web counter
LEXO PA REKLAMA!

SHKARKO APP

App Store
Google Play

E fundit!

x

Survey for free professions/ After the new law, 23% will close the activity or emigrate

2024-05-02 07:28:00, Aktualitet CNA

Survey for free professions/ After the new law, 23% will close the activity or

In April, the declarations for "Preliminary installments of tax on personal income from business" were published in the system for self-employed professionals.

Although these installments were in compliance with the new income tax law, which entered into force on January 1 and imposed a tax on self-employed persons at 15% up to 14 million lek income and 23% above this limit.

But the announcement of installments, as expected and as warned, was accompanied by many reactions. The debates arose mainly due to the half-hearted implementation of the law and the lack of prior information from the relevant state institutions.

First, there was ambiguity in the terms used, forcing the administration to delete the assessment notice from the system.

Secondly, the declaration of income was made according to the model of the old forms, i.e. the existing ones, but according to the new tax rates that start implementation from January 1, 2024 with the self-employed of free professions.

Thirdly, the period of the calculated and published tax installment was unclear and the 12-month payment was compressed into 9 months.

Fourth, in the calculations for the prepayment of the simplified tax by the tax administration, the 30% deduction of expenses (which the law provides for entities with a turnover of up to 10 million lek) is not taken into account, but only the expenses declared by the business, making the installments to result higher in relation to the preliminary calculations of the business, based on the logic of the law. Taxation said the deduction will be made early next year, as the new forms could not be completed.

In this mess of normative acts, those who suffered are the professionals who will be forced to pay sums, which most of them called high injustices, or they did not reserve them, because they followed the logic of the law.

The law has already been sent to the Constitutional Court by several interested parties. The reasons for sending the law to the Constitutional Court are the violation of equality between taxpayers, the principles of the rule of law, and the violation of competition between businesses with the effect of artificially increasing fees for services provided by independent professionals.

At the height of this debate, during the period April 23-30, "Monitor" conducted an online survey targeted at freelancers, through the platform aimed at measuring citizen response ECR (Engaged Citizens Reporting). The survey included a combination of quantitative and qualitative questions.

The response was high. The survey was completed by 613 freelancers, 35% of whom were women. Of them, 71% were from Tirana.

The results of the survey clearly showed the negative perception of the implementation of the new income tax law.

96% of the respondents answered that the application of the progressive tax would have a negative impact on their activity. Only 3% said there would be no impact, while the choice for a positive effect or no impact was less than 1%.

Survey for free professions/ After the new law, 23% will close the activity or

Most of the subjects will increase the prices; 23% will close the business, or emigrate

While waiting for the implementation of the Income Tax Act, freelancers seem to have given up in the face of legal ambiguities and half-hearted implementation, leading to high installments they have to pay up front.

Everyone will have to adapt to this new reality, while almost everyone said that the consequences will be negative, not only for them but also for their customers who will face higher costs of the services they will receive from accountants, lawyers, IT professionals, etc.

38% of respondents said they would be forced to raise prices, 26% said they would sacrifice net profit, and 4% said they would cut operating expenses. Although they expect to raise prices, this seems difficult in a market where competition is high .

"I will try to raise the prices, but this is not easy since the businesses have budgeted. I can even close it. I have already left businesses with low rates. I reduced the activity by 60% by removing the employees", comments an accountant from Tirana.

Many others are seriously considering not only closing the activity, but also emigrating, which was the choice of 23% of respondents. Specifically, 17.5% of the respondents said that they will close or suspend the activity, while another 5.4% said that in addition to closing the business, they would leave the country. Kosovo and Estonia were two of the choices mentioned for emigration.

"I will close the activity and reopen it in Kosovo because there is a more suitable tax system", wrote a consultant from Tirana. A digital analyst from Kukësi claims that "I will close the activity in Albania and create a legal entity in Estonia that gives more certainty regarding fiscal policies, and has excellent digital infrastructure".

"I have to think and move to live abroad with my family, the personal income tax affects 2 of the only sources of income in the family (husband and wife)", says an economist from Tirana.

The moral damage that the government has created by allowing huge abuses of taxes, as it is resulting from SPAK's investigations, is felt everywhere in the answers to this questionnaire.

