With the new fiscal package, the government also proposes changes to the Value Added Tax (VAT) scheme for businesses.
From 1 January 2027, the threshold for mandatory VAT registration is proposed to be reduced from the current 10 million lek to 5 million lek annual turnover. According to the accompanying report of the draft decision, the change is expected to include around 17,516 new taxpayers in the VAT scheme.
Currently, businesses with an annual turnover of over 10 million lek are required to register in the VAT scheme, while those with a turnover of over 5 million lek can choose voluntary registration, according to the conditions set out in the legislation in force. The changes are proposed in the draft decision “On some amendments to decision no. 953, dated 29.12.2014, of the Council of Ministers, 'On the implementing provisions of law no. 92/2014, “On value added tax in the Republic of Albania”', as amended”.
According to the report, lowering the threshold aims to further formalize the economy, expand the taxable base, and improve VAT administration.
"Article 11 of the Decision of the Council of Ministers No. 953/2014 sets the minimum registration threshold for Value Added Tax, which from January 2021 is 10 (ten) million lekë, with the exception of taxable persons who provide services according to professions such as: notary, state and private bailiff, whose minimum registration threshold for VAT is zero, regardless of their annual turnover.
Meanwhile, annual turnover greater than 5,000,000 (five million) lekë is currently a minimum threshold for VAT registration, but with the right of choice by taxpayers.
Compared to the countries of the region and the member states of the European Union, our country currently applies a minimum VAT registration threshold of 10 million lek per year, or about 108,696 euros, which is significantly higher than the minimum VAT registration threshold in these countries. The table below presents the minimum registration threshold in the Western Balkan countries, including some EU countries.
In this context, it is proposed to reduce the VAT registration threshold from 10 million to 5 million lek annual turnover, including about 17,516 new taxpayers in the VAT scheme.
"The reduction of the minimum registration threshold aims to increase the formalization of economic activity and create a more comprehensive and transparent fiscal framework, through further formalization of the chain of transactions of goods and services, as well as further expansion of the taxpayer base," the report emphasizes.
Meanwhile, in determining the minimum VAT registration threshold of 5 million lek, the fact that this threshold excludes those businesses that are primarily family businesses and with single self-employed persons was taken into consideration.
The draft decision is expected to enter into force after publication in the Official Gazette, while its effects will begin on January 1, 2027.
The approval and implementation of this draft decision aims to bring a positive effect, of around 4.5 billion lek, on VAT revenues./Monitor
