- Splitting a business into two entities is not possible for a natural person, because the same personal identification number is registered only once in the National Business Registry.
- The 0% rate of income tax applies until December 31, 2029, to annual gross income up to 1,400,000 lek. Above that threshold, the 15% and 23% rates apply.
- When the same NIPT carries out two activities, the revenues are combined. The threshold is not calculated for each sector separately.
- For limited liability companies, a split is legally possible, but the two companies with the same partners become related parties, and transactions between them are subject to the arm's-length principle.
- In the example calculated below, the 540,000 lek in taxes saved is offset by about 360,000 lek in duplication costs for accounting alone.
The division of a business into two entities is prohibited for a sole proprietor and allowed for a limited liability company. The entire distinction comes from a single sentence in the Tax Procedure Law, and that sentence completely changes the conversation depending on the form you have today.
Business splitting refers to the distribution of the same economic activity across two or more separately registered entities, so that none of them exceeds the threshold for a tax obligation. The threshold most often mentioned is the zero rate threshold, 14,000,000 lek gross annual revenue. Immediately after that comes the VAT threshold, 10,000,000 lek.
This guide answers three questions: Is splitting by your legal form allowed, what happens when two companies belong to the same partners, and how much does a split actually save once its costs are deducted. It doesn't provide a way to cross the threshold unnoticed, because in a system where invoices are reported in real time, no such routes exist.
Read also: Business as a sole proprietor. What do you pay and what do you report in the first year?
The threshold is 14,000,000 lek. What exactly happens when you cross it?
Until December 31, 2029, the profit tax rate is 0.1% for entities with annual gross income up to 14,000,000 lekë, while above this threshold the rates of 1.5% and 2.3% apply. The legal basis is Article 69 of Law No. 29/2023, which is covered in full on our website. zero regime until 2029.
The threshold is measured on gross turnover excluding VAT, not on profit. This is where most calculations go wrong. A business with gross revenue of 15,000,000 lek and a profit of 1,000,000 lek has exceeded the threshold, whereas a business with gross revenue of 13,500,000 lek and a profit of 5,000,000 lek does not pay corporate income tax.
Crossing the threshold doesn't affect anything other than the rate. Contributions, taxation, the annual declaration, and dividend tax continue in the same way before and after it. Therefore, the real savings from a split are smaller than they appear, because most obligations don't depend on the threshold.
It's worth keeping one more thing in mind. The threshold of registration for VAT It is 10,000,000 lek, so it's lower. Anyone concerned about 14,000,000 lek has usually been VAT-registered for some time and doesn't come off the register through a split that leaves both entities above 10,000,000 lek.
From this point on, everything depends on a single question, and its answer splits two completely different paths.
If you are an individual, the law closes the question with a single sentence.
A natural person with the same personal identification number is registered only once by the National Business Center, pursuant to Article 40, paragraph 1, of Law No. 9920 of May 19, 2008. Therefore, a second NIPT in your name is not a plan that exists or doesn't exist; it is an action the system does not perform.
This rule is not new. The General Directorate of Taxation publicly announced it as early as 2019, when the deadline of August 31, 2019 was also set for natural persons with more than one NIPT, who were required to apply to the National Business Center for the closure of others and the maintenance of a primary NIPT. The then notice cited the rule in a different section, because the numbering has changed with subsequent updates to the law. The content of the rule has remained the same.
For the individual, then, the question is not whether separation is allowed. The question immediately becomes another, and usually takes two forms.
Can I register the second business in my wife's name?
Yes, the spouse can register as a separate individual, since they are a different person with a different identification number. But then the second entity must actually be her business, not your business under her name.
The difference between the two is not formal. It's revealed by things that can't be hidden. Who issues the invoices and to whom. Who owns the equipment and the premises. Where the employees are and who pays them. Who bears the loss when things go wrong. If all of these remain with you, you have two NIPs and a single business.
