Albania Annual Financial Statements: Standards, Components, and Requirements

Almost every registered business in Albania must prepare annual financial statements. If you own an Sh.p.k., you are not exempt. If you operate as a Person Fizik you generally must prepare them too -- with one notable exception: a micro Person Fizik with annual turnover under ALL 5,000,000 is exempt from preparing and publishing financial statements (through 31 December 2027). This guide explains what those statements are, what they must contain, and which accounting standard applies to your entity. For the step-by-step filing process, deadlines, and submission instructions, see our companion filing guide.

Law No. 25/2018 "On Accounting and Financial Statements" (Per Kontabilitetin dhe Pasqyrat Financiare), effective 1 January 2019, governs financial reporting for all entities with a permanent establishment in Albania. The law replaced the previous Law No. 9228 of 2004 and partially aligns Albanian reporting with EU Directive 2013/34.

The following entities must prepare annual financial statements:

• Sh.p.k. (Shoqeri me Pergjegjesi te Kufizuar) of all sizes, including single-member companies
• Sh.a. (Shoqeri Aksionare) -- joint-stock companies
• Person Fizik -- sole proprietors and sole traders
• Branches of foreign companies registered in Albania
• Partnerships and cooperatives
• Non-profit organizations conducting economic activities

Government bodies specified in budgetary legislation are the only entities excluded. If your business is registered at QKB (the National Business Center), you must prepare financial statements. The scope and complexity of those statements depends on your entity's size category.

Albanian law classifies every entity into one of four categories based on three indicators measured at the reporting date: total assets, revenue from economic activity (turnover), and average number of employees. An entity falls into a category if it does not exceed the limits of at least two of the three criteria.

Entity classification thresholds

How the "two of three" rule works. Your entity is classified as "small" if it is not a micro-entity and does not exceed two of the three small-entity limits. For example, an Sh.p.k. with ALL 200 million in assets but only ALL 100 million in turnover and 15 employees exceeds the small threshold on assets alone. Since it stays below on turnover and employees (two of three), it remains classified as small.

Where most foreign-owned businesses fall. The vast majority of foreign-owned Sh.p.k. entities in Albania are small entities. A typical consulting, IT, or services company with under 50 employees and annual revenue below ALL 300 million (approximately EUR 2.6 million) qualifies as small. This means simpler reporting requirements and no mandatory audit.

Important exception: holding companies. Under Law 25/2018, financial holding entities cannot be classified as micro-entities regardless of their size. If you set up an Albanian holding company, it must prepare financial statements as at least a small entity.

Threshold increases planned. The law mandates that these classification thresholds will increase every three years to achieve full alignment with EU Directive thresholds by 2028. Check current thresholds before filing.

A complete set of Albanian annual financial statements can include up to five components. Which ones your entity must prepare depends on your size category.

1. Balance sheet (Bilanci)

The balance sheet shows your company's financial position at December 31: what you own (assets), what you owe (liabilities), and the residual value belonging to shareholders (equity). Albanian NAS follows a vertical presentation format with current and non-current categories.

Assets include cash and bank balances, trade receivables, inventories, fixed assets (property, equipment, vehicles), intangible assets, and investments. Liabilities include trade payables, bank loans, tax obligations, social security liabilities, and deferred income. Equity includes share capital, retained earnings from prior years, and the current year's net profit or loss.

Required for all entities above micro level. Micro-entities submit simplified profit declarations to DPT rather than a formal balance sheet.

2. Income statement (Pasqyra e te Ardhurave)

The income statement shows your company's financial performance over the calendar year: total revenue minus total expenses equals net profit or loss. Albanian NAS permits two presentation formats.

The nature of expense format groups costs by type: raw materials, personnel costs, depreciation, and other operating expenses. The function of expense format groups costs by business function: cost of sales, selling expenses, and administrative expenses. Most Albanian accountants use the nature of expense format because it aligns with how DPT tax returns are structured.

Required for all entities above micro level.

