Executive summary

On 15 September 2026, Albania deposited its instrument of ratification for the Organisation for Economic Co-operation and Development (OECD) Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule (STTR Convention). Albania was the second jurisdiction to deposit an instrument of ratification, following San Marino. The second deposit satisfies the conditions for the STTR Convention to enter into force; therefore, it will enter into force as a formal matter on 1 January 2027.

The entry into force of the STTR Convention is a milestone in the implementation of the STTR component of Pillar Two. However, the STTR will apply only with respect to jurisdictions that incorporate it into their tax treaties by ratifying the STTR Convention (or through protocols to their treaties). At this time, there are no tax treaties that will be covered by the STTR Convention on the date it enters into force.

Background

The STTR is a treaty-based component of the OECD/G20 Inclusive Framework's Pillar Two project. The STTR allows a source jurisdiction to impose additional tax on certain payments between connected persons if the income is subject to a nominal corporate income tax rate below 9% in the recipient jurisdiction. The OECD released the STTR model treaty provision and accompanying commentary in July 2023. (See EY Global Tax Alert, OECD/G20 Inclusive Framework releases Subject to Tax Rule model treaty provision and commentary, dated 25 July 2023.)

In September 2023, the Inclusive Framework adopted the STTR Convention, and the OECD launched the Convention in October 2023. The STTR Convention provides a mechanism for jurisdictions to implement the STTR through existing bilateral tax treaties without negotiating separate protocols for each treaty. (See EY Global Tax Alert, OECD/G20 Inclusive Framework launches Multilateral Convention to implement the Subject to Tax Rule, dated 12 October 2023.)

On 19 September 2024, the OECD held the first signing ceremony for the STTR Convention, during which nine jurisdictions signed the Convention and an additional 10 expressed their intention to sign it. (See EY Global Tax Alert, OECD holds signing ceremony for the STTR MLI, dated 25 September 2024.) Albania subsequently signed the STTR Convention on 23 September 2025. (See EY Global Tax Alert, The Latest on BEPS and Beyond, dated 29 October 2025.)

On 11 December 2025, San Marino became the first jurisdiction to deposit its instrument of ratification for the STTR Convention. (See EY Global Tax Alert, The Latest on BEPS and Beyond, dated 17 December 2025.)

Detailed discussion

On 15 September 2026, Albania deposited its instrument of ratification for the STTR MLI with the OECD, becoming the second jurisdiction to do so and thus satisfying the conditions required for the STTR Convention to enter into force as a formal matter.

Under its terms, the STTR Convention enters into force on the first day of the month following the expiration of a period of three calendar months beginning on the date of deposit of the second instrument of ratification, acceptance or approval. Accordingly, the STTR Convention will formally enter into force for Albania and San Marino on 1 January 2027.

The STTR Convention does not apply automatically to all tax treaties of a participating jurisdiction. For a treaty to become a Covered Tax Agreement, both treaty partners must be parties to the STTR Convention and must have notified the OECD that they wish the treaty to be covered. At present, Albania and San Marino do not have a bilateral tax treaty and therefore the STTR Convention has no application between the two jurisdictions.

For each jurisdiction that subsequently deposits an instrument of ratification, acceptance or approval, the STTR Convention will enter into force on the first day of the month following the expiration of a period of three calendar months beginning on the date of deposit.

Once the STTR Convention enters into force for jurisdictions that have a Covered Tax Agreement between them, the STTR generally takes effect for taxes imposed by either of the jurisdictions from the first day of a fiscal year beginning after a period of six calendar months has elapsed from the later of the dates on which the STTR Convention entered into force for the two treaty partners.

Implications

Albania's ratification satisfies the conditions required for the STTR Convention to enter into force as a formal matter and represents a milestone with respect to the STTR under Pillar Two. The immediate practical impact nevertheless is limited, because the STTR will apply only with respect to jurisdictions with tax treaties that are covered by the Convention and only after the applicable entry-into-effect period has elapsed. At this time, no tax treaties are covered by the STTR Convention.

The STTR is a core element of Pillar Two and, where applicable, applies before the Global Anti-Base Erosion (GloBE) Rules. Businesses should monitor the implementation of the STTR by relevant jurisdictions through the STTR Convention or bilateral treaty negotiations and evaluate whether the STTR could apply to their transactions or arrangements.