersonality as the “mother” company. Branches are organized and administered separately and carry out theiractivities with third parties in the company’s name. Representative offices, on the other hand, do not operatedirectly to create income, but promote the company’s activity: they may sign agreements in the name and onbehalf of the company.

Many foreign investors operate successfully in Albania through branch offices. A branch or representative officeshall be registered with the National Registration Center – QKR together with the required documents of theparent company The branch or representative office is therefore represented by a legal representative authorizedby the parent company.

Joint ventures(Shoqëri e thjeshtë)Albanian law does not address expressly the approach to joint ventures between private parties. Joint ventures areforeseen by the Civil Code using the term “simple company”. Joint ventures are based on an agreement enteredinto between two or more persons, natural or legal, that agree to engage in an economic activity with the otherparty/parties. What is particular to this type of partnerships is that joint ventures do not have legal personality: twocompanies might decide to create a new corporate entity for their joint venture and register it (under one of theforms indicated above); alternatively, they may agree by contract to start a joint enterprise without registering orcreating a new corporation. In the latter case the activity shall be carried on by the two entities rather than througha new corporation.

As a practical matter, while considering to enter into a joint venture with a local partner should carefully determinebeforehand the expectations of the parties concerning the various aspects of the relevant investment or project.It is also recommended that foreign investors negotiate a dispute resolution mechanism (e.g. an arbitration clause)in the joint venture agreement.

4.3 Registro nazionale delle imprese (QKR-CNR)

www.qkr.gov.al

Laws No. 9901 and Law No. 9723, dated May 3rd, 2007 “On National Registration Center” (“NRC” or QKR inAlbanian), as amended, modified the business registration process from a court-administered judicial procedurerequiring several days and numerous administrative steps to complete, to a new streamlined administrativeprocess. Starting a business became easier through online publication of the relevant documents, reduction of theregistration cost and consolidation of tax, health insurance and labor registration into a single application.

Economic activities, including e.g. tourism, construction, telecommunication, fuel trade, radio and TV broadcasting,fishing, medical products trading, require a trade license. Law No. 10081, dated February 23rd, 2009 “Forlicenses, authorizations and permits in the Republic of Albania”, has facilitated the licensing process through theestablishment of a one-stop shop license center.

Documents required by the National Registration Center (NRC) – QKR for the registration of a new company in

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Albania include:

1. Articles of incorporation and bylaws signed in the presence of a notary public; these should contain company’sname, registered office, objective(s), initial capital, term (which in Albania can be unlimited) and the name ofshareholder(s), administrators and/or directors; and2. Application form (NRC - QKR) completed and filed by the legal representative/s of the company (or authorizedattorney-in-fact).

Registration of a branch or representative office In case of registration of a branch or representative office, the NRC/QKR requires, in addition to the above listeddocuments:Application form completed and filed by the representative of the branch (or representative office) or of the mothercompany (or authorized attorney-in-fact);Articles of incorporation and bylaws of the mother company, with amendments if any;Extract issued by the company register or equivalent authority of the place where the mother company is registereddated not earlier than 90 days from the date of submission: This document must show (a) that the mother companyis regularly registered at the relevant company register or equivalent authority, (b) that the mother company is notsubject to dissolution or bankruptcy proceedings, and (c) information on the management of the mother company;Resolution of the Board of Directors of the mother company resolving upon the creation of the branch orrepresentative office in Albania and appointing its legal representative of the branch;Financial statements of the mother company for the last financial year and related auditor report.

4.4 Taxes payable by a commercial company According to Albanian tax law, a newly registered company is liable to pay the following taxes:

› Income tax: 15%, unless the company is classified as small business (an annual turnover up to ALL 8 million); › Cleaning tax: fix rate or variable, depending on the estimated annual turnover and type of business activity; › Sign tax: ALL 120 (approx. Euro 0.85) per year; › Property tax: an annual amount depending on the square footage of real estate owned by the company, if any;

Labor service tariff (relating to the declaration of employees to be made to the labor office): ALL 1,000 (approx.Euro 7.14) per year..

Also to be considered are notary and administrative costs for the incorporation and registration of a companywith the company registry.

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5/Public PrivatePartnerships (P.P.P.),concessions and publicprocurement

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Public Private Partnerships (PPP) and Concessions are commonly employed by the Albanian government in orderto finance public projects. The main areas in which PPP are employed include:› Public Procurement (employment contracts and/or public services);› Joint – Venture (constitution of a special purpose vehicle (SPV) with a public-private participation);› Concession (public works given in concession, connection of public services).

5.1 Public procurementsThe public procurement process in Albania is conducted electronically via a dedicated website: www.app.gov.alCompanies may create a joint venture in order to submit a bid for a public procurement. Sub-contracting of worksand/or services by the winner should not exceed 40% of the contract value.

The Agency of Public Procurements oversees the public procurement process and performs several specific tasks,including e.g.: consulting the contracting authority and the bidders on the legal framework of the publicprocurements; administering the on-line publication of the tenders; annulling the decisions of the contractingauthority when they are in violation of the law; and taking legal initiatives to improve the legal framework of publicprocurements. The legal framework of public procurements provides for an administrative review of the decisions of the contractingauthority and for an investigation procedure conducted by the Agency of Public Procurements.As a last resort, interested parties may present their claims before of the District Court of Tirana.vThe Procurements Ombudsman is an administrative body that investigates, either on its own initiatives or based onclaims by other parties, irregularities of procurement procedures and refers its findings to the Agency of PublicProcurements and other competent authorities. Claimant companies must pay a tariff in order for their claim to betaken under examination. This tariff is equal to 0.5% of the value of the procurement. In case the claim of thecompany is considered valid and lawful, to the same company will be refunded the full tariff paid; otherwise the feewill be retained and transferred to the state budget.

5.2 Concessions and PPP In 2013 Law No. 125, dated 25 April 2013 “On concessions and public-private partnership” was approved andentered into force.The concession and/or PPPs adjudication procedure is based on the principles of transparency, non-discrimination,proportionality, efficiency, equal treatment, mutual recognition and legal certainty.

Concessions/PPP are possible in the following sectors:› Transportation, including highways and roads, engineering structures, railways and railway transportation, canals,ports, airports, bridges and tunnels;› Production, transmission and distribution of electrical energy and heat;› Water supply, including production, administration, cleaning and distribution, waste water treatment,accumulation and distribution, irrigation, drainage, cleansing of water channels and dams;› Administration, collection, transportation, elaboration and elimination of solid waste;› Telecommunications; › Education and sports;› Health;› Prisons; › Projects on recycling and rehabilitation of land and forests in industrial zones and parks;› Information technology and database maintenance services;› Natural gas supply;› Agreements on administration and implementation of public services, including the above mentioned sectors.

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The Council of Ministers, upon proposal of the Minister of Economy and of the local government Authority, mayauthorize the implementation of concessions also in other sectors.

In special cases, the Council of Ministers may offer concessions at the symbolic price of Euro 1 to local or foreigninvestors.

The Law also states that the provisions of the Law no. 9663, dated 18 December 2006 “On concessions”, asamended (which it has abrogated) shall be applied regarding the concession contracts granting procedures, theassessment procedures and the contracts concluded before the entry of the Law No. 125/2013 into force (i.e.before 25 May 2013). The latter law shall not be applied regarding the concession contracts which have been signedbefore 25 May 2013, except the provisions which regulate the concessions/PPP register, which muswvt be regulatedwithin 25 November 2013.

Interested parties may also submit unsolicited projects for concession. If such projects are approved, the party thathas submitted the unsolicited project is awarded a bonus credit for the preparatory work in assembling the unsolicitedproject. Such bonus gives the bidder an advantage over other bidders during the process of selection of theconcessionary for the realization of the project.

Companies may create a joint venture in order to submit a bid for a concession project.

In any case, a special purpose vehicle (SPV) should be established for the implementation of the concession project.The transfer of quotas of shares in the SPV requires the approval of the contracting authority.

The procurement and concession documentation is published online on the government website (www.app.gov.al)and the submission of tenders takes place online.

The Procurements and PPPs Ombudsman protects the legal interests of the bidders, examines claims and complaintsby them, investigates violations of law and refers the findings to the contracting authority and to the Agency ofConcessions.Regarding the settlement of disputes, the Law No. 125/2013 provides that the concession/PPP contract shall beregulated by the laws of the Republic of Albania.

In special cases, the Council of Ministers may offer concessions at the symbolic price of Euro 1 to local or foreigninvestors for the enhancement of investments in the above mentioned sectors or in other sectors of primaryimportance for the economic development of the country, based on strategic objectives. The Minister of Economymay propose to the Council of Ministers the list of assets to be granted in concession at the symbolic price of Euro1 and after its approval the pertinent concessions may be implemented.

The Agency of Concessions assists the contracting authority throughout the whole procedure, from the identificationof possible concessions until the signing of the concession agreement.

The Procurements Ombudsman protects the legal interests of the bidders, examines claims and complaints by thebidders, investigates possible violations of law and refers the findings to the contracting authority and to the Agencyof Concessions.

The legal framework of concessions provides for an administrative review of the decisions of the contracting authorityand for an investigation procedure conducted by the Agency of Concessions.

As a last resort, interested parties may present their claims before of the District Court of Tirana.

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6/Energy, utilities, oil and mineral resources

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6.1 EnergyGeneral OverviewInheriting an old electric-energetic system which dated back before the fall of the Berlin Wall and going througha very difficult and long transition, the Albanian Government’s objective consists in the development of the energysector by making it secure and competitive in order to guarantee energy supply to all consumers, at reasonableprices, in compliance with economic, environmental and market principles and in accordance with EU Directivesand the EU Energy Treaty.

Recently, the energy sector has been subject to significant changes. KESH, the Albanian electro-energeticcorporation, has been broken up into smaller companies for the production, transmission and distribution of energyand then privatized. Additionally, legislation has been implemented setting clear market rules. Finally, a regulatoryauthority for the energy sector, ERE, has been established.

6.1 Legal FrameworkThe main set of rules concerning electric energy is composed by a series of primary and secondary sources, whichregulate the actions of the operators active in the sector and the authorizations required for the construction ofenergy production plants.

Law No. 9072 “On the electric energy sector”, dated 22 May 2003, as amended (the “Law on electric energy”)sets forth the rights and obligations of natural and legal persons, the functioning of the authority of the sector(ERE), the procedures for the selection and development of a market model and its regulations. The construction of hydroelectric energy plants is primarily governed by the legislation on concessions. Theconcession is finalized with the signing of a special agreement called concession. Other sources of energy (e.g.. wind, photovoltaic, biomass and thermal) are governed by the Decision of theCouncil of Ministers No.1701 date December 17th, 2008, “On the approval of the regulation on procedures forpermits allocation for the construction of new power generation facilities, which are not covered by the law ofconcessions”. In any case, the required authorization is issued by the Council of Ministers.

