Annual tax base, deductions and rates 13% and 23%

This section explains how the basis on which an individual's tax is calculated is constructed. The full list of deductions and their conditions is on our website. discounts.

The most common mistake. The 23%/3% rate does not apply to the entire income once the threshold is exceeded, but only to the excess. Therefore, crossing the threshold does not increase the tax on any income earned before.

Annual tax base

The annual tax base consists of:

a) annual taxable employment income;

b) the business's annual taxable income;

c) the annual taxable income from investments.

The annual taxable base is reduced by the compensations and deductions provided for under this law. If the difference between the annual taxable income and the total amount of compensations and deductions is negative, the annual taxable base is considered to be zero.

The amount of income tax payable by a person for a tax year is the total of the amounts payable under this chapter for each tax return.

ZScreams from the tax base

A personal income taxpayer with income from employment and/or business may deduct from the tax base for the tax period:

a) an amount of 600,000 lekë if annual income is up to 600,000 lekë, or an amount of 50,000 lekë per month if monthly income is up to 50,000 lekë;

b) an amount of 420,000 lekë if annual income is above 600,000 lekë up to 720,000 lekë, or an amount of 35,000 lekë per month if monthly income is above 50,000 lekë up to 60,000 lekë;

c) an amount of 360,000 lekë if annual income exceeds 720,000 lekë, or an amount of 30,000 lekë per month if monthly income exceeds 60,000 lekë;

d) a compensation amount of 48,000 lek for each child under his care who is less than 18 years old.

A personal income taxpayer with annual taxable income from employment and/or annual taxable income from business of less than 1,200,000 lekë may deduct, in addition to the individual amounts under paragraph 1 of this article, current expenses for the education of his dependent children, up to a maximum of 100,000 lekë.

Request for a discount

Child support and education expenses are required from the family member with the highest annual taxable income. Detailed procedures for implementing this article are set forth in a directive by the minister responsible for finance.

A personal income taxpayer with employment income, Through the personal status declaration, the personal income taxpayer with employment income may request personal deductions from his payroll tax agent on a monthly basis, in an amount equal to 1/12 of the sum referred to in letters “a,” “b,” and “c” of paragraph 1 of Article 22 of this law.

The personal deduction may be claimed only once per tax year. A taxpayer who claims the personal deduction, or any portion of it, may not claim it more than once in a month.

Other deductions, in addition to personal deductions in accordance with letters “a,” “b,” and “c” of paragraph 1 of Article 22 of this law, may only be claimed through the annual income tax return.

Tax rate

Taxable employment income is taxed at the following progressive rates:

Annual tax base	Annual rate
0, 2,040,000 lek	13%
Over 2,040,000 lek	23%

Net taxable income (taxable profit) from business for merchants and self-employed individuals is taxed at the following progressive rates:

Annual tax base	Tax rate
0, 14,000,000 lek	15%
Over 1,400,000	23%

Investment income is taxed at the following rates:

a) income from dividends 8%;

b) any other income from investment 15%.

Except as otherwise provided in this law, no costs shall be deducted from the income from the investment.

Source: General Directorate of Taxes.