Albania: Changes to taxation of individuals’ business income

New income tax law—Law no. 29/2023

New income tax law—Law no. 29/2023

The new income tax law—Law no. 29/2023—provides the following categories of income realized by individuals that will be considered as business income, to the extent they are not categorized as employment income:

  • Income from any kind of business activity, including the activities of self-employed and entrepreneur individuals
  • Interests, dividends, and royalties that are effectively related to the business activity
  • Income from the sale of securities that are effectively related to the business activity
  • Income from the lease of whole or part of tangible or intangible assets of the business activity
  • Income from the sale of assets and/or liabilities, including the sale of business activity
  • Capital gains realized from the sale or disposal of all or part of business assets as a result of a business reorganization process
  • Gifts, grants, or subsidies received by an individual in relation to the business activity
  • Income deriving from technical or digital automated services
  • Capital gains from revaluation of business assets when these assets are given as a contribution in kind to the capital of a company (either for the incorporation or capital increase)
  • Income deriving from transactions with virtual assets or mining of virtual assets effectively related to the business activity

Entrepreneurs or self-employed individuals with annual business turnover up to ALL 10 million may elect to deduct business expenses using flat rates depending on the type of activity performed without the necessity to be verified by a tax audit for their accounting records. Otherwise, they may choose to calculate the taxable income by deducting the actual business costs supported with the relevant tax documentation for any expense incurred. The taxpayers electing one or the other method are required to notify the elected option to the tax authorities, and they are allowed to change this method only once in a three-year period.

The new law also provides for a different method of taxation of business income:

  • Taxable business income up to ALL 14 million will be subject to 15% personal income tax.
  • Taxable business income over ALL 14 million will be subject to 23% personal income tax.

Final settlement of the personal income tax due from the business activity and submission of the respective tax return is required by 31 March of the following year.

Read a September 2023 report prepared by the KPMG member firm in Albania 



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