Albanian legislation is going through an approximation process with EU legislation and the Albanian legislative bodyis adopting a series of directives and/or European and international standards in order to encourage the productionof electricity from renewable sources. In this context, Law No. 9501 “On the ratification of the Constitution of theEnergy Community Treaty” (hereinafter the “Treaty”), dated 3 April 2006, has been enacted. The Law on electric energy and the Treaty provide the framework for the approval of renewable energy plants andthe issuance of green certificates. Law No.138, dated 2 May 2013, “On renewable energy sources” was promulgated, aiming to stimulate theproduction of energy from renewable sources. Law No. 138/2013 contains a series of definitions drafted inaccordance with the Directive 2009/28/CE of the European Parliament, Council and of other EU secondarysources..

Law No.138/2013 disciplines inter alia:(i) the legal framework with reference to the incentives for the production of renewable energy;(ii) primary national incentives with reference to the production of renewable energy;(iii) the priority of the connection in the network system of power plants using renewable energy sources in theAlbanian territory;(iv) priority to the purchase and payment of the electricity produced from renewable energy sources;

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(v) the regulatory framework on the licensing and approvals necessary for the production of renewable energyas well the relative procedures;(vi) the guarantee in relation to the origin and coordination of the requirements for the licenses and permits;(vii) mode of stimulation of solar energy systems relating to the water heating;(viii) the use of renewable energy sources in the transportation sector.

Main provisions provided by Law no. 138/2013:› proposal for the adoption of: (i) a national action plan for renewable energy sources, and (ii) national objectivesfor the utilization of renewable energy sources;› introduction of support schemes by the Council of Ministers to achieve the objectives outlines in the Nationalaction plan for renewable energy;› regulations for the priority for access to the electricity network;› incentive system – as proposed by ERE – based on the size of the facilities and features to benefit from theincentive rates and tariffs;› Origin Guarantee certificates – furnishes the minimum requirements for the acquisition of guarantees of origin,its elements, the way in which they can be exchanged etc.; furthermore, foresees the cooperation in theinternational arena in order to enter into agreements with EU states or the Energy Treaty of the community inorder to recognize each other CoG;› photovoltaic panels and energy transportation: are foreseen support schemes provided for the promotion ofthe photovoltaic systems such as exemption from customs duties.

The Council of Ministers, the National Electricity Regulatory Agency and the Ministry of Energy and Industry willapprove within January 1, 2015 the implementation regulations.

Competent AuthorityThe electricity sector regulatory authority in Albania is the Electricity Regulatory Agency (“ERE”). ERE is anindependent authority established by the Law on electric energy and operates as a market regulator andadministrator of licenses in the electricity sector. It is also responsible for monitoring the authorized activities andfor the resolution of disputes between authorized parties and consumers. Finally, ERE approves the electricityrates and sale prices.

Additionally, the Ministry of Energy and Industry is the executive body in charge of the administration, developmentand investments in the energy sector.

General Regime For Production, Transmission And Distribution Of ElectricityThe major stakeholders in the sector are:

Production agency:KESH (Albanian Electro Energetic Corporation) is a joint stock company (Sh.a.) wholly owned by the AlbanianGovernment through the Ministry of Energy and Industry pursuant to Law No.7926 “On the transformation of publicenterprises into commercial companies”, dated April 20th, 1995, as amended. KESH is a company authorized byERE to pursue the production and sale of electricity. The company is authorized by ERE for the production and sale of electricity.KESH is organized in the following divisions:› Production (hydroelectric centrals) – it manages 3 hydroelectric centrals, as follows: HEC Fierza, HEC Komanand HEC Vau i Dejes, and a Termic Central TEC Vlora;

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and› Public provision, which deals with the purchase of energy from production plants and producers.

Transmission agency:The Transmission System Operator (“OST”) has been established under the Decision of the Council of MinistersNo.797 “On the Constitution of the System Operator Transmission SH.A. Tirana”, dated 4 December 2003. It isa joint stock company (Sh.a.) wholly owned by KESH Sh.a.OST’s main corporate purpose includes the transmission of electricity from producers to the electric energytransmission system and the development of the transmission, maintenance and interconnection points of thetransmission network.OST performs three principal functions:› Market operator;› Manager of the electricity transmission system; and› Manager of the interconnection system.

Supply agency: The Distribution System Operator CEZ Shpërndarje Sh.a. (“OSSH Sh.a.”) has been established under theDecision of the Council of Ministers No. 862 “On the establishment of the operating companies SH.A. DistributionSystem”, dated 20 December 2006. CEZ Shpërndarje Sh.a. (“OSSH Sh.a.”) is a joint stock company (Sh.a.) with24% of the share capital held by the Ministry of Economy, Trade and Energy, and 76% held by CEZ AS. (on 24September 2010 the name of the company changed from OSSH Sh.a. to CEZ Shpërndarje Sh.a.)

CEZ Shpërndarje is responsible for the management, maintenance, security and development of the distributionsystem. It guarantees the system’s efficiency in meeting the electricity distribution demand.CEZ currently is administered legally by the State (ERE) and its license has been revoked for failure to fulfill theobligations under the sector regulation. An international arbitration is currently ongoing between the parties.

Additionally, 40 other operators work in the sector. They produce energy from plants obtained as concessionsand from private plants for a total of 60 HEC with installed capacity up to 15 MW each.Over 100 grants have been allocated by the Albanian Government since 2007 to date for the construction of newelectricity production plants. There are now few projects throughout Albania that have already obtained a license to build wind plants: theseprojects are currently developing and are not yet operational.

Article 38 of Law No. 9073 “On the electricity sector”, dated May 22nd, 2003, which promotes the production ofelectricity from renewable sources, has imposed upon OST the obligation to offer preferential treatment to thetransmission of electricity from renewable sources. Finally, the Law of 24 December 2002 n.8987 "By the facilitiesfor the construction of new electricity generation" and the Decision of the Council of Ministers no.560 of 27 August2004, provide for exemptions from customs duties for machinery and investment in facilities used for the productionof renewable energy.

The amount of electricity produced in the country during 2012 was 4,722 GWh. The total quantity of importedenergy was 2,894 GWh. KESH Sh.a. is one of the leading public companies in the country. The production ofelectricity in 2012 by KESH Sh.a. was equal to 93% of the national production. The remaining 7% was producedby concessions and private plants.Electricity (220 V 50 Hz) is supplied by local authorities (CEZ Shperndarje Zone Directorates) belonging to CEZShperndarje (OSSH) and separated from KESH.

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Energy tariffs are set by ERE pursuant to the Law on electric energy and ERE’s methodology. The networkobsolescence and distribution problems led to a significant loss of electricity produced.In an attempt to address the structural problems concerning the energy sector, the Albanian Government haslaunched a series of initiatives to reverse the performance deterioration in the sector. An ongoing commitmentin terms of investments and implementation of legal and procedural frameworks is considered necessary. Thiscommitment has been also taken from several donor countries.On the other hand, the Albanian government has privatize Hydropower plants, two of which are “HEC Ulëz -Shkopet” Sh.a. (49 MW) and “HEC Bistrica 1 dhe Bistrica 2” Sh.a. (29 MW).

Types Of Licenses For ElectricityCompanies interested in working in the electricity field in Albania should be registered as Albanian legal enteritisand have a particular license which, as per Article 13 of the Law on electric energy, is required to conform to theprocedures established by ERE, as provided by its Regulation no.16.The above mentioned legislation provides an obligation to obtain a license for the following activities: › Production of energy from power plants; › Distribution; › Transmission;› Import;› Wholesale or retail sales; › Trade, within or outside the country.

6.2 Oil and mineral resources

OIL RESOURCESRecoverable reserves from existing oil fields in Albania are estimated at approximately 440 million tons. Gasreserves are estimated at 1.56 billion Nm3. Although deposits of natural gas can be found in Albania, there isno distribution network that operates through pipes or containers. Gas for domestic use is distributed throughcylinders.

Reserves of oil sands are estimated at 600 million tons, of which 55 million tons of bitumen. Possible explorationsmay help discover more reserves of oil and gas, whose extraction has started in Albania in 1918. Crude oil isexported mainly to Italy and the gas is used by local industry.

Some companies currently operate in the oil sector in Albania: the state-owned company Albpetrol Sh.A., activein the extraction and production of crude oil and currently in the process of privatization after the first failedattempt in 2012; and Armo Sh.A., active in the refining and marketing industries and already privatized in August2008.

Additionally, other companies like Bankers Petroleum, Stream Oil & Gas and Petroman as are active in theextraction and production of crude oil and gas, through the petroleum agreements entered into between Albpetroland these companies.

Approximately 20 privately held companies operate in the oil products sale industry.

Several private operators own distribution points and supply tanks. Since 1997, the number of filling stations inAlbania has increased and they are now present throughout the country.

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The amount of estimated Albanian oil reserves has captured the attention of several international oil companies,including Agip (Italy), Coparex (France), Naftaplin INA (Croatia), JKX, Royal Dutch Shell (England/TheNetherlands)_ and Premier Oil (Great Britain).

Foreign investments could help the oil industry in Albania, with particular reference to the modernization ofequipment and manufacturing parts, industrial processes, communications, transportation and environmentaltechnologies, recovery rates and economic efficiency.

Legal FrameworkThe legal framework for this industry is based on the following: › Law No.7746 “On Hydrocarbons (Research and Production)”, dated July 28th, 1993, as amended; › Law No.8450 “On products, transport, trade in oil, gas and their derivatives”, dated February 24th, 1999, asamended; and› Law No.9946 “On the natural gas sector” (“Law on Natural Gas”), dated June 30, 2008.

Law No.7746/1993 regulates the activities of research and production. Under this law, any person who intendsto engage in the activities of research, development and production of hydrocarbons in Albania is required toenter into an agreement with the Ministry of Energy and IndustryLaw No.8450/ 1999 regulates the activities of processing, transportation and marketing of oil and gas. All legalpersons, public or private, local or foreign, whose activities relate to processing, transporting and trading oil or gasare subject to this law. With the entry into force of Law No.10081 of 2009 on licenses, authorizations and permits and the completionof the regulatory framework by Decision of the Council of Ministers No. 538 of May 26th, 2009 “On licensing andpermits to be processed by or through the CNL and some other common regulations”, all parties involved in theseactivities have to apply for a permit from the National Center License – QKL(a public institution depending fromthe Ministry of Economic Development, Commerce and Entrepreneurship)

The Law on Natural Gas allows the creation of a competitive market in this sector and its integration into regionaland European markets. This law provides the necessary legal basis for the implementation of policies, standardsand procedures for the organization and regulation of the natural gas market.

The Law on Natural Gas has been drafted on the basis of the EU Directive 55/2003/EC for natural gas and theexperience gained by countries in the region. Under this law, ERE is responsible for allocation of licenses,transmission activities, distribution, supply, marketing and management of natural gas storage facilities for dry andliquid natural gas.