"I will apply for a visa in Estonia as a digital nomad to benefit from 0 taxes. I can't pay 500 euros per month for 2500 euros salary. At least not in a country like Albania, where taxes are being openly misused and the accused are released under house arrest ", says a developer from Tirana.

About 3% of the respondents said that they would close the activity and work in the black, or would declare less activity than the real one. About 1% hope that the law will be overturned in the Constitutional Court and only 0.8% said they will pay what the law says. A few are considering converting to a limited liability company, or expanding their operations to accommodate the new bowls.

There are three scenarios, writes a marketing professional from Durrës: 1. Professionals will raise prices. 2. They will declare more expenses and less invoices. 3. They will suspend the activities.  

"The consequences will be the most negative possible, closing many activities, reducing the number of businesses in the market, worsening the company's finances, laying off employees, reducing our turnover as a result of closing businesses, a deterioration of of the entire professional base in Albania, with the consequences of evasion and the decline of quality in all free professions", writes an auditor from Tirana.

Professionals warn that the negative effect will also be felt in commercial companies. -"The law is based only on a general economic code without taking into account that the company offers services other than information technology. We have other employees, this law affects all commercial companies, not only the self-employed! We must cut jobs under the pressure of increased wages and new taxes which are unaffordable or we will raise prices or close the business. Business has at least a 10-year plan, while government fiscal policies change every year, unlike promises. We are totally disappointed", says an expert of other information technology services from Tirana.

Survey for free professions/ After the new law, 23% will close the activity or

Not being informed about the postponement of the 30% discount, caused 64% of respondents not to declare expenses

The taxable profit of freelancers, according to the new law, would be calculated by deducting from the total income a known a priori value of expenses in the amount of 30% (for income up to 10 million ALL), or in the opposite case by keeping full accounting of income and expenses.

But, because it was not possible to approve the new income declaration form, the 15% tax rate for profit tax was calculated based on the income, expenses and profit declared by the entities themselves for 2023 that were included in the regime of young.

Meanwhile, an information campaign by the finance and tax authorities was missing.

The complete non-implementation of the law caused confusion among businesses, a large part of which claim that they did not declare the expenses, as they were informed that they would be deducted automatically. As a result, subjects were faced with unexpectedly high bills, as many found themselves taxed on all income.

64% of the respondents said that the expenses of 2023 were not deducted from the tax liability. Of these, 82% said that they had not declared the expenses, as they thought they would be recognized and deducted automatically, or that they thought it was not necessary to reflect them.

Survey for free professions/ After the new law, 23% will close the activity or

Loans to pay taxes

Faced with an unexpectedly high expense, most freelancers declare that they cannot afford to pay. This was the answer of 75% of respondents, while only 25% said they had the opportunity to pay.

Survey for free professions/ After the new law, 23% will close the activity or

Their main hope is the revision of the installments after the appeal, or the overthrow of the law by the Constitutional Court. These options were chosen by almost half of the respondents who said that they could not afford to pay.

21% of the respondents said that they will not pay as they cannot afford it.

There are also those who declared that they will turn to banks to get a loan, the choice of 18% of the respondents. Others, faced with the inability to pay, consider closing the activity (8.7%)

Survey for free professions/ After the new law, 23% will close the activity or

The new law will increase evasion

In 2014, the new socialist government decided to escalate income tax, raising it to 23%, from the flat 10% it was before.

Initially, the threshold above which the tax of 23% was paid was 130,000 ALL and then it gradually increased to 150,000 and 200,000 ALL, which is currently.

This high level encouraged professionals to leave the insurance scheme and open businesses as individuals, where they paid minimal taxes. These movements prompted taxes to make several legal changes aimed at limiting these evasions, the most recent of which is the implementation of the new tax regime from January 1, 2024 for progressive taxation with tax rates of 15% and 23% for employees themselves, persons physicists and tradesmen of the services of free professions.

But even this latest move is not expected to fight evasion, as long as the rest of small businesses will continue to have zero tax until 2029.

89% of the respondents said that imposing a tax on self-employment will increase evasion and informality, and only 3% stated that it would not.

- Basically, every payment that I can, I will receive in cash. Those who want a bill I will bill a 20% plus. Prepayment is very wrong as it creates unnecessary burden. Why not make it like the VAT collection, so that every 3 months, the obligation comes out and you pay it", says one, a programmer from Tirana.

