IT business accounting and service exports. What changed after the expiration of the 5% rate?

IT business accounting changed at a single but significant point as of January 1, 2026. The 5% profit tax rate for software producers and developers expired on December 31, 2025. Many companies continue to calculate the prepayment at that rate because it has been in effect for seven years.

The IT business is an activity that produces, develops, maintains, or advises on information systems, and often sells its product outside Albania. It is precisely this combination that makes its accounting different. There is no inventory, no industry license, and no cash register. In return, there are two questions that other sectors don't have: where the service is taxed and who really performs the work.

This guide follows an IT activity from the day before registration through year-end. It covers the legal form, registrations, invoicing and fiscalization, VAT on exported services, self-billing for services purchased from abroad, project accounting, relationships with collaborators, deadlines, and controls.

Read also: Business as a sole proprietor: what you pay and what you report in the first year.

Natural person or LLC, and what is written in the QKB

The choice between a sole proprietor and a limited liability company does not depend on revenue in this sector. It depends on the client. A developer who works alone, with two or three small clients, usually registers as a self-employed sole proprietor. A team that signs contracts with foreign companies needs an LLC, because the other party requires an entity with capital and limited liability.

The second difference is liability. A natural person is liable with their personal assets for the obligations of the business. In an LLC, liability is limited to the company's capital, and this matters when the contract contains indemnification clauses for delays or software defects.

Which activity code does an IT business choose at the QKB?

The IT activity codes are located in section J of the Nomenclature of Economic Activities, rev. 2. Class 62.01 covers computer programming, class 62.02 provides IT consulting, class 62.03 manages IT installations, and class 62.09 offers other information technology services. Data hosting and processing fall under class 63.11, web portals under class 63.12, while the publishing of ready-made software programs falls under class 58.29.

The code is not a formality. It specifies what the administration expects in your statements, and during inspections it is compared with the invoices' descriptions. Therefore, the object of activity in the QKB is written as the actual work, not more broadly. Full list of Section J classes Helps with making the right choice before registration.

When is it worth it for a LLC to export services?

When a foreign client requests a contract with deadlines and guarantees, when the team grows to more than two people, or when you anticipate taking investment. The company allows ownership to be divided into shares and a new partner to join without having to start the business from scratch. For a sole developer with revenues below the VAT threshold, an LLC adds administrative costs without providing any tax benefit, since both structures equally benefit from the zero-rate regime until 2029.

Recordings that only this sector requires

Here this guide differs from the first three in the series. The IT activity does not require a sectoral license. There is no authority that grants permission to write code, no licensing categories, and no technical inspection before opening. This is stated openly, because the absence of an obligation is as much information as its presence.

However, there is a specific registration, and it specifically affects IT companies that sell to Albanian businesses. Anyone who produces or maintains software solutions for invoicing and fiscalization must register as the producer or maintainer of the software solution. The basis is Government Decree No. 239, dated March 20, 2020, and the application is made online at e-Albania portal. After approval, the entity receives an electronic certificate with the manufacturer's code and the solution code, and is entered into the public register.

The practical consequence is simple. Without that registration, your solution cannot be offered to Albanian taxpayers for fiscalization. If your software is sold only abroad or is not linked to invoicing, this requirement does not apply to you.

The software's 5% license expired. What is valid today?

Until December 31, 2025, legal entities engaged in the production and development of software were taxed at a rate of 51% on profits. The act defining these activities was Government Decree No. 730 of December 12, 2018. It required that the activities be specified in the articles of association and that their revenues be clearly itemized in the explanatory notes to the financial statements.

That regime no longer applies. As of January 1, 2026, software producers will be taxed under the general regime. This is the point where IT companies most often make mistakes this year, because the quarterly prepayment is calculated based on the previous year and the old rate remains in the internal tables.

The Case of an IT Company	Profit tax rate
Annual turnover up to 14,000,000 lek	0% until December 31, 2029, pursuant to Article 69 of Law No. 29/2023
Annual turnover over 14,000,000 lek	15% on taxable income
Software producer, until December 31, 2025	5%, a rate that is no longer applied
Self-employed natural person, above the threshold	15% up to 14,000,000 lek profit, 23% only on the excess.

Note the difference between the two thresholds with the same figure. The zero regime is measured on annual gross turnover, whereas the 15% and 23% thresholds for a natural person are measured on taxable profit. A developer with 20,000,000 lek in gross revenue and 6,000,000 lek in profit does not qualify for the zero regime, but his entire profit is taxed at 151 TP3T.