There is also a consequence that is often not taken into account. Your spouse becomes a related person to you within the meaning of Article 3(13) of Law No. 29/2023, which defines a related person as any person connected to another in a relationship that directly or indirectly affects the determination of the tax base. Therefore, any sale, lease, or service between your two entities is considered a separately examined transaction.
What if I have two completely different activities?
When the same NIPT carries out two activities, the threshold is calculated on the subject's total turnover, not on each sector separately. If you simultaneously have trade and services, the revenues are combined and compared to 14,000,000 lekë.
The second activity is added by changing the scope of activity at the National Business Center, not by opening one. New registration as a natural person. This is why many owners only discover the rule at the counter, having built a plan on the opposite assumption.
If you have an LLC, the split is possible, but the question changes.
Two limited liability companies are two separate taxpayers, so the 1,400,000-lek threshold is measured for each one separately, and the same person can be a partner in both. Here, no provision prohibits this separation.
That's precisely why the question shifts. It's no longer about whether it's allowed; it's about whether it endures. And sustainability is measured by two things: the reason why the second society exists and the way the two interact.
When two companies are considered related parties
Two companies become related parties when there is a relationship between them that directly or indirectly affects the determination of the tax base, pursuant to Article 3, paragraph 13, of Law No. 29/2023. A similar definition is also found in Article 5 of Law No. 9920/2008.
Joint partnership, joint administrator, the same address, and economic dependence are the typical circumstances that create this relationship. Being related persons is not a violation and does not in itself carry any consequences. What changes is that transactions between you are no longer treated as ordinary market transactions.
What happens to the prices between your two companies?
Transactions between related parties must follow the arm's-length principle, meaning the terms should be those that two independent parties would agree upon. Law No. 29/2023 addresses these transactions in Article 32, regarding the transfer of prices, and in Article 44, regarding the arm's-length principle.
In practice, this means that the rent Company A invoices to Company B, the administrative services between them, and the price of the goods transferred from one to the other must be documented and explained. When profit is shifted from one company to another without a commercial reason, there is only one possible explanation, and that is the threshold.
It is also worth remembering how the controls are selected. Law No. 9920/2008 supports selecting controls based on risk analysis, in Article 45. Two companies with the same partners, the same address, and revenue just below the threshold are not violations, but they are a pattern that risk analysis easily identifies.
Read also: Is your business ready for a tax audit?
Calculated example. How much does a separation really save?
The apparent saving of a separation is the income tax that isn't paid, while its cost is the doubling of everything else. The figures below are rounded and illustrative, not actual client data.
Let's take a company with annual revenue of 24,000,000 lek and a profit of 3,600,000 lek. As a single entity it exceeds the threshold, so the profit tax is 15% on the 3,600,000 lek, which amounts to 540,000 lek. If split into two companies, each with 12,000,000 lek in revenue and 1,800,000 lek in profit, both remain below 14,000,000 lek and profit tax falls to zero.
| Voice | Value per year |
|---|---|
| Corporate profit tax, 15.1% on 3,600,000 lekë. | 540,000 lek |
| Profit tax as two companies below the threshold | zero lek |
| Significant savings | 540,000 lek |
| Second accounting subscription, lower bandwidth threshold | 360,000 lek |
| It remains before other costs. | 180,000 lek |
The figure of 360,000 lekë comes from the prices we publish ourselves. A second VAT-registered company with employees falls into the 30,000 to 60,000 lekë per month bracket, and the table uses its lower limit. If you take the midpoint of the bracket, the savings disappear.
And this is only the first step. The second company requires its own financial statements and its own board resolution by July 31, as well as its own fiscalization certificate., POS terminal for each point of sale, bank account, and contributions to the administrator when another person is appointed. Add your time, which isn't billed anywhere but is still spent nonetheless.
When the profit goes to the partner, dividend tax 8% It's paid the same in both scenarios, so it's not really comparable. Thus, the distribution doesn't change the cost of withdrawing the money; it only affects the year's profit tax.
