Genuine self-employed persons, from March 2026, will complete the form for self-declaration of status

2026-01-07 14:45:00, Ekonomi CNA

Genuine self-employed persons, from March 2026, will complete the form for

Self-employed individuals who receive over 80% of their income from a single client or over 90% from fewer than three clients must, by March 2026, self-declare data on contractors providing services, work methods, etc., in order to verify the source of income.

The self-declaration will be carried out by completing the "Declaration of Self-Employed Status" form and aims to verify the source of income, when it originates from business relationships, and not from employment, as many employees, in order to avoid taxes or reduce tax liabilities, left the payroll and registered as self-employed individuals.

The approved amendments to the law "On Income Tax", part of the 2026 fiscal package, determine that the Self-Employed Status Declaration form will be submitted to the regional tax directorate where the entity is registered, within the same period as the Annual Personal Income Declaration, in March.

The declaration will include data divided into 5 sections, for the two contractors or two businesses that the self-employed person provides his services to.

First, basic data about the first contractor of the self-employed person, such as NIPT, trade name, address, the invoice value excluding VAT of the contractor for the employed individual. Section 2 of the form will include general data about the contractor, i.e. about the business to which the service is provided.

Section 3 of the declaration focuses on the self-employed person's conduct in providing the services. It asks whether the self-employed person reports on his work, how often he provides the services, and whether he is obliged to perform them personally. It also checks whether he can use assistants or substitutes and whether the contracting business determines the manner and sequence of the work.

Section 4 focuses on the control that the self-employed person has over the factors and output of the service. It asks for information about the materials and equipment used, who provides them (self-employed person or contracting business), and where the services are provided. It also asks whether the self-employed person processes any part of the output on their own premises and what they do with the final product or service.

Section 5 focuses on the nature of the relationship between the self-employed and the contracting business. It asks whether the work is done under a contract and its details, whether there are set hours, the type and method of payment, and who sets the fee. It also checks whether there is a financial risk to the self-employed and whether there are penalties for failure to deliver the services within the deadlines.

If this declaration shows that he is actually self-employed, then the Tax Authorities do not consider him a disguised employee and he will continue to be taxed as a small business, with a lower tax rate and without full obligations as an employee.

Only those who use self-employment as a form of avoidance (e.g. companies that register employees as "self-employed" to avoid tax obligations) will be reclassified as employees under the changes to the income tax law.

The tax administration will use this information to assess whether the income comes from genuine business relationships or disguised employment. This is expected to avoid penalties for real professionals and strengthen control over tax evasion.

Therefore, this statement will serve as an assessment tool for the tax administration to determine whether the individual is carrying out a genuine business activity or is in a situation of tax avoidance.

With the adoption of the new Law No. 29/2023, “On Income Tax”, as amended, an anti-avoidance rule was also adopted, which provides that income earned by a self-employed individual will be considered income from employment, if: 80% or more of the income earned is obtained directly or indirectly from a single client; or 90% or more of the total income earned is obtained from fewer than 3 clients.

Only self-employed individuals who provide services are exempted from this rule: only to non-resident persons in the Republic of Albania, or only to entities that do not have a permanent establishment in the Republic of Albania. The authorities acknowledge that the practical implementation of the anti-avoidance rule has brought unfair penalties for this category.

"After the entry into force of the anti-avoidance rule on January 1, 2024, from the practical implementation and requests of the entities, it has been noticed that not all entities affected by this rule carry out employment activities. Some of them are based on genuine business relationships, but due to business performance they may be included in the assessment scheme of the anti-avoidance rule.

According to tax administration data, the number of businesses that could be affected by this rule is around 6,000 entities, of which over 1,000 entities were registered and operated before 2016, the year in which the 0% tax rate was introduced for entities with a turnover of up to 5 million lekë. So, around 19% of the entities included in this scheme are businesses that existed before the creation of tax incentives for small entities, which subsequently contributed to the erosion of the tax base.

"The majority of these entities are considered to be natural persons who exercise a genuine business activity," the law states.

However, the form will not be completed if the self-employed individual provides services only to non-residents in Albania or only to entities that do not have a permanent establishment in Albania. In this case, the self-employed person is automatically considered to earn income from the business and does not need to submit the declaration./ Monitor