What is the Fiscal Peace Agreement and how does it work?
The Fiscal Peace Agreement is a voluntary one-year agreement between the taxpayer and the tax administration. Both parties agree in advance on the business's taxable profit for the following year and the tax to be paid on it. Simply put, you and the tax authorities pre-determine the profit base at the beginning of the year, eliminating the surprises of potential tax audits during that period. This "peace" has an initial 1-year term, with the option to renew for two additional years (up to 3 consecutive years in total). After this pilot phase, the scheme will be reviewed, as the current law remains in effect until 2028.
How does it work in practice?The tax administration takes your taxable profit from the previous year and increases it by +18%. This becomes the agreed profit base for the following year. On this predetermined profit, you will pay the standard 15% corporate income tax. If you earn more: If your actual profit exceeds this base (+18%), the portion above that limit will be taxed at a reduced rate of only 5%. This serves as a reward for your success; the state taxes additional growth at a lower rate instead of the standard 15%. If you earn less: Even if your profits fall below the agreed amount, you are still obligated to pay tax based on the minimum profit set in the agreement. Essentially, the state guarantees its tax revenue on the +18% growth, even during a downturn.
This is why it is called "peace"—even if your business faces difficulties and profits decrease, you pay according to the agreement, while the tax administration keeps its promise not to disturb you with audits.
In other words, the Fiscal Peace Agreement does not replace the self-declaration system that businesses normally follow, but creates an alternative path for those who opt-in. During the term of the agreement, no on-site tax audits will be conducted regarding that year's profit, except in cases of serious fraud (e.g., fraudulent VAT schemes or major concealment of income). This means zero inspectors at your door for corporate income tax as long as you honor the agreement. The administration may only perform "desk audits"—remote system verifications—rather than full-scale inspections.
Furthermore, as part of this one-year agreement, businesses are granted the right to adjust certain financial data from previous years. The law allows for the re-declaration (adjustment) of specific balance sheet items for the last 3 years, such as cash balance, inventory, assets, or doubtful liabilities. You can regularize inconsistent figures (e.g., carried-over loans, obsolete inventory, etc.) or declare assets not previously on the balance sheet, up to 30% of their value. By paying a 5% tax on the adjusted difference, you will not be penalized for these corrections. This mechanism provides an opportunity to clean up your financial statements with minimal tax costs—similar to a simplified financial revaluation that would normally result in much higher taxes or penalties.
Important: These re-declarations must not be used to artificially lower profits in future years or to affect other obligations such as VAT. The objective is transparency, not concealment.
In Essence: How does the Agreement work? You apply, the tax authorities present an offer with a predetermined profit base of +18% over the previous year, you accept it electronically, pay the tax according to that agreement, and in return, you enjoy a year of peace without audits. If your business performs better, you pay a small additional tax (5%) only on the extra profit; if it underperforms, you have still secured your "peace" with a predetermined tax amount.
The Purpose of the Law and Benefits for Both Parties
Why was this agreement created? The main purpose is to encourage voluntary compliance with tax obligations by building a more collaborative relationship between the business and the state. The law aims to offer a new, proactive way to increase mutual trust; for the business to trust the administration that it will not penalize them unfairly, and for the administration to trust the business that it will declare honestly. This new approach is expected to improve the business climate in the country, making the tax system more predictable and investor-friendly.
Let’s look at the concrete benefits for each party.
For the Business
You benefit from certainty and predictability. You know from the beginning of the year how much tax you will pay, so you can plan your finances. This brings stability to the business's performance; as long as you respect the agreement, you do not have to fear unforeseen fines or penalties.
Also, if your business exceeds expectations and generates more profit, you are rewarded with a low tax rate (5%) on that extra profit. This encourages you not to hide income; the more you declare, the relatively less tax you pay for the surplus. In this way, the agreement also aims to change the old mindset of hiding or manipulating profit.
Another practical benefit is the possibility to adjust the financial statements of past years with minimal cost (5% tax) without fear of punishment. This gives you a clean start in accounting terms. At the end of the day, for correct businesses, this agreement offers peace of mind; you avoid conflicts with taxes and focus on business growth.