Furthermore, ERE has the authority to set tariffs for various services related to the natural gas sector, approve theinvestment plan of companies operating in the industry, protect consumers and monitor contractors for supplysecurity public service obligations, rules, procedures and related codes and network measurement, governing thegeneral legislative framework in the field of natural gas

Privatizations in the Oil SectorIn the context of the initiative of privatizing Albpetrol Sh.A, the state company active in the extraction and productionof crude oil, in 2012 some recent amendments have been introduced to the current Law on Oil Exploration andProduction, which briefly provide that:

› the Agreement entered into between the Ministry and Albpetrol for petroleum operations shall remain in full

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force even after the privatization of Albpetrol; › Albpetrol shall be entitled to carry out petroleum operations, for a term of 25 years from the privatization, inrelation with all those areas where no petroleum agreements been entered into with third parties; › the petroleum agreements entered into between Albpetrol and third parties, as per license agreements, shallcontinue to be affective even after the privatization;› in case of early termination of petroleum agreements entered into between Albpetrol and third parties,Albpetrol enjoys the preemptive right to keep carrying out the petroleum operations under the same termsand conditions set out in the petroleum agreements.

MINERALSGeneral OverviewAlbania has considerable mineral resources, such as chromium, copper, nickel and coal. The quality and quantityof chromium is particularly high: before 1990, Albania was the third largest world producer and is currently theonly European country with substantial reserves of this mineral. The general amount of reserves classified KNRis reported to be more than 10 million tons. Albania also has significant unexploited deposits of bauxite and phosphate, as well as significant reserves ofmarble and stone.

The Albanian Government has pursued a policy of facilitating the licensing procedures and promoting theexploitation of the natural resources of the country. This initiative has attracted potential investors, which nowhave agreements with the Ministry of Energy and Industry (approved by Parliament) for the exploitation of certaindeposits for a period of 99 years. These agreement provide not only for the exploitation of minerals but also fortheir technological transformation. The planned investment under these agreements are estimated atapproximately Euro 1.5 billion.

Other investors in the mining sector, including e.g. Selenice Bitumi, Tirex Canada, Balkans Resources and theAustrian group DecoMetal, have been approached by the Albanian Government for the exploration of metallicminerals such as copper, chromium, and nickel. Investors including Italian companies Fassa, Colacem and SeasifGroup have been approached for the exploitation of other minerals such as limestone.

Currently, a few dozen foreign companies are active in this field, including Canadian, Italian, Greek, Australian,Swiss, Austrian and Russian companies. Foreign companies operate 81 mines while more than500 domesticcompanies operate in more than 600 mines throughout Albania.

Legal FrameworkThe mining sector is regulated by Law No.10304 dated 15 July 2010 “On Mining Sector in the Republic ofAlbania” - “Mining Law”), which abrogates the previous Law 7796 of 17 February 1994, "Mining Law of theRepublic of Albania", as well as a series of regulatory acts, and the mining royalty..

Additional regulations concern environmental protection and water treatment, health and safety at work, and theuse of explosives in mines.

Any person or entity, Albanian or foreign, has the right to carry on a mining activity, in compliance with theprovisions of the Mining Law.

A mining permission is granted for the following categories of minerals:› Metallic, non-metallic, coal, bitumen minerals’ group;

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› Construction minerals’ group;› Precious, semi-precious minerals’ group;› Radioactive minerals’ group.

Based on the above-mentioned categories of minerals and the type of activity being undertaken, the relevantpermits are issued that guarantee the holder the exclusive right to exploration and / or exploitation of one or moreminerals specified in a confined area.

According to the mineral categories mentioned above and the type of activity to be undertaken, a set of permitsmay be issued, such as Leje Kerkim and Leje Zbulimi (exploration permits) or Leje Shfrytezimi (permission for theexploitation of minerals). These permits can also be combined.

The request for a mining permit is presented at the National Center of License - QKL together with the necessarydocumentation in accordance with the law.

Workshop on Investments and Integration Opportunities in the Energy Sector.

From May 5th to May 7th 2014 the 1st edition of S.I.A. – Italian Week in Albania “Investments and integrationopportunities in the energy, tourism, manufacturing (”facon”) and agricultural sectors” was held in Tirana, organizedand promoted by the Italian Embassy in Albania, inaugurated by the visit of President of the Italian Senate Mr.Pietro Grasso and by the Albanian Prime Minister Mr. Edi Rama and by the Governor of the Albanian Central Bank.Our firm has been the reference partner of the Workshop on the Energy Sector, taking a broader report on theAlbanian legal framework on the matter. The material can be downloaded from our website at the following link:http://www.tonucci.it/ita/news_eventi/convegni_tirana_2012.php.At the Workshop participated also the Minister of the Ministry of Energy and Industry of Albania, ERE’s Chairman,the Commissioner of the Italian Authority of electricity, gas and hydro system, together with the representatives ofTerna S.p.A. (Terna Crna Gora), EBRD (European Bank for Reconstruction and Development), TAP (Trans AdriaticPipeline), Camuna hydro electric group – Essegei - and the Italian Chamber of Commerce in Albania.

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7/ Real estate &property law

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7.1 Public propertyLaw No. 8743 “On State property”, dated 22 February 2001 makes a distinction between state and public property- the latter includes property owned by the state which is functional and indivisible from the state itself andconsidered of public interest (parks, rivers, lakes, etc).

Public property is transferred or given in use as per terms and limits established by special laws. Property whichis not considered public, if not subject to special laws, has the same legal status of private property.

Article 3 of Law No.7980 “On land purchase”, dated 27 July 1995, provides that no transfer of property ownershipcan be made on public land until the compensation process for former owners, if applicable, has been completed.However, there is a very important exception to this rule: under section 3(b) of Law No.7980 of 1995, the Councilof Ministers may decide to sell a free public land if the planned investment to be made in that same land is veryimportant for the interest of country. The sale price is established by Decision of the Council of Ministers.The real estate may be owned by Albanian individuals as well as Albanian legal entities without restrictions,regardless of whether the shareholder/s of the Albanian entity is/are of foreign origin.With regard to the ownership of real estate by foreign persons and foreign entities: (i) there are no restrictions onthe acquisition by them of the buildings (i.e. apartments, offices, etc.); (ii) they are not entitled to obtain ownershiptitle over agricultural land, woodland, pasture and meadow, but are only entitled to lease such type of real estatefor a period up to 99 years; and (iii) they are entitled to purchase private or state-owned constructible land plot(i.e. land that is not agricultural land, woodland, pasture or meadow) on condition that the investment built overthe land plot exceeds at least three times the value of such land plot.

7.2 Real estate registration The land in Albania is required to be registered with the local Offices of Registration of Immovable Properties. Asa rule, in order to become effective toward third parties, the property rights are required to be registered. Not all the rights are subject to registration, for example: the rights of a lease with a term less than nine years.

Registration of real estate in Albania is governed by Law no. 33/2012 "On Registration of Real Estate" the centralauthority responsible for registration of real estate is the Central Office of Real Estate Registration, whichcoordinates the several Offices of Real Estate Registration located throughout the Albanian territory.

In case real estate is registered for the first time, the competent Office registers it temporarily for 45 days, givingto all interested persons the time to submit claims or requests to the relative Office, before proceeding with finalregistration of the real estate property (temporary registration). According to the Albanian Civil Code (“CC”), LawNo.7850, dated 29 July 1994, as amended, real estate shall not be subject to any transaction if not registered withthe Real Estate Register.

The data of the property and/or other documents which affect the rights of the owners are required to be registeredwith the Register of Real Estate within 45 days from the date of their formation and/or constitution, such as: thelocation of the property (plant) and its borders; date of registration; act of acquisition of ownership, identity of theowner; the liens, leases, the right to use the property and any other similar right of ownership connected to theproperty which is transferred by the owner to third parties.

If during the period of temporary registration no complaints or claims have been received, the property is registereddefinitely. Otherwise, in case of claims, which do not result of agreements, the competent Court will decide overthe dispute, with the obligation for the public officer of competent for the real estate registration, to note in it thecontroversy and the subsequent decision of the Court.

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Under Albanian laws, the following shall be registered with the Registry: the ownership rights; mortgages; servituderights; emphyteusis; usufructs; leases for a term in excess of nine years; and any other real rights over immovableproperties.

According to Law no.33/2012, the deed that creates any of the aforementioned rights must be registered with thelocal Registry within 30 calendar days from its execution date, otherwise a daily fine equal to 10% of theregistration fee (until a maximum of ALL 300.000) will be applied at the moment the contractual party/ies file thedeed at the Registry for registration. The leases with a term less than nine years are not mandatory to be registered.

Article 83(1) of the CC provides that the legal transaction for the transfer of ownership title over immovableproperties must be done through a notary public deed and must be registered, otherwise it is null. Accordingly,under the CC, the ownership title is transferred to the new owner at the moment the notary deed is registered withthe Registry.

On the other hand, the High Court of Albania under its Unifying Decision no. 1, dated January 6, 2009, providesthat the ownership title over the immovable property passes to the buyer at the time the seller and buyer executea sale-purchase contract. Thus, the registration of the sale-purchase contract with the Registry is not an elementof validity of such contract.However, in practice, the buyer prefers to register the notarized deed with the Registry in order to preserve hisrights and to render it enforceable towards third parties.

7.3 Refund and compensation process of former expropriations In 2006 the Albanian Parliament amended Law No. 9235, dated 29 July 2004 “On property compensation andrestitution”. The Law No. 9235 aims at resolving competing land ownership claims resulting from communist-eraexpropriation of land. Law No.9538, dated 17 July 2006 didn’t bring important modifications, except for the transferring of theresponsibility for implementing the entire process of restitution and/or compensation to a new constituted agency.The responsibility for the implementation of the relevant legal process has been transferred to a newly establishedagency. Also, the amount of land qualifying for restitution increased from 60 to 100 hectares. Another importantchange has been the extension of the deadline for filing property compensation and restitution requests, which wasset at 31 December 2008: no requests would be accepted after that date. In 2014 the Albanian Parliament, with law no. 49/2014 extended the deadline for all the compensation andrestitution requests, and the entire process is expected to be resolved within April 2015. The Albanian Government has presented three methods of compensation for expropriation claims: (1) restitution,(2) compensation of property with similarly valued land in a different location, and (3) cash settlement or otherfinancial compensation. The successful implementation of the restitution process is an important challenge for the government and it is keyto future economic development.

7.4 Acquisition of land by foreignersAccording to Law No.7980, dated 17 July 1995, “On the acquisition of land”, foreign investors, natural or legalpersons, are entitled to lease state owned land. On the other hand, for what concerns, natural persons who donot enter in the category of “investors” (as defined by law), they are not entitled to buy agricultural land in Albania.

In addition, restrictions on the right of sale and purchase of land are, according to Law No.7980, also provided

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for foreign natural and/or legal persons that invest in Albania. The latter may acquire land in Albania only if theinvestment they make exceeds of at least three times the value of the land on which the investment shall be made.

