Many small entrepreneurs ask themselves, “I haven't exceeded the 10 million lek threshold – do I have to register for VAT myself?” This threshold refers to the annual turnover threshold (currently 10,000,000 lek). Above which registration as a VAT taxpayer is required. Value Added Tax is mandatory.
According to the of the law, Businesses with a turnover below this threshold are not required to join the VAT scheme and can remain VAT-free small businesses until they exceed the threshold.
At first glance, not paying VAT seems like a big advantage. 20% less tax for your customers and fewer documents for you. But in reality, the decision to voluntarily register for VAT isn't that simple. VAT isn't always just a burden, nor is it a universal benefit for everyone. It depends on the nature of your business, the clients you have, and your plans for the future.
Below we will analyze what it means to be a VAT-registered entity. In which cases it is worthwhile or not worthwhile to voluntarily register, even when the law does not require you to do so.
Read also: How to prepare a 2026 tax plan – even if you're not an economist
What does it mean to be a VAT-registered business?
Being a VAT-registered business means that your company is part of the tax scheme. And there are specific monthly obligations. First, you must issue VAT invoices for every sale and keep detailed records of sales and purchases. Each month, by the 14th of the following month, you must file your VAT return for that period and pay the corresponding amount due.
In practice, this means calculating how much VAT you have collected from your sales and how much VAT you have paid on purchases from your suppliers. The difference is either remitted to the government or retained as a credit (if the VAT on purchases exceeds that on sales).
For example, if during the month you sold goods for 1,000,000 lekë plus VAT and purchased goods for 500,000 lekë plus VAT, you will pay VAT on the difference (20% on the added profit).
Being VAT-registered requires financial and administrative discipline. The Tax Administration expects returns to be filed on time and accurately; otherwise, fines and late-payment interest will apply. Any VAT return filed late may result in a fine, and late payments incur daily interest.
Therefore, in addition to the financial aspect, you should also consider your capacity to manage the documentation. If you don't have an accountant, you may need to hire one. Or invest your own time each month to complete the statements and reconcile the books.
When is it worth signing up, even if you're not required to?
Not all small businesses stay outside the VAT scheme. Some choose voluntary registration because, in their circumstances, the benefits may outweigh the costs. Here are some situations when it might be worth joining VAT even if you're not required to:
Most of the clients are other businesses (Business-to-business)
If you sell primarily to VAT-registered businesses, they can deduct the VAT you charge on your invoices. This way, your price to them remains virtually the same, while you benefit from the VAT refund on your costs and purchases.
For example, a raw materials supplier who sells to other factories will be more readily accepted if he issues an invoice with VAT, because his business partners can claim it as a credit.
B2B businesses generally don't have a problem with VAT, since it's deductible for them and they're accustomed to this regime. In fact, being registered can give you a more professional image in the eyes of partners. They treat you like a serious business with a certain level of activity.
You have a lot of VAT purchases (you want to deduct them).
One primary reason to register is the financial benefit of deducting the VAT paid on purchases. If your business has significant expenses for equipment, goods, or services subject to VAT. Registration allows you to reclaim the VAT paid. This can significantly reduce your operating costs.
For example, a manufacturing startup that buys machinery and high-value raw materials can save 20% of the amount of those purchases by being VAT-registered, because it will claim that 20% as input tax credit. Without registering, that amount would remain an additional non-deductible cost.
So, the higher the VAT-eligible spending portfolio, the greater the incentive to register and take advantage of the credit.
Plan for rapid growth (it's better to start early)
If your business is still below the threshold, but you anticipate crossing it soon (or have expansion ambitions), it may be worthwhile and a smart idea to opt into VAT from the outset. This makes the transition easier. You won't have to suddenly change prices or your invoicing system once you cross the threshold, because you've integrated VAT from the start.
Early registration gives you the opportunity to stabilize VAT-inclusive prices and establish reporting procedures when the workload is still manageable. When your business grows further, you will have already gotten past the “shock” of implementing VAT and will be on the right track without any fiscal surprises. In short, think long-term: if your goal is to grow big, adopting VAT now can save you headaches down the road.
