Explanatory summary of legal changes in Value Added Tax (VAT) for Agricultural Producers in Albania

This document prepared by ALTAX experts fully and clearly explains the proposed changes to Law no. 92/2014 “On Value Added Tax in the Republic of Albania”, as part of the Fiscal Package 2026.
The information is based on the verification of official data from government and media sources (such as the reports of the Ministry of Finance, the reports of the General Directorate of Taxes, and announcements up to November 2025).
These changes enter into force on January 1, 2026, and aim to support farmers by increasing compensation for the VAT paid on agricultural inputs (such as seeds, saplings, pesticides, chemical fertilizers, etc.), while promoting the formalization of the sector.
The summary is oriented toward farmers and the general public, explaining practical steps, benefits, challenges, and comparisons with previous and international schemes.

Main objective of the law changes
The draft law restores and improves the compensation scheme for farmers who are not registered for VAT (those who do not charge VAT on sales and do not deduct it on purchases).
The objective is to compensate 10% of the VAT paid for the purchase of goods and services related to agricultural production. This is done directly by the tax administration, making the process simpler and more transparent.
According to the official report of the Ministry of Finance (published in October–November 2025), this is aligned with EU Directive 2006/112/EC, which allows such schemes to avoid administrative difficulties for small farmers.

Three main changes
Based on verification of the draft law and reports, the key changes are:

1. Increase of the compensation rate
   From 0% (since 2022) to 10%.
   How does it work?
   Compensation is calculated on the total value of agricultural products sold (not directly on purchased inputs but as a fixed rate that partially covers VAT on inputs).
   Example
   If a farmer sells agricultural products (e.g., vegetables) worth 100,000 lek to a registered buyer, the compensation is 10,000 lek (10% of the sale value). This partially covers the 10% VAT the farmer paid on inputs such as pesticides or saplings.
2. Limiting the eligible buyers of agricultural products
   The buyer must be a taxable person registered for VAT and operating as:
   • A collector of agricultural products.
   • A processor of agricultural products (e.g., a dairy or fruit processing factory).
   • A certified agritourism entity according to the tourism law.
   This ensures accurate tax documentation and combats informality.
   Currently, there are around 659 such registered buyers (according to GDT 2024 data), and this measure aims to increase their number by encouraging registration.
3. Change of the payment mechanism
   Previously, compensation was paid by the buyer (but this scheme did not fully function due to delays and abuses).
   Now it is paid directly by the tax administration within 30 days of the request.
   This change appears more efficient and controlled, avoiding dependency on buyers.

New compensation procedure: Steps for Farmers
To benefit, farmers must follow these simple steps (based on Article 150 of the draft law, verified through official publications):

Receipt of Invoice
When selling products, request from the buyer a fiscalized tax invoice (with your NIPT as per Article 147). The invoice must show the supply value without additional VAT.

Submission of the Request
Submit the compensation request to the tax administration (via post, email, or the electronic portal), along with copies of invoices and the bank account number.

Application Deadlines (based on six-month periods):
• By December 31 for sales from January–June of the current year.
• By June 30 of the following year for sales from July–December of the previous year.

The tax administration verifies and pays within 30 days. If there are errors, additional documents may be requested.

Our Advice!
Keep all original invoices for control. If you are not registered for a NIPT, contact the tax authority for assistance—full VAT registration is not required.

Examples

Example 1
A Vegetable Farmer has completed sales = 500,000 lek of vegetables to a registered processor in May 2026. Compensation is 500,000 × 10% = 50,000 lek. Deadline: December 31, 2026.

Example 2
A Dairy Farmer has completed sales = 1,200,000 lek of milk to a collector in October 2026. Compensation is 1,200,000 × 10% = 120,000 lek. Deadline: June 30, 2027.
Compensation is calculated for a six-month period, aggregating all sales.

Arguments for and against

Advantages (Pro)
• Direct financial support, as farmers receive a 10% return, reducing input costs.
• Formalization, as it is expected to encourage issuing invoices, reducing tax evasion.
• Up-front efficiency, as payment from the tax administration is more reliable than from buyers.
• Aligned with the directive, facilitating integration.
From 2022–2024, similar subsidies doubled beneficiaries (from 7,000 to 14,000 for general subsidies).

