- Reclassification of the self-employed occurs when 80% of annual revenue comes from a single client, or 90% from fewer than three clients.
- The percentage is calculated on billed revenues, not on collected revenues. This was clarified by Directive No. 4, dated February 4, 2025.
- As of January 2026, reclassification is no longer automatic. The self-employed person protects their status with the Self-Employment Status Declaration.
- The declaration is submitted by March of the following year, together with the annual income tax return.
- The rule does not apply when services are provided exclusively to non-resident clients who do not have a permanent establishment in Albania.
Reclassification of the self-employed individual occurs when his income is taxed as employment income. The criteria are two: 80% of annual income from a single client, or 90% from fewer than three clients.
The criteria are specified in Article 12, paragraph 1, letter “ç”, of Law No. 29/2023 on Income Tax. By Instruction No. 4, dated February 4, 2025, the Ministry of Finance clarified that the percentage is calculated on billed revenues, not on collections.
This precision changes the moment when the obligation arises. The invoice issued in December is included in that year's calculation even if the client pays in February.
Read also: Changes to income tax, March 2026: what's changing for the self-employed
When the self-employed are taxed as employees
The logic of the rule is simple. When a person is effectively working for a single client, the relationship approaches employment even if on paper it is a service contract. The law treats it for tax purposes as employment.
The consequence is not merely formal. The switch from the business regime to the wage regime alters the rate, the deductions, and the reporting. The page provides a full comparison of the two forms. Wage or self-employment.
What are the two exact criteria?
First criterion: 80% or more of annual revenue comes from a single client. Second criterion: 90% or more of annual revenue comes from fewer than three clients.
It's enough to meet one criterion. You don't need to meet both at the same time.
What is the percentage calculated on?
The percentage is calculated based on the income billed during the year. The tax liability is then calculated on the annual net income, that is, the billed income minus deductible business expenses.
Before February 2025, the practice of calculating collections created uncertainty, because two people with the same invoices could arrive at opposite results simply due to the ordering of payments. That doubt no longer exists.
When the rule is not enforced
The rule does not apply when services are provided exclusively to non-resident individuals or entities without a permanent establishment in Albania. This protects the service exporter working with a foreign client.
Be careful with the mix. When there's also a resident Albanian client among the customers, the rule comes back into effect and the non-resident client's payments are included in the calculation.
Read also: Tax legislation, hub of topics and deadlines
What changed after February 2025?
The rule did not remain as it was. Within a year, a safeguard was added that removes the automatic reclassification.
| The moment | What happened? |
|---|---|
| September 2023 | Instruction No. 26 applies criteria 80% and 90% of Article 12. |
| February 2025 | Instruction No. 4 specifies that the basis is billed, not collected. |
| December 2025 | Law No. 81/2025 adds the option to self-declare one's status. |
| March 2026 | Instruction No. 9 regulates the procedure and the declaration form. |
How the Self-Employed Status Declaration Works
When the criteria are met, the self-employed person may self-declare that they are not in a state of tax evasion. The declaration is completed using the model in Annex No. 1 of the guidance and submitted to the regional tax directorate.
The deadline is by March of the following year, along with Annual income statement. Until a contrary assessment by the tax administration, the income is treated as business income.
What remains the same
The 80% and 90% criteria were not removed. The calculation basis on billed revenues was not removed. The exemption for non-resident customers was not removed.
Only the automatic consequence changed. The administration reserves the right to verify and, when it finds a deviation, to reclassify the income. Therefore, the declaration is not a formality; it must reflect the reality of the work.
Read also: Labor Code, employment relationship, and employer's obligations
How much does reclassification weigh for a self-employed person?
The example below follows the calculation given in the instructions, with rounded figures.
Calculated example with income of 4,000,000 lek
A self-employed programmer invoices 4,000,000 lek within the year. Of that amount, 3,280,000 lek, or 82%, come from a single client, and 720,000 lek from five other clients.
The 80% criterion is met, so the income is treated as employment income. The deduction of expenses is recognized at 30% of income, i.e., 1,200,000 lek, and the personal legal deductions are 408,000 lek, which include 360,000 lek of basic deduction and 48,000 lek for a dependent child.
The taxable base is set at 2,392,000 lek. With rates of 13.1% up to 2,040,000 lek and 23.1% above that threshold, the tax amounts to 346,160 lek.
Comparison is what matters. But the same income, treated as business income, falls under zero regime until December 31, 2029 for annual income up to 14,000,000 lek. Therefore, the reclassification does not increase the tax; it creates it.
Read also: Taxation of liberal professions, January 2024 change
Read also: Reporting by sellers and self-employed individuals on digital platforms
What should the self-employed person do during the year?
Three steps cover most of the risk. First, track your billing percentage by client throughout the year, not in March when it's too late. Second, when the percentage approaches the threshold, document the actual independence of your work, your schedule, your resources, and the other clients you've contacted.
Third, when the criteria are met, submit the Self-Employed Status Declaration within the deadline. Contribution obligations and registration as self-employed are addressed on the page. status and contributions, while documenting billing and expenses at Finance and Accounting.
If you haven't registered yet and are evaluating the form, the registration steps and the choice of legal form can be found at business registration. These pages are updated whenever the rule changes, so it's worth keeping them as a reference point throughout the year.
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
When is the self-employed person reclassified?
When 80% or more of annual revenue comes from a single client, or 90% or more from fewer than three clients. Only one criterion need be met.
Is the percentage calculated on invoices or on payments?
Regarding invoices. Instruction No. 4, dated February 4, 2025, clarified that the basis is the invoiced revenue, not the collected revenue. The December invoice is included in the year it is issued, even if it is paid the following year.
Will I be automatically reclassified if I exceed 80%?
No, as of January 2026, the automation was removed. Law No. 81/2025 and Instruction No. 9, dated March 12, 2026, allow the submission of the Self-Employed Status Declaration, and until a contrary assessment is made, the income is treated as business income.
When is the Self-Employment Status Declaration submitted?
By March of the following year, to the regional tax directorate, together with the annual personal income tax return.
What happens if I work only with foreign clients?
The rule does not apply when services are provided exclusively to non-residents without a permanent establishment in Albania. If even one resident client is involved, the rule applies again.
How much does the reclassification cost me?
It depends on the income. In the example with 4,000,000 lek, the tax comes to 346,160 lek, whereas as business income under the zero-rate regime up to 14,000,000 lek the tax would be zero. In addition to the tax, there are also contributions and audit consequences.
Is the statement enough to protect the status?
The declaration places the burden of proof on the administration but does not eliminate verification. When an audit finds a deviation, the revenues may be recharacterized. Therefore, documentation of the work's actual independence remains necessary.