For the Tax Administration
The state also has its own tangible benefits.
Firstly, it ensures more stable revenue collection; practically, it plans from the beginning of the year for +18% more tax from each participating business. Instead of waiting for annual declarations with the hope that businesses will have higher profits—and often being disappointed by low declarations—the administration guarantees an increase in collections without extra effort.
Likewise, it saves resources and time because tax inspectors will not waste energy on these regular businesses but can focus on those who actually evade tax. The number of routine audits can be significantly reduced, being replaced by risk analysis toward those who are not part of the agreement. Tax conflicts and appeals are expected to decrease; when the parties agree at the beginning, there is no reason to have trials at the end. This increases the efficiency of the administration and reduces the burden of administrative cases.
In the longer term, a more collaborative climate improves the country's image for foreign investors; large businesses know they can have an agreement with the state, which makes Albania a more predictable place to invest. The state, therefore, gains the trust of honest taxpayers and creates a new culture where voluntary compliance is valued, while focusing punishment only on real violators.
In the end, the common goal is for the tax-business relationship to move from hostile to collaborative. As highlighted in the law's explanatory memorandum, such practices increase the efficiency of revenue collection, reduce conflicts, and limit subjective interventions during audits, as everything is clearly agreed upon beforehand. The business gains clarity, the state gains stability—a situation where both parties win.
Who qualifies and how is the agreement concluded?
Not every business can become part of the Fiscal Peace Agreement. The law clearly limits the scope of application to certain businesses, primarily medium and large ones. Here we will explain the main qualification criteria and the step-by-step procedures for concluding the agreement.
Who qualifies for fiscal peace?
According to the law, taxpayers—physical or legal persons—who simultaneously meet these main criteria have the right to apply:
Annual income over 14 million ALL
The scheme applies only to businesses considered medium or large, specifically those with annual gross income over 14,000,000 ALL. This is the point where a business moves from the favored regime for small entities to the normal tax regime. Therefore, small businesses are not included at all; if your company has a turnover below this threshold, you neither can nor need to enter into the agreement. The goal is to target those who already pay full tax without exemptions.
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No unpaid tax liabilities or unsubmitted declarations
The business must be up to date with payments and declarations. You must not have unpaid tax liabilities or missing declarations for past periods. The administration seeks regular businesses for this scheme; therefore, only those who have historically been correct with taxes can benefit.
Not being under appeal or tax investigation
If you are currently involved in an appeal or investigation—for example, you have an administrative appeal for a fine or are under special audit/investigation, such as anti-evasion verification—you cannot enter the agreement. Your tax situation must be calm and without open legal issues. Likewise, if your company is being criminally investigated for tax offenses such as fraud and/or evasion, or if you have a final conviction for concealment of income or money laundering, you are immediately disqualified.
Not being subject to any special benefit
As mentioned, the law excludes those who benefit from reduced tax rates or special legal exemptions. Similarly, entities implementing concession projects are not accepted, likely because they are treated separately under fiscal legislation.
In practical terms, the administration will filter applicants based on these criteria. The idea is for businesses without problems to enter the agreement. A manufacturing company with high turnover that has declared and paid liabilities regularly every year can benefit, but another company—for instance, in construction—that has had VAT issues or lawsuits with tax authorities, will not be allowed. The administration seeks reliable partners for this pact, not someone with a history of abuse.
How is the agreement concluded? Steps and Procedures
The process to become part of the Fiscal Peace Agreement is quite straightforward and is conducted online:
Application
The interested business must apply electronically through the tax portal via the e-filing system to join the agreement. The law specifies that the application is made within the deadline for submitting the annual income tax declaration of the previous year. This usually means from January until March 31, or April 15 (which is often the extended deadline for balance sheets) of the following year. For the first year of implementation, 2026, a special instruction is expected to specify the deadline and procedure, as it is a pilot year.
Tip: If you are interested, check the announcements from the Tax Directorate at the beginning of the year for application methods, as there may be additional practical instructions.
