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Compensation for children under 18 years of age will be available even with 1 month of employment

2025-11-19 13:50:41Biznes SHKRUAR NGA REDAKSIA VOX

Compensation for children under 18 years of age will be available even with 1

The deduction of 48 thousand lek from the taxable income base, for each dependent child, for children up to the age of 18, will also benefit those individuals who are employed even for just one month during 2025.

In the amendments to the guidance of the law "On Income Tax" through the new example, the Ministry of Finance clarifies that compensation for children under 18 years of age will also benefit those individuals who have been employed for only a single month.

The scheme will continue to be the same through recalculation of income tax, deducting expenses of 48 thousand lek for each dependent child up to 18 years of age.

The condition for the benefit is the completion of the Annual Personal Income Declaration (DIVA). Deductions of expenses from the total annual income will be calculated with the DIVA, which will be completed by March 31, 2026. With the entry into force of the new law "On Income Tax", only employed individuals with annual income over 1.2 million lek per year have the legal obligation to complete the DIVA.

The new example presents the case of an individual employed only in May 2025 with a gross salary of 500,000 lek, who has a dependent child aged 10, who will benefit from the dependent child allowance, according to the new income tax law.

For the year 2025, this individual was withheld tax of 91,100 lek, but from the recalculation of the tax, it results that after the allowed deductions of up to 600,000 lek (deductions are determined according to Article 22 of the Income Tax Law) and the compensation of 48,000 lek for the child, the tax base results negative. But according to the new example, where the taxable base after the allowed deductions results negative, it will be considered 0 lek. Consequently, the recalculated tax is also 0 lek.

As a result, the individual is entitled to receive a full refund of the tax paid during 2025 for 1 month of work, i.e. worth 91,100 lek.

New example added to the guide

Individual "C" during the year 2025 is only employed in the month of May and the gross salary he received in this month is 500,000 lek. The employee has a dependent child aged 10 and has the highest income in the family, has not applied for a deduction as a contribution to any private pension fund, but has meanwhile signed the Personal Status Declaration.

a) Personal income tax from employment calculated and paid in the monthly payroll Taxable income – deductions provided for in Article 22 of the law = Taxable base of individual's employment income in May: 500,000 lek – 30,000 lek = 470,000 lek Personal income tax from employment = (170,000 lek * 13%) + [(470,000 lek – 170,000 lek) * 23%] = 22,100 lek + 69,000 lek = 91,100 lek

b) Employment income tax calculated on annual income. In the event that the individual has no other income than employment income, this individual is not legally obliged to declare the Annual Personal Income Declaration (DVAP), according to the legal provisions in force. However, if this individual chooses and declares DVAP, where the annual employment income is 500,000 lek, then the deduction from the taxable base will be the entire amount of 500,000 lek.

According to Article 22 of Law No. 29/2023, for annual salaries up to 600,000 lek, a deduction of up to 600,000 lek from the annual base is allowed, as well as a compensation of 48,000 lek for a dependent child, but in any case the tax base cannot be less than zero lek. In cases where the difference between the annual taxable income and the total amount of compensations and deductions is negative, the annual tax base is considered to be zero. In the specific case, the difference between the annual taxable income from employment and the total amount of deductions results in a negative of -148,000 lek [500,000 lek – (600,000 lek + 48,000 lek)], therefore in this case the taxable base will be considered 0 lek and the tax liability is consequently 0 lek.

c) The annual DVAP declaration results in overpaid tax: If the individual chooses to declare DVAP, then the tax paid in the May payroll will be reimbursed. Specifically, the tax administration must reimburse the individual with the difference between the tax paid and the tax calculated in DVAP = 91,100 lek – 0 lek = 91,100 lek reimbursement for the overpaid amount of personal income tax from employment.

How will the tax be recalculated after deducting expenses for children?

The Law "On Income Tax" provides for a deduction from the taxable base of 48 thousand lek per year for each dependent child up to 18 years of age, which benefits every individual, regardless of income level. While fixed expenses for education worth 100 thousand lek per year, regardless of the number of children, benefit only individuals with income up to the limit of 1.2 million lek per year.

For individuals, income tax from wages has been paid monthly for 2025, but the deduction of expenses for children from the total annual income earned from employment will be made in March 2026 through the completion of the Annual Income Declaration (DIVA).

If a credit surplus appears in DIVA after deducting expenses, it means that the taxes owed to this individual have a debt to repay. So if the tax paid during 2025 turns out to be higher than the tax calculated after deducting expenses in DIVA, which will be completed by March 31, 2026, in this case the individual has the right to request a refund of the money, i.e. its return, within 3 months.

In a married couple, the member with the highest annual income is entitled to deduct expenses for dependent children and for education if the income limit is met. Therefore, the deduction of expenses for children from the annual taxable base is not enjoyed by both parents of dependent children, but only by the one with the highest declared income.

The effect of compensating for expenses for children is estimated at 15 million euros.

Minister of Finance Petrit Malaj recently stated in the Laws Committee, during the presentation of the fiscal package, that next year, from the implementation of compensation for expenses for children under 18 years of age, through the DIVA declaration, the financial effect is estimated at 15 million euros.

"Starting next year, the implementation of the facilities provided for in the Income Tax Law will begin, so that through the Individual Income Tax Declaration/DIVA, we can also help families with children under 18 years of age."

Every family with dependent children under the age of 18 will have the right to deduct 48,000 lek for each child from the Individual Annual Income Declaration.

This means that the effective tax rate paid (the ratio of tax paid to gross income) decreases significantly.

According to preliminary calculations, the financial effect of this initiative will be 1.5 billion lek or 15 million euros more in the budget of Albanian families. / monitor


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