With the implementation of the “Income Tax Law” starting from January 1, 2024, the profits of free professions’ businesses will be taxed at rates ranging from 15% to 23% after deducting expenses from annual income.

The Tax Administration has sent a letter to businesses, informing them that they are part of the list of approved free professions by the Government. Therefore, starting from January 1, 2024, they will be taxed at 15%.

In the tax letter sent to free professions’ businesses, it is clarified that for the calculation of the preliminary profit tax for the year 2024, the data that this category of businesses will declare for income and expenses in 2023 will be used. Specifically, the data declared for income, expenses, and taxable profit that businesses will declare for the year 2023 will be subject to assessment by the Tax Administration for the calculation of the preliminary profit tax during 2024.

This scheme is the same as the one used for large businesses, which prepay income tax based on profits from previous years.

For the completion of the annual income statement for the declaration of profit tax for the tax period of 2024, free professions will use the forms according to the law adopted in 1998 “On income tax”.

Approximately 29,000 businesses in free professions will pay progressive tax ranging from 15% to 23%

The Ministry of Finance estimates that up to 90% of all businesses (divided into 3 categories: self-employed, individual entrepreneurs, and merchants) fall within the annual income bracket of up to 14 million lek, which will be taxed at a rate of 15%.

For free professions defined according to the decision “On the implementing provisions of Law No. 29/2023, “On income tax”, with annual income up to 14 million lek, the deductible fixed and undeclared expenses in accounting are recognized at a rate of 30%.

The other category of businesses falling within annual income over 14 million lek is obliged to declare annual expenses with the tax administration, unlike the first category where fixed or undeclared expenses are recognized in accounting at a rate of 30%. After deducting the declared expenses at the tax administration, the profit of this category will be taxed at the 23% tax rate.

The projected revenues from this category are estimated at around 3 billion lek according to the 2024 budget project report. The “Income Tax Law” stipulates that free professions with annual income up to 14,000,000 lek will be taxed on profit at 15%, after deducting expenses and the minimum wage towards the total annual income.