Implementation of the New Income Tax Law: Requirements for Employees and the Declaration of Personal Status

 

 

 

The recently enacted Income Tax Law No. 29/2023 requires employees to submit a Declaration of Personal Status, which serves to determine the application of deductions from the taxable base as stipulated under Articles 20 and 22 of the law. While this declaration is mandatory for all employees, its practical implications are most significant for individuals engaged in multiple employment relationships.

Requirements

  1. Single Employment Relationship:
    Employees with a single employment relationship will experience no changes after submitting the declaration. Employers will continue to apply the appropriate tax exemptions and deductions as usual.

  2. Multiple Employment Relationships:
    Employees with two or more jobs must submit the Declaration of Personal Status to only one employer. This selected employer will apply the non-taxable salary limit of 30,000 lek, as specified in Articles 20 and 22 of the law. Employers in secondary employment relationships will calculate income tax on the full salary amount, without deductions.

Taxation Framework Under the New Law

  • Salaries up to 30,000 lek: Exempt from tax (0%).
  • Salaries from 30,001 to 200,000 lek: Taxed at 13%.
  • Salaries exceeding 200,000 lek: Taxed at 23% on the portion above the threshold.

For salaries below 50,000 lek, a reduced rate is applied:

  • For salaries between 30,001 and 50,000 lek, the taxable portion is limited to 50% of the amount exceeding 30,000 lek, taxed at 13%.

Practical Application for Dual Employment

Historically, employees with dual employment relationships would receive tax exemptions for the first 30,000 lek of income from each employer. At the end of the fiscal year, they would file an Annual Personal Income Declaration, where they would reconcile and pay additional taxes on any excess benefits received. Under the new law, this reconciliation will now be handled automatically during the year through payroll deductions by the primary employer.