- In September 2019, undistributed profits from 2017 and earlier years qualified for a reduced rate of 81% instead of 151%, provided the tax was paid by September 30, 2019.
- Anyone who missed that date lost the discount and had to pay the full rate of 15%—twice as much—for the same profit during the same period.
- This case illustrates a principle that still holds today: temporary tax reliefs often have a firm deadline after which there are no exceptions.
- Law No. 8438/1998, on which this deduction was based, is no longer in effect. Today, dividends are taxed at a standard, permanent rate of 81%, in accordance with Law No. 29/2023.
On September 14, 2019, the General Directorate of Taxes reminded taxpayers that undistributed profits realized in 2018 benefited from the reduced rate of 8% if payment was made by August 20, 2019, while undistributed profits from 2017 and earlier years benefited from the same 8% rate, but with a payment deadline of September 30, 2019. Anyone who missed this second deadline lost the discount and had to pay the full rate, then 15%, on the same profit.
From our daily work, we see that businesses with temporary tax relief often treat deadlines as guidelines rather than as rigid. The case of September 30, 2019 clearly shows the opposite: the last day was absolute, with no tolerance or extensions.
Read also: Dividend tax: from the temporary 2019 reduction to today's rate and the How profits are distributed and how dividends are taxed: our complete guide.
How the September 30, 2019 deadline worked
Two deadlines for two groups of earnings
Law No. 8438, dated December 28, 1998, “On Income Tax,” as amended, which is no longer in force, provided for two separate deadlines for the same deduction, August 20, 2019 for the 2018 gains, and September 30, 2019 for the gains of 2017 and earlier years, including reserves and capitalized gains. Why two different deadlines is not known for sure from the notice itself, but the practical effect was clear: two separate windows of opportunity, each with its own cut-off date.
The cost of missing the deadline
Missing the September 30, 2019 deadline did not impose a separate penalty, but it increased the tax rate from 81% to 151%, effectively more than doubling the tax burden on the same amount of profit. For a business with substantial undistributed profits from 2017 and earlier, this was a significant financial difference, avoidable simply by meeting a deadline.
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The lesson on today's temporary facilities
Even today there are time-limited tax incentives, for example, the 0% tax regime on profit for businesses with revenue up to 14,000,000 lek, which is valid until December 31, 2029. The 2019 case reminds us that every such relief has a real deadline and that it's worth planning ahead, not leaving it until the last days.
How we handle this with our clients
When a client has a time-limited tax relief, we mark it on our internal calendar a few weeks before the deadline so that the decision can be made with ample time, not under the pressure of the last days.
Frequently asked questions
Does the September 30, 2019 deadline still apply?
No. It was a one-time deadline tied to the old Law No. 8438/1998, which is no longer in effect.
What is today's dividend rate?
8%, but as a permanent standard rate under Law No. 29/2023, not as a discount conditioned on a payment term.
Where can I find today's dividend rules?
In our complete guide to profit distribution and dividend tax, linked above.