International ConventionsGenerally, international laws are not relevant to real estate in Albania. However, the international bilateralconventions that have been ratified and implemented by Albania have preference over local laws on certaintransactions involving foreign investments on real estate, such as the bilateral conventions on tax treaties.

TaxTransfers of real estate are subject to a transfer tax that is payable by the seller. The rate/amount of the tax dependson the type of the real estate and its location. The transfer fee of buildings is calculated based on the area of theproperty that is transferred. For example, the tax for buildings that are used for business/commercial purposes,located in Tirana, amounts to 2,000 ALL per square meter; the transfer tax for land or other immovable propertythat is not a building is 2% of the sale price. Individuals that are subject to the income tax are exempted from thepayment of this tax.

The transfer tax is to be paid prior to registration of the real estate with the Registry. The transfer of real estate is exempt from VAT.

The tax payable by the seller who is a natural person is the tax on the income gained from the disposal of the realestate, and consists of 10% of the capital gained (difference between the sale price and the purchase price ofthe former). Specifications on the calculation method of the capital gained are provided in the special directivesof the Ministry of Finance and Ministry of Justice.The tax on the income gained from a real estate transfer by legal entitles is calculated jointly with the tax on theoverall income generated by that entity during the respective fiscal year.

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8/Environmental protection

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8.1 Legal framework and responsabilityThe environmental policy in Albania is regulated by the Constitution of the Republic of Albania and Law No.8934,dated 5 September 2002 “On Protection of Environment” (hereinafter “Law on Environment Protection”), asamended, as well by the new legal framework on the environmental policy, entered into force on March 2013.

The legal new legal framework consists of three cardinal acts: › the Law no. 10431 dated 9 June 2011 “On the Environmental Protection” quite completely harmonized with theDirective 2004/35/CE; › the Law no. 10440 dated 7 July 2011 “On the Assessment of the Environmental Impact” quite completelyharmonized with the Directive 85/33/CEE, and › the Law no. 10448 dated 9 July 2011 “On the Environmental Permission” quite completely harmonized with theDirective 2008/1/CE (hereafter collectively referred to as “New Acts”).

hereinafter jointly denominated “Laws on Environment Protection”.

In particular, articles 56 and 59 of the Constitution clearly demonstrate the importance attached to environmentalissues, including the right of citizens to be informed on the status of the environment and its protection, the obligationof the state to provide for a healthy and ecologically adequate environment for the present and future generations,as well as the rational exploitation of forests, waters, pastures and other natural resources, on the basis of the principleof sustainable development.

The Law on Environmental Protection deals with sustainable development, the prevention and reduction of risk tohuman health, the polluter pays principle, the priority of pollution prevention over subsequent remediation of thedamages caused thereby, rehabilitation and restoration of the damaged environment, the establishment andstrengthening of the institutional system of environmental protection on a national and local level.

The Law on Environmental Protection provides for the institution of the agencies and bodies that administer andenforce the environment legal framework. Such bodies are the Ministry of Environment, Forests and Administration of Waters (hereafters “Ministry ofEnvironment”), Regional Environmental Agencies (hereafter, “REA”), the Environmental Inspectorate, units responsiblefor the environmental issues near the central and local authorities, as well as inter-ministerial organisms, approvedby the Council of Ministers, to follow on important environmental issues.

Albania has executed with the European Union the Agreement for Stabilization and Association, which also providesthe obligation of our country to approximate the national legislation with that of the European Union. In this regardthe Ministry of Environment and other bodies under its hierarchy in closed cooperation with local and internationalexperts have been working on drafting new legal and sub-legal acts on environment issues which comply withEuropean Union policies on the environment. Such new legal and sub-legal acts have also been developed incompliance with international conventions and treaties on environmental issues.

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8.2 Environmental permitsIn principle, the environmental permit is required with regard to the conduction of any kind of activity that isconsidered to have an impact on the environment.Environmental permits are divided into 3 categories depending on the activity that will be carried out:

a) for activities of category A – environmental permit of Type A;b) for activities of category B – environmental permit of Type B;c) for activities of category C – environmental permit of Type C.

The above mentioned categories for specific activities are foreseen by Law No. 10448, dated 9 July 2011 “Onthe environmental permit”.

The procedural aspects of environmental permits issued for production activities are mainly covered by LawNo.10081 of 2009 on licenses, authorizations and permit on the basis on the one – stop shop principle.

The environmental permits are issued by the National License Center, prior approval of the National EnvironmentalAgency and Minister of the Environment (for permits of type A and B) and of the Regional Environment Agency(for permits of type C).The Ministry of Environment, in case of activity in the territory of the Republic of Albania that has a badenvironmental impact on the territory of a neighboring state, should communicate the details and data of theenvironment permit to the Council of Ministers, following the necessary procedure.

The interested parties have the possibility to present an administrative claim against the actions or omissions ofthe competent authorities that issue the permits. The claim it is deposited at the National License Center.

LiabilityThe State Inspectorate for environmental permits of types A and B is the Regional Agency for the Environment andfor permits of type C are the competent authorities responsible for the control on the proper implementation of theenvironmental permit. In case of violation of Environmental Law, the authorities may impose fines, confiscation of equipment or materialscausing pollution or damaging the environment and even suspend or revoke, temporarily or permanently theenvironmental permit. On the other hand, in case of administrative contraventions and/or criminal violations, there shallalso be evaluated the damages caused to the environment by the infringing person who shall be liable for the paymentof the same.Some of the environmental violations represent criminal acts under the Albanian Criminal Code, ChapterIV (Article 201 - Polluting the Air; article 202 - Transporting Toxic Waste; article 203 - Polluting the Water; article 204- Prohibited Fishing; article 205 - Unlawfully Cutting Forests; article 206 - Cutting Decoration and Fruit trees; andarticle 207 - Breach of Quarantine for Plants and Animals).

Disclosure obligationsUnder Law No. 10431 “On Environmental Protection”, during the implementation of the activities, physical personsand legal entities are obliged to provide for informing the Regional Environmental Agency about the results ofself-monitoring for periods of not less than once in each three months and at any time for all accidents oremergency situations which have an adverse effect on the environment.

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8.3 Kyoto Protocol CDM (Clean Development Mechanism) The large energy potential of Albania has prompted the Albanian government over the years towards its valorizationin economic terms, aiming to attract foreign investments and technology, without neglecting the protection of habitatsand public health. In this respect, in October 1994 the Republic of Albania ratified the UN Framework Conventionon Climate Change (UNFCCC).

In December 2004 Albania also ratified the Kyoto Protocol through Law No.9334, dated December 16, 2004, witha double goal: aligning Albania to the international context but also opening the borders to the “flexible mechanisms”of the Kyoto Protocol and their ability to attract companies wishing to invest in the areas of renewable energy.

Thanks to a Memorandum of Understanding with the Italian Minister of the Environment, Territory and Sea Protection,since 2005 the Albanian Government has received the necessary technical and legislative support for theestablishment of the practices necessary to implement the flexible mechanisms of the Kyoto Protocol.

Among the flexible mechanisms, the most interesting proved to be the CDM (Clean Development Mechanism)pursuant to Article 12 of the Kyoto Protocol, which allows companies in industrialized countries with emissionconstraints to implement projects aimed at reducing gas emissions in countries which are not part of Annex I, suchas Albania. This mechanism on the one hand allows developing countries to use modern technology and build sustainabledevelopment and on the other hand permit the reduction of emissions where it is more economically convenient todo so. The emissions avoided by the implementation of projects generate emissions credits or CERs (CertifiedEmission Reduction) which can be used for compliance with the assigned reduction commitments.

The process works as follows:

› A private or a public body carries out a project in a developing country aimed at limiting greenhouse gas emissions(e.g. photovoltaic, wind turbines, construction and rehabilitation of hydroelectric plants, thermal power generationfacilities from renewable sources, biomass plants, energy efficiency through restructuring energy);› The difference between the amount of greenhouse gases emitted and what really would have been emittedwithout the project is considered as avoided emission and credited in the form of CERs (1CERs = 1 ton CO2equivalent); CERs Credits can then be sold and/or accumulated.

Investing in the areas of renewable energy and energy efficiency through a CDM project represents a goodopportunity for companies, also thanks to the possibility for these projects to obtain quality certification pursuant tointernational standards.

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9/Banking, financialsystem and insurance

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9.1 Legal framework and main banking groups operating in AlbaniaIn order to facilitate the transition to a market economy, the Albanian banking system underwent a major restructuringstarting from 1996.

The Albanian banking system includes banks and non-bank financial institutions, as regulated by law. On the otherhand, the Albanian financial system is regulated by the following laws: (i) Law on Albanian Financial SupervisoryAuthority (AFSA), (ii) Law on Insurance, (iii) Law on Securities, (iv) Law on enterprise acquisitions with public offer,(v) Law on Enterprise Obligations, (vi) Law on local government), (vii) Law on voluntary pension funds, and (viii)Lawon collective investments Two principal laws regulate the functioning and structure of the banking system today: (i) Law No. 8269 datedDecember 23rd,1997 “On the Bank of Albania” (as amended), regulates the powers of the Bank of Albania in orderto maintain a stable banking and financial system. and (ii) Law No. 9662 dated December 18th,2006 “On Banks inthe Republic of Albania (as amended) disciplines the second-tier banks, such as the so-called commercial banks thatprovide banking and financial services, which are subject to authorization and supervision by the Bank of Albania.These two Laws are implemented through the decisions, regulations, orders and directives issued by the Bank ofAlbania. Union Bank is the only bank operating in Albania with only Albanian shareholders. There are several internationalbanks working in Albania, such as Intesa Sanpaolo Bank, BKT, Raiffeisen Bank, Veneto Banka, Societè GeneraleAlbania Bank, Tirana Bank, ProCredit Bank, Credit Agricole, First Investment Bank, International Commercial Bankand Alpha Bank. Furthermore, since 1999 the Albanian Bank Association operates in Albania (www.aab.al).

From the point of view of investment banking, in Albania is also operative EBRD – European Bank for Reconstructionand Development.http://www.ebrd.com/country/country/albania/index.htm). EBRD is one of the most important investment institutions operating in Albania with particular reference to thedevelopment of private projects in the energy, infrastructure and transportation sector, as well as telecommunications,agriculture, tourism, financial and corporate. There are also several joint ventures between state owned and privateenterprises or institutions operating in Albania.Banking is currently one of the most developed sectors of economy in the country, as well as the negotiation of thetitles of public debt, as a sole active market title sector in Albania

9.2 Bank of Albania (BoA) As stated by article 161 of the Constitution, the Bank of Albania (BoA) is the Central Bank. The Constitution provides that the Bank of Albania has exclusive competence to issue and circulate the Albaniancurrency (ALL – Lekë), implement automatically the monetary policy and manage the Albanian reserve of foreigncurrency. These activities are provided by Law No.8269 “On the Bank of Albania” dated 27 December, 1997, asamended, which sets out its objectives, tasks, organization, ownership and financial transparency.The Bank of Albania is a state owned-bank and is accountable to the Parliament. However, according to Law n.8269/1997, the Bank of Albania is independent of the powers of the state, but reports regularly to the Parliamenton its activities. The Bank of Albania exerts its activity through its organs, such as: the Supervisory Board, theGovernor and the Deputy Governor and, moreover, its officers. It is supervised and governed by the SupervisoryCouncil, composed of 9 members appointed by the Parliament for a term of seven years and eligible forreappointment. The Supervisory Council is administered by the Governor, who also serves as its General ExecutiveDirector in charge of the day-to-day business of the Bank of Albania. The Bank of Albania has a General Inspectorappointed by the Parliament for a term of 5 years and eligible for reappointment. It is responsible for the accountingand financial statements of the Bank of Albania.

