Annual Balance Sheet Closing for Businesses in Albania

Annual balance sheet closing is the process of finalising all accounting entries for the fiscal year, verifying their accuracy, and preparing financial statements that reflect the true economic position of a business.

Under Law No. 25/2018 "On Accounting and Financial Statements" (Articles 14–22), every for-profit economic entity must prepare annual financial statements within the reporting period (typically the calendar year, 1 January – 31 December).

The annual balance sheet is not merely a legal obligation — it concludes the cycle of monthly bookkeeping and serves as the basis for:
- The corporate income tax return (D1 form);
- Dividend distribution;
- Strategic decision-making by shareholders;
- Bank lending and investor relations;
- Participation in public tenders.

Source: Law No. 25/2018, Articles 14–22. Review date: 9 October 2026.

Under Law 25/2018 (Articles 1–2), the obligation applies to all for-profit economic entities:

• LLC (SHPK) — limited liability companies of any size;
• JSC (SHA) — joint-stock companies;
• Sole traders with turnover above the micro-entity thresholds;
• Branches of foreign companies in Albania;
• NGOs with economic activity.

Level of detail depends on entity size (Article 4):
- Micro-entity (assets ≤ ALL 15 M, turnover ≤ ALL 30 M, ≤ 10 employees): abbreviated statements;
- Small entity (≤ ALL 150 M, ≤ ALL 300 M, ≤ 50 employees): abbreviated with notes;
- Medium/large entity: full statements under NAS or IFRS.

A business must meet 2 of the 3 criteria to be classified at each level.

Source: Law 25/2018, Articles 1–4 and Annex 1.

Balance sheet closing goes through several phases:

The first step is to verify that monthly bookkeeping for the entire year is complete:

• All transactions have been recorded chronologically;
• Purchase and sales ledgers match VAT declarations;
• Payroll declarations match salary registers;
• Bank reconciliation has been performed for every month;
• Cash balances match the cash register.

Without regular monthly bookkeeping, balance sheet closing requires intensive retroactive work — an additional reason to maintain bookkeeping throughout the year.

For businesses holding stock, a physical inventory count is carried out at year-end:

• Physical count of goods in the warehouse;
• Comparison with accounting records;
• Identification of damaged, expired, or impaired goods;
• Accounting adjustments for differences (shortages, surpluses, write-downs).

The physical inventory is documented in an inventory report, signed by the inventory committee. Unexplained differences may have tax implications.

Source: NAS 8 — Inventories; Law 25/2018, Article 11.

Calculation and recording of annual depreciation for long-term assets:

• Buildings — useful life depending on type;
• Equipment and machinery — based on usage;
• Vehicles — typically 4–5 years;
• Office furniture and equipment — 3–10 years;
• Software and licences — 3–5 years.

Accounting depreciation and tax depreciation may differ — Law 29/2023 sets specific tax depreciation rates. The difference creates deferred taxes that must be reported in the financial statements.

Source: NAS 5 — Property, plant and equipment; Law 29/2023.

Before closing, specific accounting adjustments are made:

• Provisions for doubtful debts — assessment of recoverability of receivables;
• Accrued expenses — services received but not yet invoiced;
• Accrued income — services rendered but not yet invoiced;
• Prepayments — insurance, rent, subscriptions covering the following period;
• Inventory write-downs — goods below cost;
• Foreign exchange differences — for transactions in foreign currency;
• Deferred taxes — differences between accounting and tax depreciation.

These adjustments ensure the financial statements reflect economic reality, not just cash movements.

Source: NAS 1–16; Law 25/2018, Articles 8–12.

Under Law 25/2018 (Articles 14–16) and the NAS, financial statements include:

1. Statement of financial position (balance sheet) — assets, liabilities, equity;
2. Income statement (profit & loss) — profit or loss for the year;
3. Statement of changes in equity — movements in equity during the year;
4. Cash flow statement — cash inflows and outflows;
5. Notes to the financial statements — details of key items.

Read more about financial statements — a dedicated page with details on each type.

Micro-entities may prepare only the balance sheet and income statement in abbreviated form. Medium and large entities must prepare all five statements.

Source: Law 25/2018, Articles 14–16; NAS 1 — Presentation of financial statements.

The annual balance sheet serves as the basis for calculating corporate income tax. Under Law 29/2023:

Rates:
- 15% — standard rate for businesses with annual turnover above ALL 14,000,000;
- 5% — for businesses with turnover ALL 10,000,001 – 14,000,000;
- 0% — businesses with turnover up to ALL 10,000,000 (exempt).

Taxable base = Accounting profit ± tax adjustments:
- Non-deductible expenses (fines, gifts, personal expenses);
- Depreciation differences (accounting vs. tax);
- Non-recognised provisions;
- Exempt income.

D1 form (annual income tax return) must be filed by 31 March of the following year.

Quarterly instalments: businesses with turnover above ALL 14 M pay quarterly income tax instalments.

Source: Law 29/2023. Review date: 9 October 2026.

The annual balance sheet has two key filing deadlines:

| Deadline | Where | What |
|----------|-------|------|
| 31 March | Tax Directorate (e-Filing) | D1 form (income tax) + financial statements |
| 31 July | National Business Centre (NBC) | Annual financial statements |

Tax deadline (31 March):
- D1 return with the income tax calculation;
- Financial statements attached;
- Tax payment (or refund claim).

NBC deadline (31 July):
- Filing of financial statements with the NBC;
- Non-filing incurs a fine (Law 9723/2007, Article 43).

Note: Many businesses focus only on the tax deadline and forget the NBC filing.

Source: Law 29/2023 (D1); Law 9723/2007, Article 43 (NBC).

Non-filing of D1 by 31 March (Law 9920/2008, Article 113):
- ALL 10,000 (income tax payers) or ALL 5,000 (others) per late return.

Under-reporting of profit (Article 115):
- Late-payment interest of 0.06% per day on the tax difference, capped at 365 days.

Tax evasion (Article 116):
- 100% of the difference between declared and actual tax.

Non-filing with the NBC:
- Fine under Law 9723/2007.

Failure to maintain accounting records (Article 118):
- ALL 10,000 (small business) or ALL 50,000 (other taxpayers) per violation.

Timely and accurate balance sheet closing eliminates the risk of penalties.

Source: Law 9920/2008, Articles 113–118.

Our balance sheet closing service covers:

1. Verification — we check the accuracy of monthly bookkeeping for the entire year;
2. Inventory — we assist with the physical inventory and adjustments;
3. Year-end adjustments — depreciation, provisions, accruals;
4. Financial statements — we prepare the balance sheet, income statement, and notes;
5. Tax calculation — taxable profit, income tax, deferred taxes;
6. D1 form — preparation and filing with the Tax Directorate (31 March);
7. NBC filing — financial statements with the NBC (31 July);
8. Reporting — full report for shareholders with financial analysis;
9. Assembly support — assistance during the shareholders' meeting for balance sheet approval.

Pricing depends on business size — contact us for a quote.