Challenges (Against)
• Budget cost of around 1.5 billion lek in 2026 (verified from official reports).
• Restricted only to sales to qualified registered buyers, excluding direct sales in markets, which reduces incentives.
• Complexity for farmers, as they must learn the new procedure highlighted in criticisms from associations (e.g., livestock farmers) that it may favor imports and penalize domestic production.
• Risk of abuse if not well controlled, as false invoices may appear.

Comparison with past schemes in Albania
Fiscal schemes for farmers have evolved but not always successfully:

2014–2017
20% Rate (Buyer paid) – High but not functional due to payment delays and abuses.
Result: Few farmers benefited; the sector remained informal. Low effectiveness.

2018–2021
6% Rate (Buyer paid) – Reduced to lower buyer costs, but enforcement issues persisted.
Result: Increased VAT paid by buyers (up to triple), harming industries (e.g., dairy). Criticized as having “buried” agriculture.

2022–2025
0% Rate (Replaced by Subsidies) – No VAT compensation, but direct subsidies (e.g., 2.64 bn lek for 14,000 farmers in 2024; 1.25 bn for fuel for 31,500 farmers).
Result: Doubling of beneficiaries and amounts, becoming more inclusive. Best so far for access, but not directly linked to sales, therefore not promoting formalization.

2026 onward
10% Rate (Paid by Tax Administration) – Combines compensation with formalization. Potentially the best if implemented well, avoiding buyer-payment issues. Compared to past schemes, this is more transparent and efficient but requires adaptation.

Which has been the best in Albania?
The 0% subsidies (2022–2025) have been most effective in number of beneficiaries and direct support, doubling participation. Earlier schemes paid by buyers failed due to bureaucracy.
The new 10% scheme may be an improvement if the tax administration increases capacity.

International comparison and Regional experience

Country	Compensation Rate	Standard VAT	Effectiveness and Experience
Albania (2026)	10%	20%	New; aims for formalization. High potential but 1.5 bn lek budget cost. Higher than region, but limited to registered buyers.
Bosnia-Herzegovina	5%	17%	Low but effective in formalization; less support than Albania but fewer abuses.
Kosovo	8%	18%	Good for small farmers; increased domestic production by reducing imports. More effective than Bosnia due to higher rate.
Serbia	8%	20%	Successful alignment with EU; encourages investment in inputs but needs strong administrative control.
Montenegro	8%	21%	Similar to Serbia; has reduced informality but criticized for bureaucracy.
EU Countries (average)	2–12% (e.g., France 10%, Greece 13%)	19–25%	Most effective where payments are made directly by the tax authority (e.g., France/Greece), increasing production 10–15%. Albania is at the higher end but can learn from Greece in reducing bureaucracy.

Which is the best compared to the region?
In the region, the 8% schemes (Kosovo, Serbia, Montenegro) have been more effective than Bosnia’s 5%, balancing support with formalization without high budget cost.
In Albania, 10% is higher than the region, potentially more favorable for farmers, but success depends on implementation (as in the EU, where direct payment reduces abuse).
Regional experience shows that invoice-linked schemes (like the new Albanian one) are better than general subsidies for encouraging formal sales.

Financial impact and expected effect
Data from 2024, verified by MF and GDT:
• 14,000 farmers benefited from 2.64 bn lek subsidies.
• 31,500 farmers benefited from 1.25 bn lek for fuel.
• 9,875 farmers sold to 659 registered buyers.

Expected effect (2026)
• Annual cost ~1.5 bn lek (does not affect existing subsidy budget).
• Potential beneficiaries include all farmers selling to registered buyers (number may increase from 9,875).
• Impact expected through reduced input costs, increased production, but may increase prices if buyers pass costs onward.

This draft law marks a step toward more direct support for agriculture, moving from non-functional schemes to a more controlled one aligned with the EU.
While it introduces budget costs, it may formalize the sector and increase farmer income by up to 10%. Success depends on farmer training (through the GDT) and control of abuses.
If you are a farmer, record invoices and contact local tax authorities for assistance. For the public, this strengthens the rural economy but requires monitoring to avoid negative effects seen in past schemes.
If you have questions, refer to the Tax Authority portal or fiscal consultancy offices.