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The Bank of Albania has its main seat in Tirana, and also has 5 branches/districts in Shkodra, Elbasan, Gjirokastra,Korça and Lushnje.The primary objective of the Bank of Albania is to achieve and maintain price stability. The Bank of Albania, inaccordance with its primary objective and based on the domestic banking market, promotes and supports thedevelopment of foreign exchange regime and systems, domestic financial market, payment system and assists inimproving monetary and lending conditions, supporting the country’s economic stability and development. Anyother objective or task assigned to the Bank of Albania is conditioned by the achievement of the primary objective.

As part of its mandate to ensure a sound banking system, the Bank of Albania licenses, supervises and regulatesthe activity of commercial banks. In its capacity as regulator, the Bank of Albania designs rules on the establishmentand licensing of banks, based on Law No.9662/2006, and of nonbanks financial institutions. In its capacity assupervisor, the Bank of Albania examines and monitors the activity of commercial banks in order to ensure that theyare safe and act pursuant to laws and regulations into force.

According to Law No.9662/2006, commercial banks are incorporated as joint stock companies and their socialcapital can be both Albanian and foreign. Anyone intending to carry on a banking business must first obtain alicense authorization by the Bank of Albania. Subject to this requirement are also authorized banks of foreign law,which may open branches, agencies and other offices in Albania. This is the only legal form for the exercise of thebanking system.

The Bank of Albania establishes that the minimum value of the social capital for a Bank is approximately of Euro10 million.

Commercial banks are required to maintain both a current and a reserve account at the Bank of Albania. Theminimum amount of the reserve account shall be determined by the Bank of Albania, which examines time to timethe balance sheets of the commercial banks to confirm the adequacy of the reserves.

Non-bank financial institutionsThe non-bank financial institutions are financial institutions that are not defined as “banks” within the meaning of LawNo. 9662/2006, as amended, but that carry out financial activities.They are subject to a license and supervision procedure established by the Bank of Albania with Regulation “On thelicensing and enforcement of the activities of non-banks financial institutions”, adopted on January 17, 2013. ThisRegulation sets the conditions, requirements, terms, necessary documentation and procedures required by the Bankof Albania for:a) issue licenses for non-bank financial institutions or accomplish the activities defined by the Regulation, such as:

(i) financing of all types, (ii) factoring, (iii) finance leases, (iv) payments and money transfer services, (v) guarantees and commitments, (vi) foreign exchanges, (vii) advisory, intermediation and other financial services for all the activities referred to at (i) and (ii);

b) issue licenses for microcredit and electronic money institutions;c) issue preliminary approvals during their activity;d) obligation to inform the Bank of Albania during their activity;e) approval of the agents of non-bank financial subjects.

9.3 Albanian deposit insurance agencyThe Albanian Deposit Insurance Agency was established in October 2002 as part of the Albanian financial safetynet. Its main target is the protection and compensation of household deposits. The main roles of the Insurance

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Tonucci & Partners, Law firm - Business Guide Albania 2014

Deposit Agency are to: (i) protect depositors from an insolvent bank; (ii) make payments based on insured depositsup to a level set forth by and according to provisions of law; and (iii) achieve the stability of the financial system.Deposits in the commercial banks are insured by the Albanian Deposit Insurance Agency up to Euros 20.000.

9.4 Foreign exchange transactionsAny person in the Republic of Albania is entitled to buy or sell foreign currency in cash through a foreign exchangemarket operator without formal consents, permissions, licenses, authorizations, approvals or certificates. Therefore,any person in the Republic of Albania may freely convert foreign currencies into Lek – ALL (Albanian Currency) andvice-versa as well as one foreign currency into another foreign currency.

The exchange of foreign currency it is a financial activity that shall be authorized with a specific license and supervisedby the Bank of Albania. As by December 31, 2013, the Bank of Albania has issued more than 333 licenses forcurrency exchange offices.

As a general rule, no current account restrictions shall be imposed on the purchase, sale, holding or transfer offoreign currencies. However, the Bank of Albania is entitled to restrict temporarily the purchase, sale, holding, ortransfer of foreign currencies if, in the opinion of the Bank of Albania, the imposition of such restrictions is warrantedto protect the level of the exchange rates or its official reserves. These restrictions can only be introduced for a periodnot exceeding twelve months and can only be extended for another period of twelve months. The Bank of Albaniadefines by regulation the current account transactions; however such definition shall be consistent with anyinternational agreement approved by the Republic of Albania.

9.5 Albanian Financial Supervisory Authority (AFSA) The Albanian Financial Supervisory Authority (AFSA) established in 2006, is a public independent institution. AFSAis responsible for the regulation and supervision of non-banking financial system and the operators of the sector. TheAFSA reports to the Albanian Parliament. AFSA’s primary goals are the protection of consumers’ interests, promotionof sustainability, transparency and reliability in insurance area, securities and private supplementary pensions’ area.

The main areas of AFSA’s activity are regulation and supervision of insurance market and its operators, of securitiesmarket and its operators, of private supplementary pensions market and its operators and of other non-bankingfinancial activities.

9.5.1. Insurance MarketThe Insurance Market is the area that it is mostly regulated and supervised by AFSA.There are at date nine active companies in the general insurance market in Albania and three offer only lifeinsurance. Insurance companies offering no life insurance are: Insig (state owned company), Sigma ViennaInsurance (Albanian and foreign share capital), Sigal - Uniqa Group Austria (Albanian and foreign share capital),Atlantik (Albanian share capital), InterSig – Vienna Insurance Group (Albanian and foreign share capital),InterAlbanian (Albanian and foreign share capital), Ansig (Albanian share capital) and Eurosig (Albanian and foreignshare capital) and Albsig (Albanian share capital). The three companies offering life insurance are: Insig, Sicred(Albanian share capital) and Sigal-Life - Uniqa Group Austria (Albanian and foreign share capital), The insurance market is expanding and attracting foreign investments. Insurance supervision and regulations arealso improving. An amendment of the insurance law was adopted in early 2007 and increased the guarantee fund

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for insurance companies.The Albanian insurance market opened up to private investments in 1996. Previously, a state-owned insuranceinstitute monopolized this market. Under Law No.9267 dated 29 April, 2004 “On Insurance and ReinsuranceActivity”, foreign and domestic insurance and reinsurance companies may establish operations in Albania. Law No.9267 allows a variety of insurance activities, ranging from property to life insurance. The only specific exclusionscontained in the law address social security, health and areas covered by special laws.In order to insure property in Albania such property must be physically present in Albania. Direct insurance fromabroad is prohibited unless it involves maritime transportation, air transportation or has been specifically authorizedby the Minister of Finance. All Albanian insurance companies shall be established in the form of joint stock companies and foreign insurancecompanies shall establish a branch in Albania. In order to engage in insurance activity in Albania a company mustfirst obtain approval from the competent authority.

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10/ Tax system

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10.1 Legal framework – the albanian tax systemSince 1995, following the process of opening and liberalization of the market, the Albanian Government,supported by the IMF, the European Union, the US Treasury Department and others, has adopted a series of taxlaws.

Currently, the legal framework regulating the tax system in Albania is based on: › Law No.9975, dated 28 July 2008 “On the national taxes”, and subsequent amendments; › Law No.9632, dated 30 October 2006 “On the local tax system” and subsequent amendments;› Law No.8438, dated 28 December 1998 “On the income tax in the Republic of Albania” and its subsequentamendments; › Law No.7928, dated 27 April 1995 “On the value added tax” and starting from 01.01.2015 it will beabrogated by the Law No. 92/2014 dated 24 July 2014 “On the value added tax in the Republic of Albania”; › Law No.61, dated 24 May 2012 “On the excise tax”; and› Law No.9920, dated 19 May 2008 “On the tax procedures in the Republic of Albania”.

Decision of the Council of Ministers No. 55, dated 3 February 2010 “On obligatory electronic declarations of thetax documents and other documents related to taxes”, as per its name, governs the obligation to file electronictax declarations.

10.2 Income tax of legal persons Law No.8438, dated 28 December 1998 “On the income tax in the Republic of Albania” and its subsequentamendments (“Law 8438”), which came into force on 21 January 1999, has substantially changed the tax system.Law 8438 governs direct taxes on natural and legal persons.

Liable to the income tax are: companies, corporate groups, consortiums and institutions; Albanians and foreignerswho conduct a business in Albania - all those that are subject to value added tax payment (“legal persons”),except those who are subjects to the simplified tax for small businesses, as provided by 10.3 as it follows.

Law No. 8438 establishes a criteria of territoriality: all sources of income are taxable, even if perceived abroad.Subject to income tax are legal persons having their headquarters (residence) in Albania, as well as legal personsnot resident in Albania but still having sources of income produced in Albania. A legal person is considered asresident in the case it has a registered office or place in Albania where it has the effective management of itsaffairs.

From 1 January 2014 the tax rate on income is equal to 15%, except what is provided by 10.3 as it follows“Small Entrepreneurship taxation”

The tax base is determined by the annual balance sheet and accounting records in accordance with accountingrules in force. The fiscal year of reference starts on January 1st and ends on December 31st of each year.

Law 8438 introduced an analytical list of non deductible expenses. Non deductible expenses include amongothers: the costs inherent to the acquisition, improvement, renovation and reconstruction of depreciable assets;the payments for voluntary social security contributions; capital increases; corporate dividends; interest on loansthat exceed the average rate declared by the Bank of Albania; representation expenses that do not exceed 0.3%of the annual turnover; sponsorships that exceed 3% of income before tax, and books sponsorships that exceed5% of untaxed income; personal items, gifts, fines; arrear interests and penalties; salary and any other form of

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compensation related to employment, payment of which is not made through the banking system; and any otherexpense that is not documented.

Based on Law No. 10364, dated 16 December 2010, dividends and profits distributed by companies which arenot-resident and not subject to the income tax will be considered excluded from the taxable profit of the companyresident in Albania, beneficiary of the aforementioned distribution of dividends or profits..

Tax authorities have discretionary powers to redefine the tax to be paid (in advance) if they believe the current year’sprofits are higher by at least 10% over the period of reference.