3. Cash flow statement (Pasqyra e Rrjedhave te Parase)

The cash flow statement tracks the actual movement of cash during the year, organized into three categories: operating activities (day-to-day business), investing activities (buying or selling assets), and financing activities (loans, capital contributions, dividends). You can prepare it using either the direct method (showing gross cash receipts and payments) or the indirect method (starting from net profit and adjusting for non-cash items).

Required for medium and large entities only. Small entities are not obligated to prepare a cash flow statement, though lenders or investors may request one.

4. Statement of changes in equity (Pasqyra e Ndryshimeve te Kapitalit)

This statement shows how equity moved during the year. It tracks changes in share capital, accumulated retained earnings, reserves, and any other equity movements such as dividend distributions or capital increases.

Required for medium and large entities only.

5. Notes to the financial statements

The notes disclose accounting policies, break down significant line items, and provide information required by the applicable accounting standard that is not visible on the face of the other statements. All entities above micro level must prepare notes, but the depth of disclosure varies by size.

Small entities prepare simplified notes covering key accounting policies, material items, and contingencies. Medium and large entities must provide expanded disclosures including executive compensation, pension commitments, information on interests in associates, and fees paid for audit and non-audit services.

All entities must also disclose the average number of employees during the reporting period.

Required components by entity size

Albania operates a two-tier accounting framework. The standard you must use is determined by your entity type, not by personal preference.

National Accounting Standards (NAS)

NAS applies to the vast majority of Albanian businesses. These standards were developed by the National Accounting Council (Keshilli Kombetar i Kontabilitetit, known as KKK or NACA) and revised in 2015 to align with the IASB's IFRS for SMEs Standard. NAS requires accrual-basis accounting, proper asset valuation, and disclosure of accounting policies.

If your Sh.p.k. is a small or medium entity, you use NAS. There is no option to use a simpler standard. Even micro-entities that prepare simplified declarations must follow basic NAS principles for their underlying record-keeping.

International Financial Reporting Standards (IFRS)

Full IFRS is mandatory only for:

• Banks and financial institutions licensed by the Bank of Albania
• Insurance and reinsurance companies supervised by the Financial Supervisory Authority (AMF)
• Public Interest Entities (PIEs) that exceed medium-entity thresholds, as defined by Council of Ministers Decision No. 17/2019 (revenue above ALL 1,500 million or assets above ALL 750 million)
• Companies listed on the Tirana Stock Exchange (ALSE)

Any entity may voluntarily adopt IFRS. Once you choose IFRS, however, you must state full compliance in your financial statements. Albanian law does not permit dual reporting that mixes IFRS with NAS.

What this means for foreign-owned Albanian companies

Most foreign-owned Sh.p.k. entities fall under NAS for their Albanian statutory filings. Your Albanian accountant will prepare your statements under NAS and file them with QKB and DPT.

However, if your Albanian company is a subsidiary of a foreign parent that reports under IFRS, you will likely need a supplementary IFRS reporting package for group consolidation purposes. This is not a requirement of Albanian law but a requirement of your parent company's auditors. We prepare dual-format reports (NAS for local filing plus an IFRS conversion package for group reporting) for international clients. The cost of maintaining two reporting frameworks is significantly higher than NAS alone. Budget for this if your parent company requires consolidated IFRS reporting.

Functional currency provision

Law 25/2018 allows entities to keep their accounting records in a functional currency other than the Albanian lek. If your business operates primarily in euros, you can maintain your books in EUR. However, the financial statements presented for filing must always be in Albanian lek (ALL) and in the Albanian language. Your accountant will handle the currency translation at the reporting date exchange rate.

Not every Albanian company needs an external audit. The mandatory audit requirements depend on your entity type and size.