In 2023, all 29,000 freelancers have declared a total income of 85 billion lek, according to data from finance, or about 810 million euros. The net profit declared by the 29 thousand freelancers in 2023 was 51 billion ALL, or 490 million euros.

The net income that remains for a professional after deducting the expenses of about 1400 euros per month (490 million euros/29 thousand professionals). Based on the self-declaration of net profits for 2024, it turns out that 29,000 self-employed people will pay about 7.6 billion ALL (or 75 million euros) of simplified income tax. With the implementation of this new rate, the net income of freelancers drops to less than 1200 euros/month.

"I think that many people who have the opportunity to return the payment in cash, will receive it in cash and will declare a very minimal profit. We who are paid anyway by foreign companies through the bank cannot do this, but we will receive costs from paying the tax. This is the only category from which tax will be collected. There is also a third category where they are paid by bank and they will simply assume the risk by not declaring them. Some professionals who have been in doubt between emigrating or not, this law would push them to leave eventually. In total, I do not believe that any significant amount will be collected from this tax, much less what the government thinks", says a programmer from Tirana .

"This law will cause a lot of fiscal evasion and price increases that many businesses will not be able to afford, like me, a new business that I have not even opened for 6 months and now I am thinking of closing it and finding other ways to work and not pay you anything. Many businesses will start operating with cash in hand and thus tax evasion will increase", says a young accountant from Durrës.

Survey for free professions/ After the new law, 23% will close the activity or

The economic status of women professionals is damaged

Many women have found a source of income through self-employment in professions such as accountants, lawyers, IT experts, etc.

The survey specifically targeted this group, which is among the most affected. 92% of female respondents said that the imposition of income tax harms the economic and social status of female professionals and only 3% said no. The tax is expected to negatively affect especially young women who are in the first steps of entrepreneurship.

"I chose to return to Albania and work remotely for the company because I wanted to live in my country as well as because of other facilities. Now I have to change the contract and return to the state where I lived before", says a business analyst from Tirana.

"I am a young lawyer by profession and my income is not high enough to be taxed at 15%. I think that there should be some exceptions to this tax, for example, here I am talking about my personal experience. I am a young lawyer and I have had my office for a year, the market is very tough and the clientele is very difficult to grow. For young lawyers, for example, at least an exception should be made from this tax for the first 5 years, so that we also have the opportunity to stay in the market", says a lawyer from Elbasan.

It also has a negative effect on women who work to support the family.

"This law sinks the middle class. The impact on the state budget is insensitive, while our daily lives are ruined for us freelancers. Our income goes directly to supporting our families. The prices of food, rent, fuel have jumped without any control, while the tax takes away the possibility to afford our daily life ", says a translator from Tirana.

Survey for free professions/ After the new law, 23% will close the activity or

What the law provides

The Law "On Income Tax" was approved in March 2023 by the Parliament. In December, the decision approved by the Council of Ministers was published in the Official Gazette with the list of free professions services that will be included in the new taxation, including 26 types of activities starting from IT service, accounting, lawyers, education, doctors, real estate, news agencies, employment agencies, sports, tour operators, etc.

The law provides that net taxable income (taxable profit) from business for commercial individuals and self-employed individuals with an annual turnover of up to ALL 14,000,000 is taxed at the 15% tax rate and for businesses with an annual turnover over ALL 14,000,000 the tax rate is 23%.

The law provides for the selection of a special 30% a priori expense deduction regime for commercial and self-employed individuals with an annual turnover of up to ALL 10,000,000 or the option of choosing to declare deductible expenses based on the respective documentation and invoices for each expense.

While businesses with an annual turnover above ALL 10,000,000 to ALL 14,000,000 are taxed at the rate of 15%, but have the obligation to document the expenses through invoices.

Even the other category of businesses that are included in the annual income over ALL 14 million have the obligation to declare the annual expenses based on the respective documentation and invoices for each expense, but unlike the first band, the profit of this category will be taxed at the tax rate of 23% ./ Monitor.al





14:20 TODAY

Skema

Nëse klikon sot në faqen e Galerive të artit ku Ajola ...

Lajmet e fundit nga