10.3 Small entrepreneurship taxationFrom January 1, 2014, was reintroduced the simplified profit tax applicable to small entrepreneurs / smallbusinesses (natural or legal persons) that have a gross annual turnover (for the previous fiscal year) less than ALL8 million (equivalent to approximately € 57,100) in accordance with Law 8438.

Under the new amendments, the small entrepreneurs/ businesses having an annual turnover from:(i) less than ALL 2 million shall be subject to a fixed tax of ALL 25,000 per year (equivalent to approximately Euro178).(ii) from ALL 2 million up to ALL 8 million (equivalent to approximately Euro 57,100) are subject to a reduced taxrate of 7.5%.

The tax as of (i) must be paid within the first half of every year.The tax as of (ii) must be paid in four installments: (1) first installment at the time of registration or renewal of the certificate of registration by April 20; (2) secondinstallment by July 20, (3) third installment by October 20, and (4) fourth installment by January 20 of the followingyear.

For the determination of the taxable income, in Albania expenses undertaken for the preservation and guaranteeingof the profit of the business are considered as deductible, to the extent that such expenses are proved by thetaxpayer. Law provides also a detailed list of deductible expenses in order to determine the deductible income.

10.4 Taxation of individuals The new rules dictated by Law 8438 substantially modified the regime applicable to personal income. The followingare required to pay tax on their entire income: residents and people treated as residents. Non-residents are subjectto tax only on the income produced in Albania.

According to Law 8438 the tax is calculated separately for each category of income. Law No.177, dated 28 December 2013 provides for a progressive tax for wages, salaries and other benefitsresulting from annual reports of work:

Reddito da lavoro (mensile) Aliquota

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Monthly taxable income Tax rate(in ALL)

From Up to

0 30,000 0

30.001 130.000 13% over ALL 30.000

130.001 and over ALL 13.000 +23% over ALL 130.000

On other income subject to taxation, for which there are no specific law provisions, the 10% flat tax rate applies.

Individual income declarationPursuant to the recent Law no.20, dated 1 March 2012, amending the previous law No. 8438, taxpayers,resident individuals in Albania, which realize taxable income in Albania and abroad for a total value of more than2 million ALL have an obligation to present the annual income declaration to the central tax administration officeno later than 30 April of the following year of expertise. This declaration must also be presented by non-residenttaxpayers who have produced income taxed in Albania.

10.5 Value Added Tax (V.A.T.) The introduction of VAT was approved by the Albanian Parliament in April 1995 as Law No.7928, dated April27th, 1995 “On value added tax”, entered into force on July 1, 1996 and has been amended by subsequentlegislation. Starting from 1 January 2015 it will enter into force the Law no. 92/2014 dated 24 July 2014 “Onthe value added tax in the Republic of Albania”, which abrogates the Law no.7928, dated 27 April 1995 “Onvalue added tax”.

Actually the Law 7928 establishes two fundamental spatial criteria for the payment of value added tax. Such taxshall apply to: (i) The supply of goods and services by a person who carries on business activities in the territory of the Republicof Albania; and (ii) The imports of goods into the territory of the Republic of Albania.

All legal and natural persons performing taxable supplies that have an annual turnover exceeding ALL 5,000,000(equal to approximately Euro 35,700) are subject to pay VAT. Taxpayers are required to register within the first15 days of the start of the economic activity. Natural persons and legal entities operating in the import/exportindustry are required to register regardless of the amount of their annual turnover. A special office dedicated toVAT registration operates in each District Tax Office.

According to the Decision of the Council of Ministers no. 18 dated 12 January 2011, entered into force 1February 2011 natural persons or legal entities which exercise liberal professions (as defined by law) such as:lawyer, notary, doctor, dentist, pharmacist, nurse, midwife, veterinary surgeon, architect, engineer, laboratorydoctor, programmer, economist, agronomist, auditor, accountant, real estate appraiser etc, are always subjectto VAT, no matter their annual turnover.

The VAT rate is 20%. The taxable amount is the value of goods and services provided, excluding VAT. The taxable amount of imported

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goods includes costs of transport and insurance, import costs, taxes, and duties or tariffs.

Law 7928 provides that VAT is equal to 0% in some cases, including: (i) Exports of goods outside the Albanian territory; (ii) Provision of goods or services relating to international carriage of persons or property;(iii) Provision of goods or services relating to commercial or industrial shipping.

By decision of the Council of Ministers No.180, dated 13 February 2013, certain VAT exemptions of importsrelative to machinery and equipment have been disciplined. The Decision sets a detailed procedure for eachbeneficiary tax payers category. Other exemptions have been provided with respect to the supply of iron andcement for the construction of hydro-power installments, according to the Decision of the Council of Ministers no.178 dated 13 February 2013.In addition, from 31 January 2013, taxpayers whose principal activity is the bricks and tiles manufacturing, ad wellin the transport of goods by technological means, are now authorized to obtain the tax credit for the purchase offuel used wholly and exclusively for their activities within a predetermined limit in relation to the their annual turnover.

According to Law no.182, dated 28 December 2013 (" Law No. 182”), with effect from 1 April 2014, theoperations of the supply of medicines and medical services carried out by both public and private health institutionsare exempt from VAT payment.The same procedure also applies to the provision of services relating to the construction phase of explorationoperations in the hydrocarbon sector, whereas provisions of services related to the exploitation phase is no longerconsidered a transaction exempt from VAT payment.

Under certain circumstances, the fiscal authorities may make a discrete assessment of the VAT payable amountsand give written notice to the taxpayer. A taxpayer wishing to contest the amount of such obligations shall, in anycase, first pay the disputed amounts and only then, within 30 days from the date of receipt of the notice, presenta complaint before the Taxes General Directorate.

The latter, through written replay, will inform the claimant about the acceptance or rejection of the claim. Law 7928grants to taxpayers that export goods the right to request a VAT refund in case of a credit higher than ALL 400,000(approximately USD 3,960) for three consecutive months. The tax credit will be repaid by public authorities within30 days of the taxpayer’s request. In addition, it should be noted that Law No. 182 has introduced a significant provision in relation to the VAT taxrefund as a credit: within sixty days from the request of the taxpayer, the Regional Directorate of Taxes shallconsider and approve the tax credit that must be repaid to the taxpayer by the Treasury Department.

Starting from 1 January 2015 it will enter into force the Law No. 92/2014 dated 24 July 2014 “On the value addedtax in the Republic of Albania”, which abrogates the Law No.7928, dated 27 April 1995 “On value added tax”.

The new Law on VAT is conform to the European Parliament and Council Directive 2006/112/CE dated 28November 2006 “On the common system of value added tax”, which provides and guarantees to the economicoperators clearer and detailed rules compared to the previous legislation.

10.6 Excise taxLegislation on excise duties was also entirely repealed and replaced by Law No.61/2012 “The Excises”.

Excise duties apply to a limited number of products for mass consumption, in particular tobacco and its derivatives,

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petroleum, alcoholic beverages, soft drinks and coffee, as well as perfumes and deodorants.

Law No. 180/2013 has furthermore increased the excise on some products, among which:tobacco and tobacco products, the applicable rate varies from ALL 2,500/kg to 5,100/kg; for alcoholic beveragesand liqueurs the excise duty varies from ALL 360/liter to 84,500/liter.

10.7 Other taxes Because of economic policy choices and distribution of revenues from the collection of taxes and charges to boththe central and local governments, in the Albanian tax system a distinction is made between taxes applicable atthe national and local level. In recent times, the fiscal policy has been characterized by a particular focus on decentralization, with a particularstrategic importance to the development of local economies.

10.8 National taxesThe recent Law No.9975, dated 28 July 2008 “On national taxes” determines the taxes applicable at national leveland regulates their collection. National taxes include:(i) Port taxes;(ii) The annual fee movement of vehicles;(iii) The environmental tax, which consists of:

(a) Import duty on vehicles used;(b) Carbon tax on gasoline, benzene and diesel;(c) Tax on plastic bags for liquids produced locally or imported;

(iv) Taxes and mining royalties;(v) Tax on transactions and stamp duty;(vi) Fees for registration of gambling, national lotteries, sports betting, casino and equestrian events; and(vii) All taxes on fishing.

10.9 Local taxes and feeLaw No. 9632 “On the local tax” of 2006, as recently amended by Law No. 10146 of 28 September 2009,regulates the tax payable to the local tax authorities. Pursuant to and for the purposes of the above mentioned Law. No.9632, are considered as local taxes: thesimplified profit tax on small businesses , the tax on real estate (buildings and agricultural land) hotels tax (5% onthe price of overnight stay paid by the costumer within the fifth of each month), the tax infrastructure for newconstructions (the rate is from 1% to 3% of the value of the investment, for the Municipality of Tirana is from 2%to 4% payable by the investor for infrastructure projects as roads, ports, airports, tunnels, dams, energy, 0.1% ofthe investment value, 0.5% of investment value for the buildings in the process of building amnesty), the tax onthe transfer of ownership of real estate, fee for public spaces use ( monthly fee calculated on the basis of theoccupied area), advertising sanitation, and other so-called taxes temporary

The tax on buildings is calculated based on the surface of buildings and is due every year. It varies depending onthe district where the building is situated. For example, the districts of Tirana and Durres apply the following taxes: (i) buildings for commercial use ALL 400 per m2;(ii) residential property ALL 15 to 30 per m2;

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TAX SYSTEM

(iii) owned building set in territories recognized as touristic villages ALL 400/M2(iv) other property ALL 100 per m2.The building tax is lower in other districts.In addition, Law No. 181/2013, dated 28 December 2013 introduced another important fee. Taxpayers who areowners of multiple residences are charged for the first home: the ordinary tax on buildings above; while for allother houses owned by them: twice the above fee.

The tax on agricultural land is calculated based on the land held by the owner, is due every year and variesdepending on the category of land and its location. The districts of Tirana and Durres apply a fee varying from ALL 1,800 to 5,600 per hectare.

The tax on the transfers of real property is payable by the seller of the property and is a necessary condition forproceeding with the registration of the property with the Real Estate Registration Office. The tax is calculated according to the surface of the property that is being transferred. For example, the tax forbuildings that are used for commercial purposes, based in Tirana, amounts to 2,000 ALL/m2. The tax for landtransfer or other real property, not buildings, is equal to 2% of the sale price. This tax is generally equal to 2% ofthe selling price.

Individuals who are subject to the payment of personal income tax are exempted From the payment of this tax.