Preparation of the Offer by the Administration
After you have applied, the tax administration verifies if you meet the conditions and drafts a concrete proposal for the agreement. This includes calculating your taxable profit from the previous year +18%, the standard tax rate to be applied to it, and the 5% rate for any profit above this level. This proposal is sent to your e-filing account.
Your Decision: Acceptance or Rejection
Once you receive the proposal, you have the right to review it and accept or reject it by April 15 of that year. Acceptance is done electronically, via electronic signature or confirmation on the portal. If you feel the offer does not suit you—for example, if an 18% increase seems too high to achieve—you can reject it without any penalty. The agreement is entirely voluntary, and if it is not reached, you continue normally under the regular tax regime. In practice, it is expected that the administration and the business will have opportunities for communication during this phase; if something does not align (such as historical data), it can be clarified. Regardless, you must either accept within the deadline or the offer expires.
Formalization of the Agreement
Upon your acceptance, the agreement is considered concluded and takes legal effect for that tax year. All further obligations are carried out based on it. Practically, you will declare and pay the agreed tax in that year's annual declaration, with advance installments during the year according to the income tax law. In the annual declaration, the profit will be reflected as per the agreement, with the 18% increase. Any data you declare can still be subjected to a desk audit by the administration to ensure there are no technical discrepancies, but you will not have physical on-site audits for that tax. The agreement is also recorded in the electronic tax register, becoming part of your official documentation.
Renewal (Optional)
At the end of the year, you can evaluate again. The law gives you the right to renew the agreement for up to 2 additional consecutive years, provided you continue to meet the criteria (e.g., you have paid correctly, have no violations in the meantime, etc.) and apply again for the following year. The procedure will be similar: each year you confirm your will, the tax authorities propose the new base by taking the previous year's profit and increasing it by 18%, and you accept and proceed. After 3 years, the scheme closes unless extended by a new law. Naturally, you can also choose to terminate it earlier if it is no longer beneficial for subsequent years; you are under no obligation to renew it.
Early Termination of the Agreement
If at any moment one of the criteria is breached—for example, an unpaid liability appears or you are found involved in a serious violation—the agreement may be considered void. The law also provides for other situations where the agreement ends prematurely, reverting to the normal regime:
- If you do not achieve the 18% increase in taxable profit (i.e., the real profit ends up lower than the one in the agreement). This is logical, as the goal was to guarantee +18%; if you don't reach it, the agreement no longer makes sense to continue.
- If the business changes its main activity, suspends, or closes the activity during the year.
- If repeated violations are discovered on your part that undermine fiscal integrity (e.g., being caught multiple times in serious errors or irregularities).
- If you delay payments or fail to pay liabilities according to the agreement.
- If you no longer meet the legal criteria (e.g., an old undeclared liability suddenly appears, or you enter a criminal investigation, etc.).
- If you achieve a profit increase of over 50% during the year (compared to the previous year), the agreement also terminates. Practically, if a business "soars" with profits far above expectations, the administration reserves the right to break the pact and treat you under the normal regime (possibly because an increase over 50% raises suspicions of previously undeclared income, or simply because the state does not want to lose too much tax on such massive growth). However, this is an extreme scenario.
When the agreement is terminated prematurely for any of the reasons mentioned above, the protective effects come to an end. In that case, the tax administration has the right to conduct a normal tax audit and re-assess the tax liability according to the laws in force, especially for those financial elements that you may have re-declared during the agreement. Therefore, it is important to enter the agreement only if you are convinced that you will carry it through to the end of the year without violations; otherwise, it could cost you more.
It is Not a Fiscal Amnesty
Since the terms "fiscal peace" and "fiscal amnesty" are often confused, they are not the same thing. The Fiscal Peace Agreement is not a fiscal amnesty. This is not a scheme where the state forgives unpaid taxes or legalizes undeclared money without penalty. On the contrary, it is an agreement for future taxation, not a forgiveness of past liabilities.