Another situation where voluntary registration is mandatory in practice: when you make imports. The law requires every business that imports commercial goods to register for VAT, regardless of turnover. So, if you plan to import products from abroad to sell on the market, you'll need to join the scheme even if your turnover is initially modest.
Analyze with AlProfit whether voluntary registration is worth it for your business.
When is it not worth it?
Of course, there are plenty of cases when staying outside VAT is more favorable for your small business. Here's when it's not worth registering if you're not required to:
When your customers are primarily individuals (B2C)
If you sell to end consumers who aren't VAT-registered, joining the scheme will force you to raise prices by 20% (or absorb that cost yourself in your margin). This will immediately make you less competitive in the retail market.
For example, a store that sells clothes to citizens will have a hard time selling a jacket for 12,000 lek (including VAT) when an unregistered competitor sells it for 10,000 lek without VAT.
Individual consumers only see the final price, so being subject to VAT could be a price disadvantage for you. If you try to keep the same final price as before by including VAT, your profit will be significantly reduced, because one-sixth of every sale will go to the government. Therefore, businesses that sell directly to the public (e.g., shops, cafes, individual service providers) usually don't rush to register for VAT for this reason.
When you don't have many deductible expenses
Suppose your activity has minimal costs: for example, you offer consulting services from home, with no significant equipment or goods to purchase. In this case, VAT registration means mainly VAT to be paid each month, because you won't have enough input VAT to deduct.
Unlike a factory that buys raw materials with VAT, you wouldn't get any significant discount, but you would have to pay 20% VAT on every invoice you issue.
In other words, if you have no expenses on which to claim VAT, joining the scheme may only saddle you with additional taxes. Many independent professionals or lean businesses (with minimal operating expenses) choose not to register until the law requires it, precisely because they derive no financial benefit from VAT credit.
When you don't have the capacity (or desire) for monthly bureaucracy.
As we mentioned, VAT comes with administrative obligations: keeping records, filing monthly returns, accurate calculations, and so on. These require time and/or costs. If you're a small team without an accountant, or a freelancer who can barely find time to deal with paperwork, it might not be worth going through this hassle.
The added cost of hiring an economist or purchasing accounting software may not be justified by the benefits if your business is still small. As noted in various guides, VAT registration increases the administrative burden. You must keep detailed documentation and report regularly, which may require additional financial or human support.
Some small businesses prefer to focus on growing their operations without added burden until the moment they're actually required to register arrives.
Practical example: The small business that voluntarily registered for VAT.
To understand the consequences more concretely, let's look at a hypothetical scenario. Arbeni is an individual who sells printed sweatshirts online. His annual turnover is about 5 million lek – so he is not required to register for VAT. However, he is considering registering voluntarily, on the grounds that he buys a lot of materials subject to VAT (blank shirts, printing ink, packaging) and would like to deduct it. What happens after he registers?
Benefits
Immediately, Arben gains the right to claim input VAT on his purchases. All the 20% VAT he pays when buying goods for his business can now be reclaimed on his return. Let's say that over the course of a year he buys materials worth 1,000,000 lek (which includes ~166,667 lek VAT). Without being registered, that 166,000 lek would simply be a lost cost for him. As a VAT-registered entity, he can deduct it from his own liabilities.
If we continue with the numerical example, let's say Arben sells sweatshirts worth 5,000,000 lekë per year. Now that he is a VAT-registered taxpayer, he must charge VAT on these sales. If he fully passes this tax on to his customers, his prices will increase by 20% (so he will collect a total of 6,000,000 lek, of which 1,000,000 lek is VAT for the state). He will pay the state the net VAT: 1,000,000 lekë collected from customers minus 166,667 lekë VAT on material purchases, which ultimately amounts to 833,333 lekë remitted.
After paying VAT, Arben is left with 5,000,000 lek in net sales revenue (the same as when he wasn't VAT-registered), but his expenses are lower because he reclaimed 166,000 lek in VAT on his supplies. The result? His profit increases by the same amount (about 166,000 lekë more per year). He is now financially better off because he reduced his costs. This is the ideal scenario when joining the VAT system gives you an advantage: Arben passed the VAT on to consumers (who, although they paid more, had no other choice) and benefited from the reduced purchase tax.