Calculated example: the same company over two years.

A software development company generates revenue of 30,000,000 lek and a taxable profit of 6,000,000 lek. The figures are rounded and do not pertain to any client.

• Year 2025, with the software rate of 5%: the tax was 300,000 lek.
• Year 2026, with a general rate of 151 TP3T: the tax amounts to 900,000 lek.
• The annual difference is 600,000 lek, which means 150,000 lek more for each quarterly installment.

The prepayment installment is where the difference becomes apparent. Installments are paid on March 31, June 30, September 30, and December 31, in accordance with Article 63 of Law No. 29/2023. When their base remains calculated at the old rate, the shortfall is revealed in the annual return and is subject to late‐payment interest of 7.81% per year.

Where is your service taxed? The question before the invoice.

For a business that sells domestically, VAT is a matter of rate. For an IT business that invoices abroad, it is first a matter of location. The VAT law determines the place of supply separately for goods and separately for services, and that determination decides whether the transaction is included in the Albanian return.

Verification is carried out before issuing the invoice. A subsequent correction affects not only the invoice but also the sales book and the period's return. How are imports and exports treated for VAT? It provides the full framework, including the zero-rate on goods exports under Article 57.

A boundary must be clearly stated. The article that determines the place of supply of services is not cited by number in this text, because we have not examined the consolidated text of Law No. 92/2014 from an official copy. Therefore, for large contracts or for clients with mixed structures, the treatment is confirmed on a case-by-case basis.

Do I need to register for VAT as a software developer?

Registration becomes mandatory when annual turnover exceeds 10,000,000 lek, with registration required within 15 days of exceeding the threshold. Voluntary registration is allowed above 5,000,000 lek and remains valid for at least two years. For a developer who invoices only abroad, voluntary registration makes sense because it grants the right to deduct VAT on domestic purchases.

The result is a credit balance. When output supplies do not include Albanian VAT and domestic purchases do, the return is regularly closed with a credit balance. Refund is required when the surplus remains for three consecutive periods and exceeds 400,000 lek, in accordance with Article 77 of Law No. 92/2014.

Read also: Regime and rates for the self-employed

Services you purchase from abroad, self-billing, and withholding tax

Every IT business buys services from abroad. Hosting, cloud servers, development licenses, advertising, and tool subscriptions are daily costs. For VAT purposes, services received from a foreign supplier are handled by self-billing by the Albanian recipient. You calculate the VAT yourself on the value of the foreign invoice and report it on your return.

For a VAT-registered business with taxable activities, the effect is usually neutral, because the same amount is both input and output tax in the same period. Failure to issue a self-invoice is not a minor formal error. It leaves the purchase ledger without the corresponding entry and creates discrepancies between the costs in the statements and the declarations.

The second question is withholding tax. Payments to a non-resident for services are subject to 15% withholding tax, pursuant to Articles 58 and 59 of Law No. 29/2023. Albania has over 40 double taxation avoidance treaties in force, and some of them reduce or eliminate this withholding. The benefit is not automatic. It requires the supplier's residence certificate and following the procedure.

The deadline for remitting the withholding tax is the 20th day of the month following the month of payment, in accordance with Article 56, paragraph 4. How does withholding tax work? It breaks down the procedure and the statement.

Invoicing, taxation, and the POS in an IT business

Electronic invoicing and fiscalization are requirements of the business activity, not of the payment method. This applies even when all collections come via transfers from abroad. An IT business with no Albanian clients still needs an electronic certificate and a registered invoicing solution.

The invoice to a customer abroad is issued and fiscalized according to the general rules. When the amount is expressed in a foreign currency, the trace of the exchange rate used is retained, because that trace is later required for reconciliation with the bank deposit. Electronic invoice and fiscalization certificate Retains the device's full steps.

Do I need a POS if I don't accept cash?

The second and final deadline for equipping a POS terminal is December 31, 2026, according to Article 59(3) of Law No. 9920/2008. The obligation applies to cash sales. Three exceptions are specified: areas without internet coverage, entities exempt from the invoicing requirement, and the sole proprietor who works alone, is not subject to VAT, and has a single location. These were also confirmed by Notice of the General Directorate of Taxes of September 21, 2026.

