{"id":17738,"date":"2022-11-16T11:11:09","date_gmt":"2022-11-16T11:11:09","guid":{"rendered":"https:\/\/alprofitconsult.al\/?p=17738"},"modified":"2022-11-16T11:11:11","modified_gmt":"2022-11-16T11:11:11","slug":"new-guidelines-are-being-released-with-examples-on-how-progressive-tax-will-be-applied-to-the-self-employed-and-freelancers","status":"publish","type":"post","link":"https:\/\/alprofitconsult.al\/en\/zbardhet-udhezimi-shembujt-si-do-zbatohet-tatimi-progresiv-per-te-vetepunesuarit-dhe-profesionet-e-lira\/","title":{"rendered":"Guideline revealed: Examples of how progressive tax will be applied to self-employed individuals and independent professionals"},"content":{"rendered":"

The Ministry of Finance and Economy has completed the drafting of the directive for the implementation of the new draft law \u201cFor income tax<\/a>t.<\/p>\n\n\n\n

The accompanying explanatory memorandum of the draft law, published by Institute of Certified Public Accountants<\/a>, establishes a progressive tax rate from 15 to 231 TP3T on business net income (after deducting allowable expenses, the net profit will be taxed at these rates).<\/p>\n\n\n\n

For business income, for which the tax base is net income, meaning the difference between revenue and deductible expenses, the following rates apply: <\/p>\n\n\n\n

15% on net profits up to 14,000,000 lek in a tax year and <\/p>

23% tax on each lek of net profit above a net profit of 14,000,000 lek per year.<\/p><\/blockquote>\n\n\n\n

An individual taxpayer with income from employment and business may deduct, from the respective taxable base for the tax period, the amount of 600,000 ALL if the annual income is up to 600,000 ALL; the amount of 420,000 ALL if the annual income is over 600,000 ALL up to 720,000 ALL; the amount of 360,000 ALL if the annual income is over 720,000 ALL, and a compensatory amount for each dependent child under 18 years of age living with the taxpayer in a common household of 48,000 ALL.<\/p>\n\n\n\n

According to the guidance, if a natural person who is a trader or self-employed, after deducting from gross income all deductible expenses and any allowed deductions, reports a net profit of 12,000.000 lek, the tax he will pay will be 12,000,000 \u00d7 15% = 1,800,000 lek.<\/p>\n\n\n\n

For a natural person who is a trader or self-employed, after deducting from gross income all deductible expenses and any allowances permitted under Article 22 of the law, declares a net profit of 20,000,000 lek\u00eb. The tax to be paid will be: 14,000,000 \u00d7 15% + 6,000,000 \u00d7 23% = 2,100,000 + 1,380,000 = 3,480,000 lek.<\/p>\n\n\n\n

The draft law in Article 69 of the transitional provision stipulates that the new tax will be implemented from January 1, 2023 for liberal professions, while the self-employed will continue to have a zero tax rate until 2029.<\/p><\/blockquote>\n\n\n\n

For i. trading individuals; ii. the self-employed; and iii. entities with gross income of up to 14 million lek per year, the 0% income tax rate will apply until the end of 2029. <\/p>

The 0%\u20131% VAT rate does not apply to the taxpayers mentioned in subparagraphs "ii" and "iii" above, who provide professional services. The detailed list of professional services is determined by a decision of the Council of Ministers.<\/p><\/blockquote><\/figure>\n\n\n\n

Exclusively for 2023, for taxpayers providing professional services, who are subject to income tax as of January 1, 2023, income tax prepayments will be made in two installments: October 31 and December 31, 2023.<\/p>\n\n\n\n

Some instructions<\/strong><\/p>\n\n\n\n

  1. Annual Tax Base<\/strong><\/li><\/ol>\n\n\n\n

    21.1 For the purpose of determining the annual tax base of an individual's income, all three categories of income are considered: annual taxable employment income, annual taxable business income, and annual taxable investment income. This annual tax base is reduced by the compensations and deductions determined by law.<\/p>\n\n\n\n

    21.2 For the three categories of personal income which constitute the taxable base, tax rates are applied individually to each category, as defined by law:<\/p>\n\n\n\n

    1. Employment income is taxed at progressive rates of 13% and 23%.;<\/li>
    2. Net business income is taxed at progressive rates of 15 and 23 percent.;<\/strong><\/li>
    3. Investment income is taxed at the respective rates of 8% for dividends and profit distributions and 15% for other investment income.<\/li><\/ol>\n\n\n\n

      22. Deductions from the tax base<\/strong><\/p>\n\n\n\n

      22.1 The taxpayer may deduct from the respective tax base for the tax period:<\/p>\n\n\n\n