Legal Basis

Law No. 29/2023, “On Income Tax”

General Instruction No. 26, dated 08.09.2023, “On Income Tax”

Instruction No. 29, dated 16.11.2023, “On Price Transfer and Advance Price Agreements”

Instructions and Decisions of the Council of Ministers – implementing the Law, pending publication

Person Definition

Personal Income Tax

Excluded Personal Income

Income from mandatory social and health insurance schemes

Economic aid from public budgets

Income exempted under international agreements

Financial compensation for expropriation for public interest or property expropriated before 1991

Financial compensation for former political prisoners and their heirs

Awards and prizes for achievements in science, sports, culture

Scholarships for students

Compensations via final court decisions or insurance contracts

Income from grants and subsidies in agriculture and livestock

Personal Income

Income is taxable if paid in cash or in kind.

Payment in kind: valued at market price (e.g., price of goods or services received in kind referring to prices for similar products on the market) – not less than cost – and converted into local currency at the exchange rate on the date of purchase, creation, or payment.

Employment Income

Excluded Employment Income

• Value of meals, non-alcoholic beverages, work equipment, medical treatment, and other benefits
  • provided at the workplace
  • available to all under similar conditions
  • creating better working conditions for employees
• Reimbursement of travel and accommodation expenses, travel allowances
  • Written authorization for business travel – purpose
  • Invoices, tickets, accommodation issued in the company’s name
• Compensation to employees in case of illness, accidents, or living difficulties
  • benefit < 20% of the employee’s annual employment income
• Life, health, and workplace accident insurance
• Salaries of consulate officers, diplomats, or similar staff from third countries and international organizations
  • in accordance with international conventions or agreements and enjoying diplomatic status

Personal Income Tax from Employment

Declaration of Personal Status

A payroll tax agent requires each employee to sign a declaration of personal status before the first payment of taxable employment income.

An employee cannot sign the personal status declaration with more than one payroll tax agent for the same calendar month.

At the employer where the employee spends the most time or earns the highest salary?

If the employee also works for other employers, these other employers apply the progressive tax rate and do not apply deductions from the tax base.

Payroll - according to the new law

Special Cases – Court Decisions

Mr. X was dismissed by his employer on January 1, 2024.

There is a final court decision dated December 31, 2029.

Decision 1

[…] Company X is required to pay salaries from the dismissal date until the court decision date, including social and health insurance contributions […]

Employer:

• modifies the payroll; and
• calculates Mr. Alfred's income tax for each month from dismissal date until the decision date, regardless of payment method, either in one sum or in installments.

Taxes:

• fines and interest generated by the system are removed by the tax administration

Decision 2

[…] Company X is required to compensate Mr. Alfred with 3,000,000 ALL for dismissal […]

Employer:

• Withholds 15% tax at source on the compensation and pays Mr. Alfred 85% of the compensation amount