Costs/Disadvantages
In reality, Arben noticed that sales to individuals are price-sensitive. Some customers began to complain about why the price of the blouses had increased from 1,000 Lek to 1,200 Lek. To avoid losing customers, he was forced to slightly lower his margin and absorb part of the VAT himself (for example, he only raised the price to 1,100 Lekë, covering the 100 Lekë VAT out of his own pocket). This means that a portion of his profit was reduced, because now a share of every shirt goes to taxes.
In addition, Arben also encountered the other side of the coin: every month he has to file and pay VAT, keep purchase and sales invoices, and spend time on record-keeping. He spent money on approved invoicing software (due to fiscalization) and consults from time to time with an accountant to understand the statements. All of these are additional costs he didn't have before. At the end of the year, he did the math: Was it worth it? It turned out that the savings from claiming VAT credit were almost offset by the tax he paid on sales plus administrative expenses.
For Arben, the main reason for opting into VAT was to grow the business in the future – he plans to export sweaters abroad (export sales are VAT-free at 0%) and expand into domestic B2B wholesale. At that point, being registered would give him free rein to operate with large businesses without any obstacles. So he accepted the short-term losses as an investment in long-term growth.
This example reminds us that the effects of VAT depend on the type of business: for a business with mass individual customers, a 20% price increase can be a serious problem, whereas for a business with taxable customers, the same increase is manageable.
Conclusion and practical advice
Registering for VAT is not an easy decision or the same for everyone. As we saw, the specific circumstances of your business are key to judging whether it's worth it or not. Some businesses benefit from VAT credit and the boost to their reputation as a “large business,” while others would simply be saddled with taxes and extra work without any real gain.
Therefore, preliminary analysis is essential. Sit down and do a cost-benefit calculation: how much VAT you'll pay on sales, how much you'll save on purchases, whether you'll lose customers due to the price increase, and whether you have sufficient resources to manage the monthly filings.
If you're not sure, don't hesitate to consult an accountant or tax advisor. To better understand your situation and whether it's worthwhile to register for VAT tax liability, we recommend contacting our office. AlProfit Consult.
A professional can help you design concrete scenarios for your business and guide you toward the best choice. An informed decision can save you thousands of lek per year—or, conversely, add just as much unnecessary cost.
Voluntary VAT registration can be a double-edged sword. Not everyone benefits equally from it, so handle it with care. Assess your clientele, cost structure, and long-term objectives. Only then decide whether VAT is a smart move for your business or something that can wait until the law requires it. A decision made at the right time and with proper professional advice will help you avoid regret and optimize your business's financial performance.
What changed with Law 79/2025?
Law No. 79/2025 “On Certain Amendments to the VAT Law” introduced three changes affecting the decision to register:
The fine for an unfiscalized invoice was increased from 10,000 to 50,000 lek. This raises the administrative risk for any VAT-registered business that does not maintain proper documentation.
Businesses with high tax compliance can apply for “trusted taxpayer” status, which provides VAT refunds within 15 days, a concrete advantage for those with high input VAT.
Self-billing for services from abroad has become mandatory regardless of turnover. If you pay for Google Ads, a cloud platform, or any foreign digital service, you must issue the invoice yourself and declare the VAT, even if you are not subject to the scheme.
Frequently asked questions
What is the mandatory VAT threshold in Albania?
10,000,000 lek annual turnover. Above this threshold, registration is mandatory within 15 days of exceeding it.
Can I register for VAT even with a turnover below 10 million lek?
Yes. The law provides for voluntary registration (Article 12) for any business that wishes to be part of the scheme, regardless of turnover.
If I register as a volunteer, can I then cancel my registration?
Yes, but the law requires at least two consecutive years below the registration threshold, plus a final audit and full settlement of obligations.
Do businesses that pay for digital services from abroad (Google Ads, Adobe) have a VAT obligation?
Yes. Under Law 79/2025, any payment for digital services by foreign entities requires self-billing and VAT reporting, regardless of whether the business is subject to the scheme or not.