Here are the main differences:
(1) Fiscal Amnesty implies that the state forgives or reduces unpaid tax liabilities, e.g., tax debts or taxes on undeclared assets, often in exchange for a symbolic payment or for the purpose of formalization. Many times, amnesties are related to the declaration of hidden assets or undeclared capital, providing declarants with immunity from criminal or administrative prosecution. Albania had discussions about a fiscal and criminal amnesty for undeclared assets, but the Fiscal Peace Agreement has nothing to do with this.
(2) The Fiscal Peace Agreement does not forgive anything; on the contrary, the taxpayer commits to paying more tax than the minimum required, +18%, in order not to be subject to audits. This is a voluntary agreement. No old liability will be deleted by this scheme. In fact, one of the conditions is that the business must have no tax liabilities.
Read also Fiscal Amnesty 2026: Which Tax Obligations Are Waived and How You Can Benefit?
(3) In a true amnesty, the state often grants immunity even against legal prosecution for previous tax violations. The Fiscal Peace Agreement does not grant any immunity for criminal offenses. This agreement does not bring any kind of administrative, tax, or criminal immunity for illegal acts such as money laundering, terrorism financing, or other criminal offenses related to the illegal origin of wealth. On the contrary, the administration has the obligation to inform the authorities if it encounters indications of such illegal activities.
(4) An amnesty usually aims to settle the accounts of the past and is often granted once and for all. The Fiscal Peace Agreement aims to open a new chapter for the future, formalizing a practice of cooperation that may not last forever but tests the ground for several years. Even the language used ("peace") implies an intermediary pact, not a unilateral forgiveness.
Therefore, if you have heard words like amnesty, tax forgiveness, etc., they refer to the other law regarding the deletion of old liabilities or previous projects. The Fiscal Peace Agreement, although part of the same package of facilitating policies, is something else entirely. This is a completely new approach for us and should be treated separately from the terms amnesty or legalization of capital.
When is it worth for the taxpayer to enter the agreement and when is it not?
The Fiscal Peace Agreement is not mandatory; every large/medium business has the right to assess the feasibility of this pact for themselves. Naturally, there is no universal "yes" or "no" answer because every business has its own situation. Below we list the typical scenarios when it is worth considering entering the agreement and when it might be better to avoid it.
When it is worth being part of the agreement:
Your business has relatively stable profits or moderate growth..
If historically your profit increases by 10-15% per year, then the agreement's requirement for +18% might be slightly above your average, but not unreachable. For companies with stable growth, this agreement brings peace; you pay a little more than you normally would, but you gain the assurance that you will not have visits from inspectors.
Example: Banks, telecommunication companies, manufacturing plants—these usually have predictable profits year after year and can surpass the +18% threshold. For them, fiscal peace is attractive because it gives them stability and protects them from the trouble of frequent audits.
You have imperfect financial statements and want to regularize them
If you know that there are elements in your balance sheets that have not been reflected correctly (e.g., cash on hand that does not match the books, inventory that is actually missing, or a bad loan that still appears as an asset), entering the agreement gives you the opportunity to fix these without fear. Paying a 5% tax to "dot the i's" is a small price compared to the risk of a tax audit that could fine you heavily for them. So, if you need a balance sheet cleanup and are ready to pay something symbolic on the differences, this agreement is worth it.
You highly value predictability and the avoidance of conflicts
Some entrepreneurs simply want to sleep soundly at night, without worrying about whether they made a mistake somewhere in the paperwork or if an audit will find a problem. If you are one of those who prefer to pay a bit more to have peace of mind, fiscal peace is right for you. Practically, you are buying an "insurance policy" against audits, and this can be valuable especially in sectors where tax audits have traditionally been aggressive.
You have investment plans or want to apply for a loan
An indirect aspect: when you are in the agreement, you guarantee a minimum profit in the statements (the +18%) and clean up old anomalies. This can make your company look financially healthier in the eyes of banks or investors, at least in the short term. Also, the fact that you have no open issues with taxes and are "at peace" can be interpreted positively by foreign partners or investors who value formality. So, if you are thinking of expanding your business and need a financial profile that is as regular as possible, the agreement can help you achieve that profile.
