Profit tax instalments of self-employed professionals to be reimbursed within 2024

The Albanian government has approved a normative act to reimburse profit tax instalments paid by self-employed professionals earlier this year. The decision follows a Constitutional Court ruling that declared the 15% tax rate on self-employed individuals disproportionate. The government has allocated 501 million Lekë for this reimbursement, benefiting approximately 6,450 taxpayers. This move resolves an ongoing legal controversy, with the reimbursement process is set to be completed by December 31, 2024.

Why does it matter: The reimbursement of tax installments paid by self-employed professionals addresses the financial concerns of approximately 6,450 taxpayers, who had to pay the 15% tax, prior to the decision by the Constitutional Court. Many self-employed professionals, such as lawyers, architects, and doctors, faced undue financial strain from the tax, and its removal supports the middle class while reinforcing constitutional principles of fairness and proportionality.

The 15% profit tax on self-employed professionals was introduced on January 1, 2024, as part of a broader tax reform aimed at increasing state revenues. However, this measure faced criticism for disproportionately impacting freelancers and self-employed individuals. In response, the Democratic Party filed a lawsuit, leading to the Constitutional Court’s annulment of the tax in June 2024.

Following the court’s decision, the government sought clarification on the law’s effects during its enforcement period. Although the Constitutional Court did not provide specific guidance, the government opted to refund the tax instalments paid, with the reimbursement process set to conclude by December 31, 2024.

The Ministry of Finance has indicated plans to reassess tax exemptions and reduce rates, potentially introducing a new taxation scheme for self-employed professionals. This review will be conducted in collaboration with international partners to ensure a fair and effective tax system. Currently, self-employed individuals with annual turnovers up to 14 million Lekë are exempt from profit tax until 2029, aligning their tax obligations with those of small businesses.

Opposition figures, such as Democratic Party Deputy Jorida Tabaku, have welcomed the refund decision but criticized its delayed implementation. Tabaku emphasized that the refunds should have been processed immediately after the Constitutional Court’s ruling, highlighting the importance of timely adherence to judicial decisions.