10.10 Social security contributionsAccording to Law No.7703, dated 11 May 1993 “On social security of the Republic of Albania”, as amended, andLaw No.10383, dated 24 February 2011 “On the mandatory health insurance in the Republic of Albania”, asamended, employers and employees are required to pay mandatory contributions to social security and health care. Mandatory contributions cover the following risks and/or the following situations: temporary inability to work due toillness, maternity leave, senior age, accidents at work and occupational diseases, unemployment. The basis of thecontribution is constituted by the minimum and maximum monthly salary established by decision of the Council ofMinisters (Decision No.1114, dated 30 July 2008, as amended), that is reviewed yearly. For the purposes of calculating social security contributions, the minimum monthly wage is set at ALL 19,406 andthe maximum monthly salary is set at ALL 97,0 30.For the purposes of calculating health insurance contributions, starting from 1 January 2014, the monthly salary ofthe taxpayer will be considered, and in any case it shall not be lower than ALL 19.406. Under the law in force, employers must pay monthly (except small firms which pay quarterly) to the Institute of SocialSecurity for each employee a contribution equal to 27.9% of the salary received by the employee. Of this rate, 16.7%is borne by the employer and 11.2% is borne by the employee. The amount of contributions due by the employeeare withheld from his salary and paid by the employer.

10.11 International agreements on double taxtationCurrently there are39 agreements against double taxation in force between Albania and other countries,including: Austria, Belgium, Bulgaria, China, Croatia, France, Greece, Italy, Malaysia, Moldova, Montenegro,Norway, Poland, Serbia, Turkey, United Kingdom, Romania, Russia, Hungary, Spain, Switzerland etc. The agreement with Italy has been in force since 1 January 2000.

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10.12 Accounting, budget and audit controlLaw No. 9228, dated 24 April 2004 “On the accounting and budget”, as amended represents the main legislativeframework on the matter.

According to Law 9228 all economic and non economic entities (e.g. NGOs) established in Albania, includingcredit and financial institutions and their subsidiaries, irrespective of their legal form, are required to keep accountsin accordance with the principles and methods set by the National Accounting Council. Micro-enterprises areexplicitly excluded.

Accounting records are written in Albanian in paper or electronic form with the applicable currency being ALL.They must be justified by supporting documentation, which will be preserved along with the accounting recordsfor 10 years after the closure of the financial year.

Law 9228 also provides the obligation to conduct an inventory of assets, liabilities and own capital, at least oncea year.The fiscal year is 12 months, starting 1 January and ending 31 December of every year.

According to Law No. 9901, dated 14 April 2008 “On entrepreneurs and commercial companies”, it is the soleresponsibility of companies to submit their accounting records and documentation for auditing.

According to Law 10091/2009 the following are obliged to statutory audit of their annual financial statements(balance sheets) before they are published, by experts of auditors:(a) all commercial companies, regardless their legal status, which are subject and implement international

accounting standards;(b) all joint stock companies which are subject and implement national accounting standards;(c) all limited liability companies which are subject and implement national accounting standards of their financial

statements, in cases where, during the fiscal year, they have reached or exceeded two of the three indicators listed below:› the total amount of assets which result from the balance sheet at the end of the relevant accounting period,has reached or exceeded ALL 40 million;› the amount of income that results from business transactions during the relevant accounting period, has reached or exceeded ALL 30 million;› to have, on average, 30 employees during the relevant accounting period.

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11.1 PreambleAlbania’s population of just 2.8 million people includes a working population of slightly more than two million. Themedian age is young by European standards: just 31.2 years.

A high proportion of the under 40s speak two languages. Foreign language training begins early in elementaryeducation and continues through high school and university. Albanian youth is generally skilled in Italian and Greekthanks to the influence and vicinity of both countries. Italian and English are common among the youngergeneration and have become the dominant foreign languages taught in the Albanian education system.

11.2 Legal frameworkRelations between employees and employers are regulated by individual employment agreements pursuant to LawNo.7961, dated 12 July 1995 “The Labor Code”, and updated in March 1996, July 2003 and December 2008. It isalso reported Law No.7703 dated 11 May 1993 “On Social Insurance in the Republic of Albania”, as amended, andother regulations also apply. A National Labor Council has been established, composed of government officials and representatives of tradeunions and employers associations. A draft proposing a Social Understanding Pact, whose major goal is to improvesocial dialogue between the government, management and employees, has also been prepared.

Albania adheres to all basic international labor organization conventions protecting the rights of employees

11.3 Types of employment agreementsEmployment agreements can be executed for a definite or indefinite period of time. As a general rule, employmentagreements are signed for an indefinite period of time, and will be considered as such if the duration is notspecified properly in the agreement. An employment agreement may be concluded verbally or in writing.

An employee may perform overtime work but it must not exceed 40 hours per week. Compensation of overtimework is normal payment plus 25% of the salary applicable for normal working hours during normal working days.For overtime work performed during public holidays or weekends, it is the normal payment plus 50%.

According to Article 12 of the Albanian Labor Code, an employment agreement is an agreement between anemployer and an employee which regulates their mutual relations and sets their mutual rights and obligations..

Albanian Labor Code recognizes:› Collective employment agreements, which are agreements entered into between an employer and a group ofemployees as a whole, even if the former is considered to be separately engaged towards every employee; › Part-time employment agreements, which are standard part-time agreements internationally used: the employeeworks a certain amount of hours or days but in any case less than the normal working schedule of the otheremployees who work full time and under the same terms. The part time employee enjoy the same rights,proportionally, as the other full-time employees;› Home working employment agreements. According to such agreements the employee works from home or fromanother place accepted by the employer, alone or with the help of his/her family. The employee working fromhome has the same rights as the employee working in the employer’s premises;› Commercial agent employment agreements. According to such agreements the commercial agent (employee)has the obligation to negotiate or conclude an agreement outside of the company premises on behalf andaccording to the instructions of the employer. Such agreement presupposes a subordination relationship

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between the commercial agent (employee) and the employer, therefore, a person who performs this activityindependently is not considered to be a commercial agent under the Albanian Labor Code› Professional training employment agreements. According to such agreements a master helps an apprenticeto qualify according to professional rules and the apprentice works for the master in order to so qualify.

11.4 Probationary periodIn case of individual employment agreements for an indefinite period of time, the first three months of work areconsidered as probationary period. A probationary period may not be imposed in cases where the parties haveentered into an agreement to perform the same work previously. During the probationary period any of the partiesmay terminate the agreement upon at least five days prior written notice.

11.5 Termination of the employment agreement After the probationary period, if an employer decides to dismiss an employee:1) the former must notify the employee in writing at least 72 hours before inviting him to a meeting;2) This meeting must be held to permit to the employer to discuss with the employee the reasons of the termination

and to give the employee the possibility to express his/her opinion;3) A written notice of termination is submitted to the employee within 48 hours to one week after this meeting,

should the employer’s position not change during this procedure, the employer may suspend the employee. Inthis case, parties retain all rights and obligations arising from the employment agreement.

In the case of one party terminating the agreement without respecting the notice period, the termination will beconsidered as a termination with immediate effect, which entails certain penalties set forth in the law. The noticeperiod is suspended during illness or pregnancy.In any event, the notice of termination which shall be sent to the employee as per the above procedure, must be issuedat least one month in advance from the termination date during the first year of work, two months in advance duringthe second to fifth year of work and three months in advance after more than 5 years of work. The parties may agreein writing upon a different notice period, provided that it cannot be less than two weeks for the first six months of workand not less than one month if the employee has worked for more than six months.

Agreements for a definite period of time terminate at the end of their term, without any preliminary notification needed.If the employment relation continues tacitly, the agreement is considered as extended for an indefinite duration andtherefore becomes an agreement for an indefinite term. According to the Albanian Labor law, after a maximum of threeyears of uninterrupted agreements for definite period, the employer’s refusal to renew the agreement is consideredas termination of an agreement for indefinite period.

› Employers and employees may, at any time, terminate the employment agreement immediately for just cause. An employer may dismiss an employee for just cause only if the employee acted in a grossly negligent manner, especially when he repeatedly violated the applicable rules and instructions in spite of warnings by the employer. Procedures determined by the Albanian Labor Code apply.

› Albanian competent courts shall decide whether a cause existed to terminate an employment agreement. In case an employer terminates an employment agreement without just cause, the employee has the right to file a lawsuit with the competent court against the employer within 180 days from the date the notice period for termination has expired. The employer who has terminated the employment agreement without a just cause can be condemned by the court to indemnify the employee with up to one year salary plus the salary that the employeeshould have received during the notice period.

EMPLOYMENT & LABOUR LAW

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11.6 Trade unions and collective agreements Collective labor law provisions concern the tripartite relationship between employer, employee and trade unions. Theright of employees to form trade unions is explicitly provided by both the Labor Code and the 1998 AlbanianConstitution. The Constitution and Labor Code guarantee as well the right of strike. Trade union members includeemployees, pensioners and unemployed persons. A trade union shall at least have twenty members in order to beestablished and considered valid as such. Trade unions can be organized in federations and confederations. Thebylaws of trade unions shall be deposited at the Ministry of Labor, Social Affairs and Equal Opportunities.

Collective agreements are entered into between one or more employers on the one hand and one or more tradeunions on the other hand. The employees who represent the union shall be elected by a majority of employees. Once signed, the collectiveagreement binds all employees regardless of whether they are or are not members of the trade union. In case ofbusiness transfer by the employer, the transferee is bound by the collective agreement for its duration. When adispute arises, both the employer and the employee have the right to bring the matter to a Reconciliation Office orto the competent court. The Reconciliation Office is a special institution focusing on alternative dispute resolution.

11.7 Employment tax and social insuranceThe 1998 Constitution expressly provides that every citizen has the right to social insurance during senior age,when he/she is unable to work or is unemployed because of reasons independent of his/her will.

The Labor Code reaffirms employer’s general duty to withhold both individual income taxes and social and healthinsurance contributions. However, the specific withholding requirements are defined in various laws, whichestablish in detail the taxes and contributions of social insurance. The taxes and contributions shall all be reportedand paid on a monthly basis.

According to Law No.7703, dated 11 May, 1993 “On Social Security in the Republic of Albania” and Law No.7870,dated 13 October, 1994 “On Health Security in the Republic of Albania”, as amended, employers and employeesare required to make mandatory contributions to social and health care security system.

The minimum wage is set forth periodically by decision of the Council of Ministers No.457, dated 9 June 2014.The current level of minimum wage is ALL 19.406 per month for 174 working hours.

The minimum wage for employees who have an employment contract at national level is ALL 22.000 (as statedby art. 111 of the Labor Code and Decision No. 573, dated 3 July 2013.The minimum reference salary thresholds applicable to the private sector, which are used to calculate the rate ofcontributions for social and health insurance irrespectively of the actual salary received by employees is ALL19.406. This regulation is aimed at countering the under-reporting of revenues by businesses. The remuneration,received by the employee in accordance with the contract of employment, is not taken into consideration for thepayment of contributions only when the salary is higher than the maximum salary of reference, equal to ALL 97,030.By Decision of the Council of Ministers No. 478, dated 16 June 2010 "For termination of the employment bypublic institutions, after reaching the retirement age" the termination of the employment by the public institutionsis considered to be mandatory and immediate when the retirement age is reached, giving the benefit of being ableto enjoy the retirement period with reference to the law in force for social security.