If you believe that after this 3-year period, the administration will tighten discipline
It has been hinted that after the offer of peace and forgiveness, the tax authorities might become more rigorous with those who still do not pay correctly. This peace comes with the message: take advantage now, because there will be no more tolerance later. If you read the situation this way, you might think it is better to enter the agreement system now on your own, rather than remaining outside and being targeted by inspectors later. This applies especially to those businessmen who know the Albanian tax culture and want to prevent any potential misunderstandings in the future.
When it is NOT worth it (or when you should be careful)
If you anticipate a significant drop in profit next year
This is perhaps the most important factor. If your business expects a difficult year—for example, due to the market, crises, or investments—and you think your profit might drop or be far below last year's level, it is better not to make an agreement. You would be forced to pay tax as if the profit were 18% higher, even when you actually have no profit at all. This would further strain your financial situation. In that case, it is better to continue with the normal regime, where if profit drops, you automatically pay less tax. Therefore, businesses with unstable or cyclical profits should think twice. For example, a construction company that records super profits one year and zero the next will find it difficult to play with +18% over a "golden year," because in the bad year, they will pay tax on a "phantom profit." These types of businesses will probably not even be interested.
If your profits could increase significantly (much more than 18%)
This sounds a bit counterintuitive (because even if they increase significantly, the portion over 18% will be taxed at 5%). In fact, to some extent, high growth is favorable because you pay little tax on it. But there are two reasons here:
First, the law sets a 50% growth limit. Above that level, the agreement is terminated. So, if you think your profit might double or more next year (e.g., you have a big contract that will change the game), entering the agreement might be a hindrance. Mid-year, if the tax authorities see you are exceeding the limit by far, they can exit the agreement, and you will be billed the normal tax for the entire profit.
Second, even if the growth is, say, 30-40% (below the termination threshold), keep in mind that you are "giving up" a 10% tax saving on the 18-30% portion (because you would have paid 15% normally, and now you pay 5%). This is good for you financially, but on the other hand, the state is losing revenue from you in that scenario. In theory, there should be no problem because the state has accepted this loss in exchange for peace. But in practice, do not be surprised if the administration becomes a bit more vigilant with you the year after the agreement. (This is an assumption, not a legal necessity). In short: if you expect a massive boom, it might suit you not to sign at all, pay 15% normally, and maintain your flexibility without restrictions.
If you do not actually meet the "model student" criteria
Many Albanian businesses, even with high turnover, might have something small missing—e.g., an unpaid fine, a late declaration, an appeal for some local taxes, etc. Officially, these would prevent you from entering. If you try anyway (or hope they will turn a blind eye), you might waste time. Until you are cleared of every old liability or conflict, there is no fiscal peace for you. Therefore, do not see it as a rescue if you have problems, because they will not accept you. Resolve those problems first, then think about the agreement in a future year.
If you are a small business (under 14 million ALL)
This is clear, but worth stating. Small businesses really have no reason to worry about this, as the law does not include them. They pay no profit tax at all (0% for turnover < 14 million until 2029). For you, the right path is to continue with the current system, which is quite favorable. Conversely, when your business grows above the threshold and becomes medium-sized, then you can consider entering the agreement if you meet the other conditions.
If you are skeptical or prefer the freedom of the current system
Some entrepreneurs might think: Why bind myself? What if I have an opportunity to hide some more expenses and lower the real profit—why should I commit to giving +18% to the tax authorities before the year even starts? This is an understandable thought for those who see the current system as having room for maneuver. The agreement requires maximum discipline and transparency. If you prefer to maintain your flexibility (even informal) and are not concerned about audits, you might not have a motive to enter. It is a business choice; some will say "it's cheaper for me to continue as I am, with the risk of an audit," especially if they assess that this risk is small for them or can be managed.