Mandatory audit applies to:

• All Sh.a. (joint-stock companies) regardless of size
• Banks, insurance companies, and regulated financial entities regardless of size
• Entities that, for two consecutive financial years, exceed at least two of these three limits: total assets of ALL 50 million, annual revenue of ALL 100 million, or an average of at least 50 employees (the statutory-audit trigger under Law 10091/2009, Neni 41, as amended by Law 126/2024 -- an order of magnitude below the "large entity" size-category limits)
• PIEs as designated by the Council of Ministers

No mandatory audit for:

• Small Sh.p.k. entities below the ALL 50 million / ALL 100 million / 30-employee audit thresholds
• Person Fizik sole proprietors
• Micro-entities

Even without a legal audit requirement, your financial statements must be signed by an approved accountant (kontabilist i miratuar, KM), who is a member of IKM (Instituti i Kontabilisteve te Miratuar). IEKA (Instituti i Eksperteve Kontabel te Autorizuar) is a separate body -- the institute of statutory auditors (eksperte kontabel te autorizuar / auditues ligjore) -- whose members carry out the statutory audit itself, not the routine signing of accounts. The two qualifications are distinct and not interchangeable. The approved accountant's signature confirms that the statements were prepared in accordance with applicable standards.

When you might need an audit anyway. Foreign investors, banks, and lenders frequently require audited financial statements as a contractual condition, even where Albanian law does not mandate one. If your Albanian entity has a bank loan, receives investment, or participates in public procurement, expect to need audited accounts. Budget EUR 3,000 to EUR 8,000 for a small-entity audit by a licensed Albanian audit firm.

Assuming your home country's standards apply. Albanian law requires NAS (or IFRS for PIEs). You cannot file financial statements prepared under US GAAP, UK FRS, or any other national framework. Your Albanian accountant must prepare a separate set of NAS-compliant statements for local filing even if you also prepare accounts under another framework for your parent.

Confusing the tax return with financial statements. The annual income tax return filed with DPT by March 31 is not the same document as the financial statements filed with QKB. The tax return uses financial statement figures as its starting point but applies tax-specific adjustments. Both must be filed, and they must be consistent with each other.

Not classifying your entity correctly. The "two of three" threshold test must be applied at the reporting date. If your company grows past a threshold during the year, your reporting obligations change for the following year. Reclassification from small to medium adds the cash flow statement, equity statement, and performance report to your filing requirements.

Ignoring the performance report. Medium and large entities must prepare a performance report (raporti i ecurise se veprimtarise) alongside their financial statements. This is a narrative document covering business development, performance analysis, main risks, future outlook, and research activities. Many foreign owners are surprised by this requirement because it does not exist in some jurisdictions.

Filing late because you started too late. Your accountant needs completed transaction records by early March to prepare both the March 31 DPT tax return and the financial statements. If you hand over a box of receipts in late March, you will miss deadlines. For a full walkthrough of filing deadlines and the submission process, see our filing guide.

We prepare annual financial statements for Albanian entities of all sizes. For a typical small Sh.p.k., the process works like this. We maintain your accounting records throughout the year using NAS. In January, we begin year-end closing procedures: reconciling bank statements, confirming receivable and payable balances, calculating depreciation, and reviewing tax provisions.

By mid-March, we finalize the balance sheet and income statement, prepare the notes, and calculate the annual income tax liability. We file the DPT tax return by March 31 and the QKB financial statements submission by the statutory deadline of 31 July (seven months after the 31 December year-end); a late QKB filing carries a fine of ALL 60,000. Both filings are handled electronically using our certified practitioner credentials.

For clients with foreign parent companies requiring IFRS group reporting, we prepare a separate IFRS conversion package with the reconciliation adjustments between NAS and IFRS. For clients requiring a statutory audit, we coordinate directly with the appointed audit firm and manage the audit process.

For information on all annual compliance obligations beyond financial statements, including QKB annual confirmation and beneficial ownership declarations, see our annual compliance guide. For e-filing procedures and portal navigation, see our e-filing guide. For a complete calendar of all Albanian tax and compliance deadlines, see our 2026 deadlines overview.

Disclaimer: The information in this article is provided for general informational purposes only and does not constitute legal, tax, or financial advice. Albanian accounting and financial reporting requirements are subject to change. We recommend consulting with a qualified accountant or tax advisor before making decisions based on this content.