Law No.10237, dated 18 February 2010 “On health and safety in the working place”, introduced an obligatoryinsurance against harms and damages occurring during working hours. The Decision of the Council of MinistersNo.1012 dated 10 December 2010, on the approval of the Regulation "On the signs on construction sites and in

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the workplace" aims to determine and define indispensable rules for signs on construction sites, for the protectionof the safety and health of workers, while the execution of public and private activities.

The law has been approved with a faster procedure in order to adapt the country to EU standards. For furtherinformation concerning employment tax, please refer to Chapter 10.

By Decision of the Council of Ministers No. 353 dated 24 April 2013 incentives have been provided for employerswho hire young people, graduates, graduates etc. from 16 to 30 years of age. These advantages consist inobtaining monthly financing for three years to the extent of 100% of contributions to social security and health care,provided that the contract lasts for a period of 6 years without interruption. Currently these measures are notapplicable as the implementing acts pursuant to the Decision of the Council of Ministers should be still adopted.

11.8 Foreign workers in AlbaniaAccording to the new Law No.108 dated 28 March, 2013 “On Foreigners”, foreign workers and entrepreneurs whointend to operate in Albania should hold both a residence permit and a work permit, issued by the competentauthorities.

Law On Foreigners have been drafted in compliance to the EU legislation..

Foreign citizens who exercise their activity in Albania, such as entrepreneurs, employers, employees, consultantsand professionals, shall hold a work permit. The work permits are issued to foreign citizens by local authorities.The law provides for a fine to be levied against foreign citizens who reside or work in the Republic of Albaniawithout permissions.To obtain a residence permit a number of documents are required, the work permit being the most important.Other documents may be mandatory in specific cases, including in between others: authorization to conducthumanitarian or religious activities, documentation proving the status of refugee, family status certificatedemonstrating the relationship with an Albanian citizen or documentation proving the status of foreign student inAlbania. Based on art.71 of the Law on Foreigners, citizens of the European Union and of the Shenghen area are exemptedfrom the obligation to obtain a working permit to work in Albania or to operate in Albania as entrepreneurs. EUcitizens have the same rights as Albanian citizens.

EMPLOYMENT & LABOUR LAW

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Intellectual andindustrial property

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12.1 Legal framework The intellectual property statutory legislation in the Republic of Albania is mainly represented by Law No.9947, dated27 April 2008 “On Industrial Property” (“Law on Industrial Property”) and Law No.9380, dated 28 April 2005 “OnCopyright and Related Rights” (“Law on Copyright”).

In addition, Albania has adhered to a series of international conventions and treaties providing on the protection ofcopyright and related rights as well as industrial property rights that enhance the legal protection of intellectualproperty. Such protection has been significantly increased by way of a persistent work of the public authorities incharge of the protection of intellectual property rights, namely the Albanian State Copyright Office (ASCO) and theAlbanian Patent and Trademark Directorate (ALPTO).

Regarding the latest legislative developments, Albania has adopted a new law on audiovisual transmissions – LawNo. 97, dated 4 March 2013 “The media in the Republic of Albania” expressly provides that the obligations ofbroadcasters to operate in compliance with the regulations on copyright.

12.2 Law on copyright The Law on Copyright protects: written works, including computer programs; lectures, addresses, sermons andother orally expressed works; musical works with or without accompanying text; dramatic or dramatic-musical works;audiovisual works; choreographic works and pantomimes; works of fine arts: drawings, paintings, sculptures,engravings and lithography; architectonic works; photographic works; works of applied art; illustrations, maps, plans,sketches and three-dimensional works related to geography, topography, architecture and science, as well asunregistered designs and textile models.Generally, the moral rights of a work are protected forever and the economic rights for the author's life plus 70 yearsafter his/her death. For anonymous or pseudonymous works, rights are protected for 70 years from the first day ofthe first legal publication of the work, unless the true author is identified, when the general term is applied.Photographic or audiovisual work of joint authorship is protected for 70 years from the day the work is legally offeredto the public or, if it was never made public, for 70 years from the day of the production of the work, i.e. 70 years afterits creation.

12.3 Free useCopyright is free from payment and author’s authorization in the following areas: (a) reproduction for personaluse; (b) reproduction in the form of citation; (c) use for teaching purposes; (d) reproduction within libraries andarchives for strictly related services; (e) reproduction for judicial and administrative use up to the extent requiredfor that purpose and quoting the source of the work and its author’s name; (f) use for the purpose of providinginformation to the public.

12.4 Copyright officeThe ASCO is currently operational and works closely with local associations of collective administration such asALBAUTOR, which protects music copyrights, and the Foundation for the Protection of Audiovisual Works (FPAA),which protects the copyrights of audiovisual works. In 2006, the National Council of Radio and Television (NCRT)signed a memorandum of understanding with the National Cinematography Centre (NCC) aimed at fighting piracyand observing international copyright law.

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12.5 Law on industrial propertyThe Law on Industrial Property protects inventions and utility models, trademarks and marks of services, industrialdesigns and appellations of origin. The inventions are protected via the patents and the utility models issued bythe ALPTO. Industrial designs, trademarks and marks of services and geographical indications are protectedthrough the registration with ALPTO. The protection granted by ALPTO for industrial designs does not exemptother rights provided by law and especially the rights granted by the Law on Copyright and other related rights.With Law No. 10, dated February 14, 2013, amending Law No. 9947, dated April 27, 2008 “On IndustrialProperty”, stricter sanctions have been disposed for violations in this area.

12.6 Industrial property officeALPTO has devoted significant efforts in enhancing the protection of industrial property rights in Albania. This hasculminated in the approval by the Albanian Parliament of the Law on Industrial Property which has considerablycontributed to the approximation of the Albanian industrial property legislation with the acquis communautaire.The ALPTO has been restructured and registration and administration of patents, trademarks and industrial designshas been computerized. This has improved the processing of applications and supply of any relevant information.

The legal framework is enhanced by an institutional structure composed of the Ministry of Culture and Tourism,the Ministry of Ministry of Energy and Industry, the Ministry of Finance, the Ministry of Justice, the GeneralDirectorate of Customs, the Ministry of Education and Science, the National Council of Radio and Television, andcourts and prosecutors office throughout the country. The competencies granted by law to these institutions areof administrative, judicial and legislative nature.

12.7 International agreement in the domain of intellectual property Albania is a signatory, among others, of the following international agreements on intellectual property rights:› Convention implementing the World Intellectual Property Organization (WIPO), member since June 1992; › Paris Convention on Protection of Industrial Property, member since October 1995; › Berne Convention on Literary and Artistic Works, member since March 1994; › Patent Cooperation Treaty, member since October 1995; › Madrid Agreement on International Registration of Marks, member since October 1995; › Rome Convention (Performers, Producers of Phonograms and Broadcasting Organizations), member since February 2000; › WIPO Performances and Phonograms Treaty (WPPT), member since February 2001; › WIPO Convention on Copyright Law, member since December 2001; › Madrid Protocol (International Registration of Marks), member since July 2003; › Budapest Treaty on Biodiversity, member since September 2003; › Budapest Treaty on International Recognition of the Deposit of Microorganisms for purposes of Patent procedure, member since September 2003; › Convention on Protection of phonogram producers against their unauthorized reproduction, member since March 2000; › Nice Agreement concerning the International Classification of Goods and Services for the purposes of the Registration of Marks, member since September 2003; › International Convention for Protection of new Varieties of Plants, member since May 2005; › Hague Agreement (International Deposit of Industrial Designs), member since March 2007; › Strasbourg Agreement (International Patent Classification), member since July 2007;

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› European Patent Convention, member since October 2009; and› Treaty on the Law of Patents, member since October 2009.

Albanian law protects copyrights, patents, trademarks, stamps, marks of origin, and industrial designs. Enforcement of property rights in Albania remains an evolving issue. IN

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13/ Personal dataprotection

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Protection of personal data in Albania is regulated by Law no.9887 “On the protection of personal data”, dated 10March 2008.

Personal data include any information on a natural person that is identified or identifiable. Elements through whichsuch person can be identified, directly or indirectly, are identity numbers or natural, psychological, economical, social,cultural or other factors. Lawful processing of personal data should respect and guarantee fundamental rights andfreedoms and in particular the right to the protection of privacy.

Personal data are processed only: (i) if the person to whom the personal data refer has given its approval; (ii) fordrafting and compiling agreements where the relevant person is a contracting party; (iii) to protect vital interests ofsuch person; (iv) to perform a legal obligation of the data controller; (v) to perform a legal obligation of public interestor a duty of the data controller or a third party, whose data are disseminated; (vi) to pursue the legitimate interest ofthe data controller or a third party, whose data are disseminated, but not when on these interests prevail the interestsfor protection of data, rights and fundamental freedoms of the person to whom the personal data refer.

Processing of personal data in the context of prevention and prosecution of criminal offences, including perpetrationof a criminal offence against the public order or other criminal offences, and national security and defense is carriedout by public authorities as prescribed by law.

The law prohibits the processing of data that reveal racial or ethnic origins, political views, membership in tradeunions, religious or other beliefs, convictions for criminal offenses, and information on the health or sexual life of aperson. Processing of these sensitive data is permitted in very specific cases listed in details by the law. Strictobligations apply to data controllers and data processors under penalty of strong administrative sanctions.

Processing of personal and sensitive data in specific sectors is disciplined by specific Decisions of the Controller.

PERSONAL DATA

PROTECTIO

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NON-PROFIT O

RGANIZATIO

NS (NPO–OJF) A

ND FO

UNDATIO

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Tonucci & Partners, Law firm - Business Guide Albania 2014

Non-profit organizations in Albania are governed by Law no.8788 “On Non-Profit Organizations”, dated May 7th,2001. This law defines as non-profit organization every association, foundation and center which performs anactivity independent from Governmental agencies and interests (articles 2 and 6).

A non-profit activity an economic or non-economic activity subject to the obligations of the members of the relevantorganization to use revenues exclusively for the purposes of pursuing the objectives of the organization as set inits bylaws.

Any legal or natural, national or foreign person is entitled to establish, be a member of or participate in any of theNPO’s activities or organs (article 5). According to their form of organization, NPOs can be with or withoutmembership: the former includes associations while the latter includes foundations and centers.

According to Law no.8788 / 2001 , NPOs, without the need to establish a commercial company, may exerciseeconomic activities in order to fulfill their non-profit objectives (article 36). In case the NPO realizes profit, theseprofits are required to be used for the organization’s purpose only.

According to article 42 of Law no. 9920, dated 19 May 2008 “On the tax procedures in the Republic of Albania”,NPOs are obliged to register with the Albanian tax authorities upon conclusion of registration with the registerheld to this purpose by the Tirana District Court.

NPOs are subject to income tax benefits in relation to donations, grants, bank interests and quoted frommemberships in accordance to Law No. 8788/2001 and to the provisions of the legislation on the income tax.

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