In summary, it is worth it for businesses with a normal growth rate, those that are compliant and want stability, and it is not worth it for those with unpredictable profits, declining profits, or those who do not want to be restricted. Many large businesses will do the cost-benefit calculation: is it worth paying, say, 3 million ALL more in tax to be at ease? If yes, they enter; if not, they don't. Some may wait to see how the first pilot year goes; it wouldn't be a surprise if there is hesitation in 2026 and then in 2027, if they see it worked without trouble for their neighbor, they will ask to enter too. It is important for every qualified taxpayer to analyze their financial situation and objectives before making the decision.
Practical Tips: How to understand if you should apply or not
In closing, here are some direct tips for you as a reader—perhaps the owner or the accountant of a medium-sized business—who is trying to decide on this matter:
Analyze your historical financial status and projections
Look at your profits over the last 2-3 years. Have they been in constant growth? Would you have surpassed the +18% threshold every year? Make a plan for the coming year as well: does an 18% profit increase seem realistic? If yes, you are in safe territory. If the years have fluctuated (e.g., +5% one year, -10% the next), be careful; ask yourself why they fluctuated and whether you have those factors under control to guarantee growth while under the agreement.
Check the "tax health" of your company
Before applying, ensure that every old liability is settled, every declaration is submitted, and that you have no open conflicts with the tax authorities. If you have anything pending (even something small), take measures to resolve it now—for example, pay those small fines or drop that appeal if you intend to enter the scheme (since debt forgiveness might resolve it anyway, but the condition is to have no active appeals). Consult with your accountant and perform a tax health check.
Calculate the opportunity cost
How much extra tax will you pay with +18%? And what are the chances you would have paid that in a normal scenario? For example, if last year the profit was 10 million ALL and the rate was 15%, the tax was 1.5 million. Under the agreement, you will declare a profit of 11.8 million and a tax of 1.77 million. Plus, if you earn over 11.8 million, you pay a bit extra. Thus, your "cost of peace" is at least 270,000 ALL (1.77 – 1.5 million). Consider: is this amount worth not having audits? In some sectors, an audit could reveal much higher liabilities (especially if you haven't been 100% compliant); therefore, 270,000 ALL might be a cheap insurance policy. In other sectors where everything is clean, you might see it as an unnecessary expense. Perform this calculation with your own figures.
Consider the need to regularize the balance sheet
If you know you have old, worthless stock, a cash balance that doesn't match real funds, etc., evaluate how large these discrepancies are. The agreement allows you to fix them at a cost of 5%. The question: If you don't enter the agreement, how likely is an audit to catch them? And if they do, how much could it cost you (full tax + fine)? Usually, undeclared cash differences are taxed at 15% plus a 100% fine = 30% effective rate; under the agreement, it is 5%.
Do not rush, but do not leave it until the last minute
Stay well-informed (we hope this article helped!). Follow the instructions expected to be issued by the Ministry of Finance and the General Directorate of Taxes. Discuss it with your tax advisor or external experts. If you decide to enter, apply early; do not leave it for the last day of the deadline, so you have time to correct any application errors or clarify uncertainties with the administration.
Consider intermediate alternatives
Remember, it is not necessarily "either I enter or there is no other way." You can also try to negotiate indirectly with the administration within the framework of the existing system—for example, by seeking tax counseling from the authorities or using other mechanisms such as rulings (official interpretations) for unclear issues to avoid conflicts without entering a formal pact. For some large businesses, this could also be a path (though it does not provide protection like the agreement). Additionally, you may choose to enter the agreement with only some of the companies in your group (if you have more than one entity) to test it in one unit first.
The Fiscal Peace Agreement is an innovation that offers new solutions, but it also requires a new way of thinking from the business side. It is like changing a game strategy: from defense (minimizing taxes and fighting audits) to offense (paying a bit more and securing protection in return). For many small and medium-sized entrepreneurs in Albania, this could be invaluable; for others, unnecessary. The decision remains in your hands. We hope this practical guide helped you clearly understand Law No. 84/2025 "On the Fiscal Peace Agreement" and evaluate your next steps with a clear mind. We wish you nothing but success and, regardless of whether you enter the agreement or not, we hope you always find peace (fiscal or otherwise) in managing your business!