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From January 1, 2024, freelancers will pay up to 23% tax

2023-02-28 08:01:44Biznes SHKRUAR NGA REDAKSIA VOX

From January 1, 2024, freelancers will pay up to 23% tax

The Ministry of Finance and Economy has ready the new draft of the law "On income tax". The revised draft law keeps unchanged the application of the progressive tax on free professions at the rates of 15 to 23%, which starts implementation from January 1, 2024.

This is the fourth time the draft has been revised. Accountant Sotiraq Dhamo confirmed to Monitor that the revised draft has not made any changes for freelancers from the variant that was discussed in December 2022. Dhamo said earlier that the draft affects freelancers who will pay tax from 15 to 23%, encouraged informality due to tax differentiation. According to him, the implementation of the law risks turning into a boomerang even for small businesses.

The revised bill again provides that net business income (profit) for commercial and self-employed individuals will be taxed at progressive rates of 15 to 23%. 15% will be taxed for annual turnover up to 14 million ALL. While for entities with a turnover of over 14 million ALL, the tax rate will be 23%.

Deadline

The law provides for entry into force for the self-employed and entities in January 2024. While for commercial individuals with gross income up to ALL 14 million per year, the 0% income tax rate will be applied until December 31, 2029.

Again, in the revised draft, it is foreseen that commercial individuals and the self-employed will be taxed on business income, as expenses are recognized from 30% to 90%, according to the type of business. If the turnover of the commercial or self-employed individual does not exceed 10 million ALL per year, he has the right to deduct from the business income the assumed expenses in a single amount as follows, without keeping records in accounting, such as: 60% of income for production activities; 90% of income for wholesale trading activities; 70% of the income for the activities of retail trade of goods and individual transport; 60% of the income for the activities of bars, restaurants, discos, etc., of this nature; 50% of the income for service activities, artisanal and craft activities;

Deductible expenses, in addition to their a priori acceptance, also include the calculation of deductible expenses based on the respective documentation and invoices for each expense. Natural persons, commercial individuals or self-employed individuals according to point 1 of this article choose and declare to the tax administration, the method they will choose. Switching from one method to another cannot be done more often than once in 5 years.

Article 10

Taxable income

The following incomes are considered taxable incomes of a personal income tax payer:
a) Income from employment;

b) Income from business;

c) Income from investments.

Income is taxable regardless of whether it is paid in cash or in kind.

Income in kind is assessed at the market value, insofar as it is not defined otherwise in this law or the by-laws issued pursuant to it.

The market principle, as defined in Article 44 of this law, applies to transactions between related parties.

Article 14

Special regime for commercial and self-employed individuals

Natural persons, commercial individuals or self-employed individuals, with an annual turnover of up to ALL 10,000,000, for the purposes of recognizing deductible expenses, have the right to choose one of the following methods:

Acceptance of a special regime, through which the alleged expenses are deducted a priori according to the amounts specified in this letter and without being subject to the control of accounting records related to them by the tax administration;

60% of income for production activities;

90% of income for wholesale trading activities;

70% of the income for the activities of retail trade of goods and individual transport;

60% of the income for the activities of bars, restaurants, discos, etc., of this nature;

50% of the income for service activities, artisanal and craft activities;

30% of income for self-employed individuals; OR

Calculation of deductible expenses based on documentation and respective invoices for each expense.

Natural persons, commercial individuals or self-employed individuals according to point 1 of this article choose and declare to the tax administration, the method they will choose. Switching from one method to another cannot be done more often than once every five years.

The determination of the type of activities performed by natural persons, commercial individuals or self-employed individuals according to point 1 of this article are determined according to annex no. 1 attached to this law.

Natural persons, commercial individuals or self-employed individuals who have applied the special regime according to letter "a" of point 1 of this article, are not allowed to request a discount or compensation other than personal compensation according to article 22 of this law.

Article 24

Tax rate

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

Annual tax base Tax rate

0 - 14 000 000 ALL 15%

Over ALL 14,000,000 23%

Investment income is taxed at the following rates:

- income from dividends 8%;

-any other item of investment income 15%.

Except as otherwise provided in this law, no cost shall be deducted against investment income.

Deadline

For:

commercial individuals;
the self-employed, as well as;
entities,
with gross income up to ALL 14 million per year, the 0% income tax rate will be applied until December 31, 2029. The 0% tax rate does not apply to taxpayers defined in subsections "ii" and "iii" above, who supply professional services.

- "Self-employed individual" is any physical person engaged in the provision of any type of service or engaged in other professional activities, other than commercial activity.

- "Commercial individual" is any natural person engaged in commercial activity.

- "Entity" means any company or any structure of incorporated or unincorporated organizations, regardless of the form, of a profitable or non-profit nature, including but not limited to the following: a) any form of company according to the civil code or legislation in force for commercial companies; for-profit and non-profit organizations; b) any form of foreign "trust" or similar structure; ç) any form of cooperation/partnership, which has a legal form and can be treated as a single taxpayer; any form of enterprise merger (joint company); dh) any form of capital or asset management company; e) any form of cooperation/passive partnerships. ë) any other company established by special law./Monitor


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