The example above is a single case. The brackets below let you find yours, because tax is calculated on profit, not on revenue.
How much income tax you owe if you exceed the threshold
Six brackets, calculated on taxable profit rather than on revenue. Up to 14,000,000 lek profit, the rate is 15% for both individuals and companies. Find your bracket and click on it. The first one is open as an example.
Annual income up to 500,000 lekView calculationClose
Profit tax, 75,000 lek.
500,000 lek multiplied by 151 TP3T yields 75,000 lek in profit tax.
A second entity starts at around 360,000 lek per year just for accounting. So the split costs you roughly five times more than the tax you would save.
Annual profit 500,000 to 1,000,000 lekView calculationClose
Profit tax, 75,000 to 150,000 lek.
1,000,000 lek multiplied by 151 TP3T yields 150,000 lek in profit tax.
The lower cost of a second party remains at over twice the savings. The calculation doesn't add up.
Annual profit 1,000,000 to 2,000,000 lekView calculationClose
Profit tax, 150,000 to 300,000 lek.
2,000,000 lek multiplied by 151 TP3T yields 300,000 lek in profit tax.
Still at the lowest cost of a second party, not including secondary mirrors, the second terminal, and your time.
Annual profit: 2,000,000 to 3,600,000 lekView calculationClose
Profit tax, 300,000 to 540,000 lek.
3,600,000 lek multiplied by 151 TP3T yields 540,000 lek in profit tax.
Here the tax approaches cost, but doesn't clearly exceed it when other items are added. This is the range where decisions are made based on your actual figures, not a general rule.
Annual profit: 3,600,000 to 14,000,000 lekView calculationClose
Profit tax, 540,000 to 2,100,000 lek.
14,000,000 lek multiplied by 15% yields 2,100,000 lek in profit tax. The rate is the same for a natural person and for a company.
Only in this tax bracket does it clearly exceed the cost of a second entity. And then the structure is built for commercial reasons and documented from day one, not to stay below the threshold.
Annual profit over 14,000,000 lekView calculationClose
Profit tax depends on your form.
An individual pays 15% up to 14,000,000 lek and 23% only on the excess, according to Article 24(2) of Law No. 29/2023. The company remains at 15% on all profit.
On a profit of 18,000,000 lekë, the individual pays 3,020,000 lekë, while the company pays 2,700,000 lekë. So here, the form you choose matters more than the question of whether the business should be split.
On what it is built. Rates are measured on taxable profit and apply when annual gross income exceeds 14,000,000 lekë, because below that turnover the zero rate applies until December 31, 2029. The cost for the second entity includes only the accounting subscription, at 30,000 lekë per month according to the rates we publish. The second set of financial statements, the second fiscalization certificate, the second terminal, the administrator's insurance, and your time are not included. The figures are rounded and illustrative, not a calculation for your case.
There's also a cost that doesn't appear on any invoice. A split business has two sets of financial statements instead of one, and each shows only half the reality. When you apply for a loan, the bank looks at the statements of a single entity, not the combined total of your two entities. So the structure that saves you tax also reduces the amount you can borrow.
Read also: What does the bank look at when you apply for a business loan?
When separation is lawful and reasonable
The second society exists when there is a reason for its existence that isn't tied to the threshold. That's the whole proof, and it's simpler than it seems.
The reasons that actually arise are few and well known. Truly distinct activities, such as manufacturing on one side and retail on the other, with separate customers, suppliers, and employees. Different partners when someone joins only for one part of the business. Risk allocation, when a high-liability activity is not wanted under the same company as the assets. Preparation for sale or for an investor, when a division needs to have its own clean financial statements.
The test we use before recommending a second structure has three questions. If the answer to any one of them is no, the structure is not built.
Would I open this second company even if the 14,000,000 lek threshold didn't exist at all?
Can I document all transactions between the two companies without relying on the fact that they both belong to me?
