Review of prepaid income tax payments when income falls

Reviewing prepayments is a business's right to lower its income tax installments when the current year is performing weaker than the previous one. Prepayment installments are calculated based on the tax from the prior year, not on the profit you're making now. When the year turns out weaker, the installment remains high and the business pays today a tax that its year-end balance won't actually owe.

This article tells you who is entitled to this, how the installments are calculated, how to submit the request, and provides you with a ready-made template to adapt.

Read also: Prepayment of income tax, deadlines, and calculation

How are the prepayment installments calculated?

Installments are not calculated on the current year's profit but on the tax previously declared. This is why a declining business may find itself paying higher installments than it is entitled to.

The base changes over the course of the year. The January, February, and March installments are calculated on the profit tax from two years ago, divided by twelve. From April onward, the base shifts to the tax from the previous year, again divided by twelve. Therefore, the April installment often changes significantly from the March one, because the newly filed annual return takes effect.

Installments are paid in four quarterly installments, on March 31, June 30, September 30, and December 31. For most businesses, the next installment is on September 30, 2026.

Who has the right to request a review of prepayments?

Any business that anticipates its income tax for the year will be significantly lower than the prior year's tax on which the installments were calculated has the right to do so. This is a right, not an obligation, and it does not apply automatically.

Instruction No. 26/2023, the implementing act of Law No. 29/2023, ties the review to concrete situations. A significant drop in sales, a significant drop in purchases, and the loss of major contracts are the typical circumstances that support the request. The argument is not enough to state; it must be shown with figures.

When you don't need any review at all

If your business has revenues of up to 14,000,000 lekë per year and benefits from the 0% rate until December 31, 2029, the tax for the previous year is zero. When the base is zero, there are no prepayment installments, so there is nothing to review.

Businesses that closed last year with a loss are in the same situation. Without tax from the previous year, there is no obligation to pay installments. Before preparing a request, check with Prepayment Subpage if you are due any installments this year.

How is the request for review submitted?

The request is submitted in writing to the tax administration. Its essence is not the form but the numerical argument that accompanies it.

The good request shows the current installment tax, the new profit forecast for the year, and the reason for the decline. Attach data supporting the forecast, such as revenue generated to date, a comparison with the same period last year, and any events explaining the decline, such as the termination of a contract or the suspension of an activity.

The administration reviews the request and makes a decision. If it is approved, the reduced installment applies to subsequent periods. Until a response is received, the existing installment term remains in effect, so the request should be prepared well in advance of September 30, not on the last day.

Calculated example

Let's take a company with a profit tax of 1,200,000 lek for last year. The monthly prepayment installment comes out to 1,200,000 divided by 12, so 100,000 lek per month.

This year the company lost its main client and revenue fell by 40% compared to last year. The realistic tax estimate for this year is about 500,000 lek, not 1,200,000. The fair installment would be 500,000 divided by 12, so about 42,000 lek per month.

Without a review, the company would pay 100,000 lek per month and would expect reimbursement next year. With a review accepted, it pays about 42,000 lek and keeps roughly 58,000 lek in business each month—money it needs precisely when turnover has fallen.

What happens if the installment isn't paid?

Failure to pay an installment is treated as failure to pay a tax obligation, not as a minor violation. A penalty of 0.061% per day of delay is applied to the unpaid amount, capped at 365 days, plus annual interest, currently 7.8%.

The practical significance is this. A review legally reduces the installment, whereas simple nonpayment lets the obligation increase the fine. When the year is tough, the right course is to request a reduction, not to remain silent. We keep the full figures of the fines at Fines and Late Fees Page.

Ready-made request format

To simplify the process, we have prepared a ready-made request template in Word. It includes the complete structure, the subject, the argument, and the fields that you fill in with your data.

The format is a starting point, not the final document. Replace the figures, dates, and the reason for the decline with your actual business situation before submitting. If you'd like us to review it together before submission, write to us.

To the Regional Tax Directorate [City]
From the subject [business name], with NIPT [number]

Subject: Request for review of the advance payment installment for income tax.

Dear,
Based on Law No. 29/2023 and Instruction No. 26/2023, we request a review of the prepayment installment for profit tax for the year [year]. The current installment has been calculated on the tax for the year [previous year] at an amount of [X] lek per month. Based on this year's performance, we anticipate that our tax liability will be approximately [Y] lek, due to [reason, e.g., a Z% decrease in turnover]. Attached you will find the supporting data. We request reducing the installment to [new amount] lek per month.

Respectfully,

Frequently asked questions

Until when can I request a review of the prepayments?

The request can be submitted before the deadline for the installment you want to reduce. For the third installment, that means before September 30. Since the administration needs time to review it, it's best to submit it a few days before the deadline, not on the last day.

Does the review automatically lower my installment?

No. A review is a request that the administration examines and decides. Until you receive a response, the existing installment remains in effect and must be paid on time to avoid a penalty.

What if my profit turns out to be higher, not lower?

If you anticipate higher earnings this year than last, you can voluntarily pay higher installments so you won't end up with a large liability at the end. The review rule works both ways, but the formal request is usually used for a reduction.

Do I lose money if I pay higher installments than necessary?

No. The prepaid surplus isn't lost; it's carried forward in the annual statement and either refunded to you or carried over. The problem isn't loss but liquidity. You're short on cash during the year precisely when you need it.

Is the review also applicable to the self-employed and freelancers?

Yes, the principle is the same for self-employed individuals who pay prepayment installments. We have addressed their specific rules and the latest developments separately on the page of self-employed.

Where can I find the request form?

The full request form is available above in this article, in the "Formatting" section. Copy it, adapt it with your data, and submit it to the tax administration.

The September 30 deadline is approaching, and a timely request saves the business money it needs today. The deadline doesn't wait for last-minute submissions.