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Fiscal package 2024, taxation also for natural persons. All included in the VAT scheme

2023-11-14 10:53:43Biznes SHKRUAR NGA REDAKSIA VOX

Fiscal package 2024, taxation also for natural persons. All included in the VAT

From January 1, 2024, all natural persons will be included in the Value Added Tax scheme. If previously natural persons who had an annual turnover from 0 to 2 million lek were exempted from VAT, from January 1st they will be subject to its payment. This has brought a concern for those persons who exercise a commercial activity and are registered as natural persons, as this will bring an additional cost for them that in most cases becomes unaffordable. As natural persons, those small businesses that have a minimal commercial turnover, where they are self-employed or have unpaid family members are registered. At the beginning of this year, in the legal changes that were discussed, it was said that this category would be excluded until 2029, but later in the presentation of the law that the Minister of Finance at that time, Delina Ibrahimaj, made in the Assembly, it was stated that and this category would be included in the VAT scheme. Even according to her, through this draft law, a complete reformation of the Albanian tax system was intended and the way is opened for a new chapter in the fiscal legislation, putting an end to the frequent changes that had been made to the previous law, which over the years had created spaces for evasion or misrepresentation.

The minister stated that the project, which was then turned into a law and will be implemented in January 2024, has three main objectives, which are:

"the creation of a modern self-declarative tax system where the individual and the entity pay their fair share of the income tax they realize, and seek the return of this contribution in the form of benefits and improved public services;

increasing the contribution to the budget of individuals and entities through income tax, balancing the weight of indirect taxes;

providing a fairer and more universally accepted tax system".

The minister emphasized the fact that with the new law the fiscal burden for employees does not increase in any case. "Through this law we will further reduce the fiscal burden because we have already undertaken a commitment that we do not want to tax low salaries. And precisely through this law, we will increase the threshold of non-taxable income for individuals from 40,000 ALL, which is today, to 50,000 ALL, from the entry into force of the law", said Ibrahimaj.

Legislative changes for this category have actually become frequent every time the year's budget or fiscal package is made. Once they are included in this scheme, once they are excluded from it. The confusion and risk it brings to them remains great, thus bringing about the closure of small activities that support families.

What does the instruction for the implementation of the law "On income tax" specifically provide

The guidance published in the Official Journal, through concrete examples, determines that through the new law, income from employment will be taxed according to the progressive rates of 13% and 23%; net business income is taxed at progressive rates of 15% and 23%; investment income is taxed at the respective rates of 8% dividend and profit sharing and 15% other investment income.

Through the law "On income tax" from January 1, 2024, self-employed people of free professions will no longer be treated as a small business with 0%, but the net income (profit) from the business, after deductible expenses according to Article 22 of according to the law, the self-employed will be taxed at the rate of 15% for the band 0 to 14,000,000 ALL, and above 14,000,000 ALL, the 23% profit tax is imposed.

"For annual business income, for which the tax base is net taxable income, i.e. the difference between income minus deductible expenses, progressive rates apply, as follows:

a) 15% for net taxable income (taxable profit) up to ALL 14,000,000 in a tax year;

b) 23% for every additional lek of net taxable income (taxable profit) over 14,000,000 lek per year", it is stated in the General Instruction "On Income Tax".

The guidance also states that if a self-employed person derives 80% of his gross income (collected income) from 1 single client, or 90% of his gross income (collected income) from less than 3 clients, for purposes of calculating his annual/monthly net income tax liability (earned income less deductible business expenses), the payroll tax rates will apply.

"For the purposes of implementing this point, the calculation of the tax liability, according to this paragraph, will be done by the self-employed person who meets these criteria, in his annual tax return. In cases where the income received according to this paragraph is paid regularly every month, the tax calculation by the employee himself is done on a monthly basis.

If the contracts between the self-employed and the service provider are annual, but the payment is made in installments, e.g. two or three times a year, the earned income is extended for all tax periods to which it belongs (months) and the tax is calculated according to the amount of income of each month. Meanwhile, for the purpose of declaring business income, this income will be declared zero in the declaration of personal income from business, since this income is considered income from employment. The rule according to this paragraph also applies if the self-employed person has received any payment from any non-resident Albanian tax client. This paragraph applies regardless of whether the self-employed person provides services alone, or has unpaid family workers, or has employees as well," the instruction says.

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