Would each company continue to operate if the other were to shut down tomorrow?
When all three answers are yes, division isn't an evasion, it's organization. When one is no, what you're building isn't a structure, it's an explanation you'll need later.
For the self-employed, the split hits from the opposite side.
A self-employed individual who allocates clients between himself and another person risks losing his self-employment status, because his income may be reclassified as employment income. There are two criteria, and only one of them is required.
First, when 80% or more of the revenue is received directly or indirectly from a single client. Second, when 90% or more of the total revenue is received from fewer than three clients. The criteria are clarified in Instruction No. 26, dated September 8, 2023, as amended by Instruction No. 9, dated March 12, 2026.
Here lies the turning point. When a self-employed person with several clients passes some of them on to a second person, that second person starts out with one or two clients. Thus the new entity is born precisely within the criteria that trigger re-qualification, and the problem doesn't shrink—it multiplies.
Protection exists and is called the Self-Employment Status Declaration, which must be filed by March of the following year along with the annual return. It does not take effect automatically. The administration can challenge it by examining the true nature of the relationship, such as dependence on the client's equipment, a imposed schedule, or the absence of personal financial risk. The full rules are available on our website. self-employed and free professions.
Read also: Partner loan and withdrawals from the account when taxed as disguised dividends
What to do when you're approaching the threshold
When turnover is approaching 14,000,000 lek, the first task isn't the structure—it's the calculation. Most owners who seek a structural solution do so based on a figure they haven't yet determined.
Take the projected annual profit, not the revenue, and multiply it by 15%. That figure is all you risk paying more. Then compare it to the annual cost of a second entity. In most small-business cases, this calculation ends the conversation.
If the profit is substantial and the calculation favors a structure, then that structure is built for commercial reasons and documented from day one, with contracts, with explainable pricing, and with actual allocation of resources. A well-built structure costs only once. A structure built just to meet a threshold costs every year, and then again whenever it's questioned.
And when the threshold is crossed anyway, this is not a failure. Look at what happens with tax obligations and with Fines and late fees if filing is delayed, because the cost of a late filing is often greater than the tax you were trying to save.
Every time there is a tax or financial change that affects your business, we notify you directly by email with a practical explanation.
Send me free notificationsFrequently asked questions
Is it allowed to split a business into two entities in Albania?
It depends on the form. A natural person cannot be registered twice with the same personal identification number, whereas the same person can be a partner in two or more limited liability companies. In the latter case, the separation is allowed, but the two companies become related entities.
Can I have two NIPT as an individual?
No. Article 40, paragraph 1, of Law No. 9920, dated May 19, 2008, provides that a natural person with the same personal identification number is registered only once by the National Business Center. If you need a second activity, it is added to the same NIPT.
If I have two stores, is the threshold calculated separately for each one?
No. The threshold is calculated based on the entity's total turnover. Two points of sale under the same NIPT combine their revenues and are compared to 14,000,000 lek.
My two companies have the same address. Is that a problem?
It is not a violation in itself. The same address, the same partners, and the same administrator are circumstances that make companies related parties, and related parties are required to apply the arm's-length principle in their transactions. The problem only arises when those transactions cannot be documented.
What happens if I cross the threshold in the middle of the year?
The annual rate is determined by the annual turnover, so exceeding the threshold affects that year's return. You view the turnover in the sales register from the fiscalization system and compare it with the threshold at each monthly closing. The check at the end of the first six-month period gives you time to plan the prepayments for the following year.
If my tax is zero, do I have to file the annual return?
Yes. The annual return must be filed even when the tax is zero, and failure to file results in a penalty for non-filing. This is one of the most common mistakes made by businesses that benefit from the zero rate.
What happens after December 31, 2029?
The zero rate is set to remain in effect until December 31, 2029. After that, the normal regime applies, so decisions on long-term return investments are calculated by taking into account the years beyond 2029, not just the following year.