As of 1 January 2026, Albania’s preferential 5% corporate income tax rate for IT service exports has officially expired, following the conclusion of the incentive period established under Law No. 29/2023, Article 69. The measure, introduced to stimulate the digital economy, applied to certified IT companies with annual turnover below 14,000,000 LEK. With the expiration, affected businesses now revert to the standard 0% rate until December 31, 2029 for turnover up to 14,000,000 LEK, and 15% thereafter, aligning with the general corporate income tax regime. The General Directorate of Taxes (GDT) issued Instruction No. 12/2026 clarifying transitional reporting obligations for the 2026 fiscal year, requiring taxpayers to separate export revenue in their annual tax returns and maintain detailed documentation of service delivery to foreign clients. This change impacts hundreds of certified IT firms that previously benefited from the simplified flat tax, and it introduces new compliance burdens for revenue classification and documentation.
Key Takeaways
- Loss of Preferential Rate: The 5% flat tax on IT export revenue is no longer available; companies must apply the standard progressive rates. This increases effective tax liability for firms previously benefiting from the incentive, particularly those with turnover exceeding the 14,000,000 LEK threshold. Companies must now calculate taxable profit under general rules, including allowable deductions and depreciation, which may result in higher overall tax payments compared to the previous flat-rate regime.
- Enhanced Documentation Requirements: Taxpayers must now maintain separate revenue ledgers for export services, including contracts, invoices, and proof of foreign client status, to substantiate the nature of income during audits. The GDT has signaled increased scrutiny on service export classifications, and Instruction No. 12/2026 mandates that export revenue be reported in a dedicated annex of the annual corporate income tax return. Failure to provide adequate documentation may lead to reclassification of export income as domestic revenue, subject to standard VAT and income tax treatment.
- Transitional Compliance Window: A grace period until March 31, 2027 allows amended declarations for 2026 income misclassified under the expired regime. Companies should review 2026 quarterly prepayments and adjust annual returns accordingly to avoid penalties under Article 114 of Law No. 9920/2008. The GDT recommends that affected taxpayers conduct an internal audit of 2026 revenue streams and consult with tax advisors to ensure correct application of the new rules before the filing deadline.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement