On July 07, 2020, the Albanian Parliament approved Law no. 112/2020, dated 29.07.2020 “On the register of beneficial owners.”
This law is designed to ensure transparency in the business environment and put additional fences on illicit activities. In fact, the preparation and approval of this law was highly recommended by the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism near the Council of Europe, and the law is partially approximated with the 4th EU AML Directive.
The law establishes the first-ever register for ultimate beneficial owners. The register will be a sort of two-layer document, with data such as name and surname, nationality, ownership nature over the entity, and so on accessible to the public, with other data accessible only by persons authorized by the reporting entities and state authorities during the performance of their functions.
The state institution in charge for administering the register is the National Business Center, the same authority in charge of managing the commercial register of companies in the country, although the two registers will be kept separate.
The Albanian legislator has provided an all-encompassing definition for reporting entities, as the following entities registered in the Republic of Albania are obliged to register their beneficial owners: (a) Commercial companies (including branches/representative offices of foreign companies), saving and credit companies and unions, mutual collaboration entities, cooperative entities, and any other legal entity that is obliged to register in Albania’s Commercial register; (b) Non-for-profit organizations; and (c) Legal entities and companies with shareholders including, in addition to local institutions of the Republic of Albania, other Albanian or foreign natural/legal entities.
Another central point of the law is the definition of a beneficial owner as an individual who ultimately owns or controls the legal entity, and/or an individual on whose behalf a transaction is being conducted.
The definition includes (a) an individual who ultimately owns or controls a legal entity, through direct or indirect ownership of 25% of the shares or voting rights or ownership interest in that entity, or through control via other means, or who benefits from a transaction performed by the legal entity on his or her account; (b) the founder or the legal representative or an individual who exerts ultimate effective control over the administration and supervision of a non-for-profit organization; (c) for trusts and other legal agreements, the settlor, the trustee, the protector if any, the beneficiary, or – where the individuals benefiting from a legal arrangement or entity have yet to be determined – the class of persons in whose main interest the legal arrangement or entity operates); or (d) any other individual exercising ultimate control over the trust by means of direct or indirect ownership or by other means.
The reporting entities have the obligation to maintain adequate, accurate, and up-to-date data and documents of their beneficial owners and the nature of the ownership.
The law empowers tax authorities to verify compliance of the entities with their obligations, as well as to confirm the accuracy and conformity of records with the information provided to the register during the course of usual tax audits.
On the other side the head of the National Business Center is entitled to impose fines both to the reporting entity and their legal representatives for failure to comply with the law. The monetary fines can vary from ALL 250,000 (approximately EUR 2000) up to ALL 500,000 (approximately EUR 4000).
The grace period in the law for reporting entities to identify their beneficial owners and collect the relevant documentation will elapse on December 31, 2020, and the register is to be established no later than January 31, 2021. Reporting entities are required to register their beneficial owners within 60 days of its establishment.
By Sabina Lalaj, Local Legal Partner, and Ened Topi, Senior Managing Associate, Deloitte Legal Albania & Kosovo
This Article was originally published in Issue 7.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
