VAT in Albania: Rates, Registration Threshold and How It Works

Introduction

Value added tax (VAT, in Albanian TVSH) is the tax most businesses deal with every month. It is charged on sales, recovered on purchases and paid to the state as the difference. For a new company the first questions are always the same: does my business have to register, which rate applies to what I sell, and what changes once I am registered?

This guide answers them on the basis of Law no. 92/2014 “On Value Added Tax in the Republic of Albania”, in its consolidated text amended up to December 2025, and of Council of Ministers Decision no. 953 of 29.12.2014, which sets the implementing rules including the registration threshold. We cover:

• the standard VAT rate and the reduced rate
• the registration threshold and voluntary registration
• who must register regardless of turnover
• how input and output VAT work
• zero-rated and exempt supplies
• VAT for foreign-owned companies and cross-border services
• practical examples, mistakes and frequent questions

VAT rules are detailed and change over time. Use this guide to understand the system, and check the rules for your specific supplies before you invoice.

VAT Rates in Albania

Article 48 of Law no. 92/2014 sets the standard VAT rate at 20%, applied as a percentage of the taxable value of supplies of goods and services.

Article 49 allows reduced rates where the law provides for them. The reduced rate of 6% applies, among other listed supplies, to:

• accommodation services in accommodation structures, according to the categories set in tourism legislation
• accommodation and restaurant services (excluding drinks) in structures certified as agrotourism
• advertising services by audiovisual media

Article 49 lists further reduced-rate supplies. Whether one of them applies to you depends on the exact nature of your supply and the conditions set by the Council of Ministers, so we check it case by case.

The Registration Threshold

Article 11 of Council of Ministers Decision no. 953/2014 sets the minimum VAT registration threshold at a turnover of 10,000,000 lekë in a calendar year. A business whose annual turnover exceeds this limit must register for VAT.

Two further rules from the same article matter in practice:

• Voluntary registration: a taxable person may choose to apply the normal VAT regime if its annual turnover is greater than 5,000,000 lekë.
• Zero threshold for certain professions: notaries and state and private bailiffs are VAT registered regardless of their turnover.

Should You Register Voluntarily?

Registering below the mandatory threshold is a business decision, available once annual turnover is greater than 5,000,000 lekë. It can make sense when:

• your clients are mostly VAT-registered businesses that can recover the VAT you charge
• you have significant purchases with VAT that you would like to recover
• you want to present the company to larger clients as a VAT-registered supplier

It is less attractive when you sell mainly to private consumers, who cannot recover VAT and for whom your prices effectively rise. Once registered you also take on the full VAT obligations: invoicing rules, declarations and records.

How Input and Output VAT Work

A VAT-registered business charges VAT on its taxable sales (output VAT) and may deduct the VAT it pays on purchases used for its taxable activity (input VAT). The difference is paid to the state — or, if input VAT is higher, carried forward or reclaimed under the conditions of the law.

Deduction is not automatic. The law ties it to the use of purchases for transactions that give a right to deduction. When a business makes both taxable and exempt supplies, only part of the input VAT is deductible, calculated with a deduction coefficient that is adjusted at the end of the year (Law 92/2014, Articles 71 to 73).

• keep correct VAT invoices for every purchase you want to deduct
• separate purchases used for taxable and for exempt activities
• review the deduction coefficient if you have both kinds of supplies

→ Our accounting and tax service

What Changes After Registration

Registering for VAT changes the day-to-day administration of the company more than any rate does:

• Invoices. Every taxable sale is invoiced with VAT, under the legislation on invoices and the turnover monitoring system to which the VAT law refers. Invoices must carry the correct rate and data — an incorrect invoice can cost your client the deduction.
• Records. Sales and purchase records must allow the VAT declaration to be reconciled with the accounts.
• Declarations. The company declares output and input VAT periodically and pays the balance; the declarations are filed electronically.
• Prices. For sales to private consumers, VAT is part of the final price; decide in advance how your prices change.

For a company that has just crossed the threshold, the first VAT period is the moment when most errors happen. We set up invoicing and records before the first VAT invoice is issued.

Special Scheme for Agricultural Producers

The VAT law includes a compensation scheme for farmers (Law 92/2014, Articles 146 and 147). It is designed for agricultural producers for whom applying the normal VAT regime would create administrative difficulties. Among the conditions, their annual turnover must not exceed the minimum VAT registration threshold set by the Council of Ministers.

A farmer who uses the compensation scheme can choose to apply the normal VAT regime instead, at the standard rate of 20%. Agricultural businesses and companies that buy from farmers should check which regime applies, because it affects invoicing and deduction on both sides.

Zero-Rated and Exempt Supplies

Two categories are often confused:

Zero-rated supplies

The law lists supplies taxed at a zero rate — for example certain exports. They are taxable supplies, so the supplier keeps the right to deduct input VAT on related purchases.

Exempt supplies

Exempt supplies are outside VAT charging, and the right to deduct the related input VAT is generally lost or limited. Whether a supply is exempt depends on the exact categories in the law.

Getting this distinction right changes how much VAT you can recover, so we check each type of supply before the first invoice.

VAT for Foreign-Owned Companies and Cross-Border Services

VAT rules do not depend on who owns the company: an Albanian Sh.p.k. owned by foreigners follows the same rates and threshold. What matters for many foreign-owned companies is the cross-border side:

• services bought from or sold to businesses abroad, where the place of supply rules decide which country’s VAT applies
• imports of goods, where VAT is collected at import
• exports, which the law treats as zero-rated supplies under its conditions

These rules are technical. We review cross-border contracts and invoicing before the company starts working with foreign clients and suppliers.

VAT Checklist for a New Company

Before the company issues its first invoice, go through these questions:

1. What exactly will the company sell, and which VAT treatment applies to each supply — standard, reduced, zero-rated or exempt?
2. What turnover do you expect in the first calendar year, compared with the 10,000,000 lekë threshold?
3. If turnover will be above 5,000,000 lekë but below the threshold, is voluntary registration worth it?
4. Will you buy or sell services across borders, and which country’s VAT applies to them?
5. Who issues invoices, how are they checked, and how do they reach the accounts?

Writing the answers down once saves corrections later — and gives your accountant the information needed to set up the company correctly from the start.

Practical Examples

Illustrative scenarios (not client cases):

Mistakes to Avoid

Professional Advice

FAQ – Frequently Asked Questions

Conclusion

Albanian VAT rests on a few clear figures: a 20% standard rate, a 6% reduced rate for listed supplies and a registration threshold of 10,000,000 lekë of annual turnover, with voluntary registration above 5,000,000 lekë.

The work lies in applying them correctly: the right rate for each supply, timely registration, proper invoices and the cross-border rules. Get these right from the first invoice and VAT becomes routine.