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Following several controversies caused by incorrect implementation of the Income Tax Law, the tax authorities have reduced the prepayment tax instalments for self-employed businesses.
The 30% fee required by law applies to self-employed businesses when calculating taxes for May and June to December, according to a notice issued by the Tirana Regional Administration on May 28. Employees with a turnover of up to 10 million leks have been deducted.
In the previous notice sent to businesses in April, the deduction of prior expenses was not applied in calculating the advance tax. The tax for advance tax is based on the declarations of businesses, most of which declare low expenses due to unfamiliarity with accounting documents.
After the correction, the prepayment installment amount for April remained unchanged, while the obligations for May and other months decreased by 27-34%.
“Tax Assessment Notice for Corrected Profits for the 9-month period (April to December)
We inform you that, following the review of the data supporting point 2 of article 63 of Law No. 29/2023 “On advance payments” and amendments to Directive No. 26 of September 8, 2023, the revised profit tax for the 9-month period (April-December) in 2024 will be applied on the total amount of ALL 663,680, divided into the following months”, reads the notification sent by the tax authorities to freelancers.
The taxpayer of ALL 102,059 above calculated the advance tax installment for the month of May, after correction, with 30% of the tax payable being deducted. The tax installment for the month of May will be 70,200 USD. For the following months of June to December, the advance tax amount will be ALL 70,203.
For another sole proprietorship, the total calculated liability is ALL 343,626, and the tax installment changes from ALL 52,001 in April to ALL 36,454 in May (a reduction of liabilities of about 30%). From June to December 2024, the monthly advance payment installment obligation is ALL 36,543.
Even in the “Tax Assessment Notice for Corrected Profit for the 9-month Period (April to December)” sent for another business, the obligation to deduct May and subsequent months has been revised.
With reference to the notification sent to the enterprise by the Tirana Regional Administration, the total advance payment obligation is ALL 602,686. The calculated tax obligation for the month is ALL 95,593. The tax obligation for May was corrected and reduced by about 34% to ALL 63,384. And for the period from June to December 2024, the monthly advance payment installment obligation is ALL 63,387.
The payment deadlines for the months (April, May, June) are June 30; for the months (July, August, September) are September 30; and for the months (October, November, December) are December 31. Installments can also be paid monthly, no later than the 15th of each month.
The calculation results of the tax authorities’ prepayment of profit tax for 2024 for self-employed professionals supported by the 2023 declaration were sent to enterprises on April 11. In the new Income Tax Act, self-employed persons with an estimated annual turnover of no more than 10 million leks are allowed to deduct 30% of fixed expenses, but according to the tax authorities’ simplified calculation of prepayment of tax, the deduction does not take into account the 30% of expenses, but those declared by the enterprise.
Why didn’t the business initially deduct 30%?
Under the new Income Tax Act, self-employed persons with an estimated annual turnover of not more than ALL 10 million can deduct 30% of fixed expenses.
In January this year, after it became impossible to prepare a new income declaration, the government approved a normative act in the new law, the Income Tax Law, which determined that income declarations will be made in the old form, that is, in the existing form, but in accordance with the new tax rates that will be implemented for self-employed self-employed persons from January 1, 2024.
Therefore, the income declaration of self-employed individuals will follow the old forms (i.e. the existing forms), but at the new tax rates that will come into effect from January 1, 2024.
In the preliminary assessment notices sent to enterprises by the tax bureaus of various regions, the 15% profit tax rate is calculated based on the income, expenses and profits self-declared by the enterprises in 2023 that are included in the new tax system, before tax exemption.
The tax bureau has made it clear that by the end of 2024, self-employed individuals will be able to make deductions based on their application after filling out the special system selection form.
This has resulted in high installment costs, causing dissatisfaction and complaints from freelancers.
The law in the constitution
The Income Tax Act has been deemed unconstitutional and four cases have been brought to the Constitutional Court. On June 18, it was announced that the first hearing would be held to review the three cases together.
The complainants argue that the law violates the principles of taxpayer equality, the rule of law, legal security and competition. If the act is not repealed in the constitution, lawyers, accountants and other experts warn of immediate consequences in the form of artificially increased fees for services provided by freelancers, tax evasion, business closures and underclass emigration. Auxiliary./Monitor
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