The third exemption applies precisely to the sole developer. If you only accept cash transfers, have no employees, and are not VAT-registered, a POS is not required. As soon as you open a second location or become VAT-registered, the exemption no longer applies. POS deadline and exemptions He keeps all the cases.

Cash payments have their own limits even when you're not selling for cash. Between two businesses the limit is 100,000 lek and with an individual 500,000 lek. Exceeding it is punishable by a 10% fine on the transaction value. For an IT business this most often affects payments to suppliers and collaborators' fees.

IT business accounting, projects, currency, and equipment

Here, well-done work stands out from work done in haste. Three issues recur in every IT file that passes through our office.

The first is the recognition of revenue in phased projects. When the contract provides for advance payment and delivery several months later, the collection is not revenue of the period in which it was recorded. It is a liability to the client until the service is completed. Mixing them up inflates one quarter's profit and drains the next, and that's precisely what throws off the installment calculations.

The second is the currency. Receipts are in euros or dollars, while the books are kept in lek. Conversion is done at the prescribed rate, and currency differences are recorded separately, either as income or as expense. When the differences are not recorded, customer balances are never closed accurately and the balance sheet carries a surplus that grows each year.

Third are the platform commissions. When work comes through an international platform, the amount credited to your account is net. Your income is the gross invoiced amount, while the commission is a separate expense. Registering only the net amount reduces the declared turnover, and turnover is precisely the measure of the zero-rate regime.

Equipment and licenses have their own rule. Computers, servers, and multi-year licenses are not expensed immediately; they are depreciated according to their asset group. The depreciation rate is not provided as a figure in this text, because it is verified in Law No. 29/2023 for each asset group and is not included in our texts without the relevant article.

The freelancer, the employee, and the risk of reclassification

The IT sector works with collaborators more than any other sector. A developer with an NIPT invoices a company, and both parties call the relationship a service. The law doesn't always see it that way.

According to Article 12 of Law No. 29/2023, a self-employed person is reclassified as an employee when they receive more than 80% of their income from a single client, or more than 90% from fewer than three clients. The consequences fall on both parties. The company is required to declare the relationship as employment, with the corresponding contributions, while the self-employed individual loses the treatment they had chosen.

This is why a team of four developers working exclusively for a single client is not a sustainable structure. The verification is done once a year, based on each client's share of my revenue, rather than after an audit. The Service Contract and Its Limits It explains where it departs from the employment contract.

How much does a contractor cost, and how much does an employee cost?

An employee under a work contract costs the gross salary plus 16.71% employer contributions, while the employee pays 11.21%. The minimum base is the minimum wage of 50,000 lek, and the cap for social contributions is 186,416 lek per month. The self-employed person pays their own contributions, with a minimum cost of 178,800 lekë per year, even in a loss-making year.

A simple comparison of costs is not sufficient for the decision. When the work is daily, with a schedule and tasks assigned by the company, the relationship is employment regardless of the form of the invoice. The employee must be declared before the first day of work, and an undeclared employee is fined 200,000 lek, pursuant to Article 119 of Law No. 9920/2008.

Read also: How to hire your first employee, from contract to payroll

Annual deadlines for an IT business

An IT business doesn't have a season. Obligations are spread evenly across the twelve months, and that's precisely what makes them easier to forget than those of an activity with defined peak times.

1. The 11th of every month. Sales and purchase books when you are under the VAT regime.
2. The 14th of every month. VAT declaration and payment for the previous month.
3. The 20th of each month. Payroll list and contributions, plus withholding tax for the pay period.
4. March 31. Annual profit tax return and individual DIVA return, mandatory even with zero tax.
5. March 31, June 30, September 30, December 31. Quarterly prepayment installments.
6. July 31. Submission of financial statements and the assembly resolution to the QKB for companies.

A sole trader submits the payroll on a quarterly basis, not a monthly one. For companies, the frequency remains monthly, even when there is a sole director with no other employees.

Controls and fines in an IT business

Control in this sector doesn't start with the documents; it starts with the discrepancies. Three of them occur more often than the others.

The first discrepancy is between the bank deposits and the declared turnover. International transfers are traceable, and an account with regular monthly incoming payments without the corresponding invoice is the most direct indicator. The second discrepancy is between the number of collaborators and the payroll. The third discrepancy is between the declared costs for external services and the absence of self-billing in the purchase ledger.

