Many businesses today operate without being registered or declare minimal income because they believe that formalization will immediately bring increased tax obligations. This fear has an understandable basis in old law, but the current law changes the calculation completely.
Most Albanian small and medium-sized businesses can operate with a 0% profit tax%until the end of 2029. This is not a promise or a proposal. It is the law in effect.
What does the new tax law provide for?
Law No. 29/2023 “On Income Tax”It took effect on January 1, 2024, and completely changed the way profits and personal income are taxed. The basic rates are 15% and 23% for business income, and 13% and 23% for employment income.
The law also provided for a transitional period with significant tax reliefs, which apply until the end of 2029. Among these, the main relief is a 0%% rate on profit tax.
Tatimi 0% mbi fitimin: kush përfiton dhe deri kur
Article 69, paragraph 1, letter “dh” of the law provides for the income tax rate 0% until December 31, 2029, for:
- merchant individuals,
- self-employed,
- entities (LLCs, partnerships, joint-stock companies, and any other legal form)
with a single condition: that the gross annual turnover (total revenue from the sale of goods and services, excluding VAT) does not exceed 14 million lek.
This condition has nothing to do with the type of activity. It has nothing to do with the legal form of the business. It has nothing to do with the geographical area where it operates. The only thing that matters is the turnover level.
What does this mean specifically
If you operate as a sole proprietor, self-employed, or as a legal entity, and your annual turnover is under 14 million Lek, your profit tax is zero Lek. Not 5%%. Not 15%%. Zero.
A self-employed electrician with annual revenue of 4 million lek. Profit tax: 0 lek. The only remaining obligations are social security and health insurance, and VAT if it exceeds the registration threshold.
An LLC providing services with a turnover of 11 million ALL. Profit tax: 0 ALL. This entity also pays no tax on its profit.
The Constitutional Court's decision and liberal professions
When the law was first implemented, the government had issued the subordinate legislation Government Decree No. 753/2023 which attempted to treat subjects with professional activity differently. Practically, that decision excluded doctors, lawyers, accountants, architects, and other similar professions from the 0% scheme.
The Constitutional Court overturned that decision with decision no. 52, dated June 27, 2024. The direct consequence: even liberal professions, if they have a gross turnover of up to 14 million ALL, benefit from the 0% rate% until the end of 2029. The limits according to the activity set by the CM are invalid.
Read also: How to register a business in Albania and what you need to know from day one.
Sectoral tax relief
The law provides for reduced tax rates also for some specific sectors, regardless of turnover level.
Agrotourism
Personat dhe entitetet që zhvillojnë veprimtari pritëse të certifikuar si “agroturizëm” sipas legjislacionit të turizmit paguajnë tatim mbi të ardhurat me normën 5% deri më 31 dhjetor 2029.
Agricultural cooperation
Entities acting under law no. 38/2012 “On agricultural cooperation societies"”They are taxed at a rate of 51 TP 3 T until December 31, 2029.
Automotive Industry
Entities conducting economic activities in the automotive industry benefit from a tax rate of 5%% until December 31, 2029.
4-5 star hotels and resorts with an international brand
Accommodation structures classified as “Hotel/Four- and five-star resort with special status,” under the tourism legislation, and which are holders of an internationally recognized trademark, are fully exempt from corporate income tax for a ten-year period. The effects of the exemption begin when the facility's economic activity commences, but no later than five years after obtaining the status. This relief applies to facilities that receive the special status until December 2026.
Software Production and Development (Completed)
Legal entities registered before the entry into force of law no. 29/2023 and which practiced software development activities were taxed at a rate of 5%, based on CM no. 730/2018. This transitional convenience has expired on December 31, 2025, and does not apply to entities registered after that date. Software businesses with a turnover below 14 million ALL remain under the general scheme 0%.
Other relief: deductions and tax treatment
The law also provides for other forms of tax relief, which are not always sufficiently recognized by businesses.
Personal allowances for individuals
If you have income from employment or business, the law provides for deductions from the taxable base. If annual income is up to 600,000 lek, 600,000 lek is deducted from the taxable base. If it exceeds that level, the deduction is 420,000 or 360,000 lek, depending on the bracket. Each child under 18 in care entitles you to an additional deduction of 48,000 lek per year. Education expenses for the child are deductible up to 100,000 lek, provided the total annual income does not exceed 1,200,000 lek.