Violation	The sanction and the basis
Failure to file on time	10,000 lekë for VAT or corporate income tax payers, 5,000 lekë for others. Law No. 9920/2008, Article 113
Late payment	0.061 TP3T per day, up to 365 days. Article 114
Inaccurate statement	20% of the difference. Article 115
Undeclared employee	200,000 lek for VAT and corporate income tax payers. Article 119
Cash payment over the counter	10% of the transaction value. Articles 120 and 121

Late fees are calculated separately from penalties and are 7.81 TP3T per year, a rate effective as of April 11, 2026. Penalties for a single obligation do not exceed 100% of the obligation itself, pursuant to Article 111, paragraph 5. When the correction is made within 30 days of the inspection notice, the penalty is applied at 50%.

Checklist and the three steps for today

This is the part you take with you. The seven items below cover what's seen first in every IT file.

• The prepaid installment base has been recalculated without the software's 5% rate.
• The scope of work at QKB matches the actual work and the invoice descriptions.
• The status of every foreign client is documented before the first invoice.
• Every service purchased externally has its own invoice in the purchase book.
• Platform commissions are recorded as an expense, and revenue is recognized on a gross basis.
• No associate exceeds the 80% threshold of revenue from a single client.
• Exchange rate differences have been recorded and the clients' balances have been closed.

The three steps for today are short. First, open your most recent prepayment statement and check the rate applied. Next, calculate what percentage of your turnover comes from your largest client. Finally, look in your purchase ledger for the self-billing of the three services you regularly buy from external suppliers.

Frequently asked questions

Is the 5% standard still valid for software developers?

No. It expired on December 31, 2025. From January 1, 2026, the general regime applies, namely a 15% tax on profit, or 1% if annual turnover does not exceed 14,000,000 lekë until December 31, 2029.

How does the accounting for an IT business differ from that of a retail store?

Three things. There is no goods inventory, but there are projects that span more than a year. There is no cash-on-hand account, but there is foreign currency and exchange rate differences. And there is no customer at the counter, but there is an overseas customer for whom the place of supply must be determined before issuing each invoice.

I only invoice clients outside of Albania. Do I need an electronic invoice?

Yes. Electronic invoicing and fiscalization are mandatory for the business and do not depend on the client's location or the method of collection.

I paid for hosting and ads to a foreign company. What should I do?

Two things. First, self-billing of VAT as a recipient of services from abroad. Second, verifying whether the payment is subject to 15% withholding tax and whether a double taxation avoidance treaty reduces it. Without the supplier's residence certificate, the relief does not apply.

I'm a sole developer, not VAT-registered, with one client. Am I at any risk?

Yes, you risk losing your employee classification, because over 80% of your revenue comes from a single client. The solution isn't changing the invoice; it's genuinely expanding your client portfolio or moving to an employment contract.

The platform takes a commission. How do I report my revenue?

The gross invoiced value, not the net amount that goes into the account. The commission is recorded as a separate expense. This is directly important because gross turnover is the measure for the zero-rate regime and the VAT threshold.

I haven't made any profit this year. Do I have to file a return?

Yes. The annual return must be filed by March 31 even if the tax is zero. The year's loss may be carried forward for up to five subsequent tax periods, with the oldest loss deducted first.

The legal basis and limits of this text

• Law No. 29/2023 “On Income Tax”. Article 12 on reclassification, Article 24 on rates, Article 54 on loss carry-forward, Article 56 on withholding tax deadlines, Articles 58 and 59 on withholding for non-residents, Article 63 on installments, Article 69 on the zero regime until December 31, 2029.
• Law No. 92/2014 “On Value Added Tax,” as amended. Articles 47 to 50 on rates, Article 57 on the zero rate for exports of goods, Article 77 on refund, Article 117 on the registration threshold.
• Law No. 9920/2008 “On Tax Procedures,” as amended. Article 59 on cash payment limits, Article 59/3 on the POS terminal, Articles 111 through 121 on sanctions.
• Government Decree No. 239, dated March 20, 2020, on the registration of producers and maintainers of software solutions.
• Decision No. 730, dated December 12, 2018, the act that established the activities under the 5% rate. It is cited as a prior rule, not as a rule in force.

Three boundaries are clearly delineated, according to our practice. First, the article that determines the place of supply of services is not cited by number, because we have not examined the consolidated text of Law No. 92/2014 from an official copy. Second, the depreciation rates by asset groups are not provided numerically, for the same reason. Third, withholding at source on foreign suppliers depends on the relevant agreement, so it is confirmed on a case-by-case basis rather than by a single rate.