Private pensions
Voluntary contributions made to a private pension fund are deducted from the taxable base up to the amount of the national minimum monthly wage. The employer can also treat as a recognized expense the contribution they make for their employee, up to the same annual amount.
Carrying losses
If a business results in a tax loss in a given year, the loss can be carried forward and offset against profits in future years, up to five years. This rule applies to losses generated from the 2024 tax year onwards.
Bad Debt Deduction
If you have receivables that have not been collected, the law allows their progressive deduction from the tax base according to the age of the debt: 20% after 6 months, 40% after 12 months, 60% after 24 months, and 85% after 36 months. A full write-off is allowed when all legal collection steps have been taken and the debt has been removed from the accounting books.
Sponsorships
Sponsorship expenses are recognized as a deductible expense up to certain limits. The limit is 5% of pre-tax profit for cultural, artistic, sporting, and research and development activities. For other activities, the limit is 3% of pre-tax profit. For the sponsorship of sports teams and athletes holding national titles, the law also provides for the possibility of deducting three times the sponsored amount if the entity has an annual taxable profit exceeding 100 million lek.
Read also: What expenses are considered deductible and how to document them correctly.
When not registering costs more than the tax
The logic behind not registering is usually based on the assumption that the tax will be high. The reality of the numbers shows the opposite: if turnover is under 14 million lek, the profit tax is zero.
Informality has a real and ongoing cost. The tax administration applies penalties and interest on undeclared liabilities. Any unregistered entity cannot issue invoices according to the fiscalization system, which limits cooperation with other businesses. When it comes time for growth, loan applications, or collaboration with public institutions, a formal tax history is missing.
Registration today does not bring additional tax costs. But it opens the door to opportunities that informality closes.
TEDA and Economic Zones: Specific Incentives
Albania has also started the development of free economic zones. TEDA Tirana, the first of its kind, is located between Kashar, Vaqarr and the Tirana-Durres highway and is managed by the Municipality of Tirana.
Businesses operating within this zone benefit from several specific tax and fiscal advantages:
- TVSH on goods and services within the zone, permanently.
- The father invests in the capital for the first five years.
- Tax on wages for the first two years of any new employment.
- Regarding training and R&D activities, permanently.
- 120% reduction of the initial investment for tax purposes.
Targeted businesses are digital, data centers, automotive, and other high value-added industries. Contract certification goes through the Ministry of Economy and customs authorities.
If your activity falls within these categories, this is a concrete option worth considering carefully.
Read also: What you need to know before starting a business in Albania as a foreigner
Frequently Asked Questions
How much profit tax will I pay if I have an LLC with a turnover of 10 million lek?
No. Any entity with gross revenue of up to 14 million lek per year pays corporate income tax at the rate of 0% until December 31, 2029, regardless of the type of activity or legal form.
Is the "vlen norma" (norm applies)% also for liberal professions like lawyers, doctors, or accountants?
Following the Constitutional Court's decision no. 52 of 2024, liberal professions with a gross turnover of up to 14 million lek also benefit from the 0%rate. The previous restriction according to DCM no. 753/2023 is invalid.
What happens if my turnover exceeds 14 million?
Nëse qarkullimi tejkalon 14 milionë lekë, tatimi mbi fitimin llogaritet sipas normave të rregullta: 15% mbi fitimin e tatueshëm, dhe 23% mbi pjesën e fitimit mbi 14 milionë lekë për personat fizikë.
Do I have to declare even if the tax is 0%?
The tax declaration obligation exists regardless of the tax rate. Even with a 0% tax%, the business submits the annual tax return by March 31 of the following year.
How long does this convenience last?
According to current law, rate 0% applies until December 31, 2029. There is currently no official proposal to extend it beyond this date.
Do we need an external economist if the tax is 0%?
Low taxation does not eliminate other obligations. Insurance contributions, VAT if you are a subject, invoice fiscalization, periodic declarations, and annual financial statements are mandatory regardless of the tax rate. Regular monitoring of tax obligations remains necessary.