Payroll tax changes are effective from 1 April 2022
New brackets shall apply for computation of salary tax. The changes were approved by the Government on 12 March and become effective from 1 April. The first ALL 30,000 (approx. EUR 240) per month shall continue to be tax exempt for all salary levels. The changes are as follows:
- For salaries up to ALL 40,000 (approx. EUR 320), the entire amount shall be tax exempt.
- For salaries from ALL 40,000 (approx. EUR 320) to ALL 50,000 (approx. EUR 400), any amount above ALL 30,000 (approx. EUR 240) shall be taxed for 50% at 13% tax rate.
- For salaries above ALL 50,000 (approx. EUR 400), the second bracket taxable at 13%, currently from ALL 30,000 (approx. EUR 240) to ALL 150,000 (approx. EUR 1,200), is extended to ALL 200,000 (approx. EUR 1 600). Any amount above ALL 200,000 (approx. EUR 1,600) is taxed at 23% tax rate.
The minimum salary is increased to ALL 32,000 (approx. EUR 260) from 1 April 2022
The Government also approved the increase of the minimum salary for social security and health insurance contributions purposes from ALL 30,000 (approx. EUR 240) to ALL 32,000 (approx. EUR 260) starting from 1 April 2022. As a result, the maximum salary level for the purposes of payment of social security contributions is proportionately increased to ALL 141,134 (approx. EUR 1,150). No cap applies for payment of health insurance contributions.
Although this increase would result in higher costs for low-cost labor intensive activities, Albania has still the lowest minimum salary in the Western Balkans, except for Kosovo.
The increase in the minimum salary and the changes to the salary tax computation were initially planned to become effective from 1 July 2022, but are brought forward earlier as part of the Social Resistance Package designed to mitigate the impact of the global energy crisis and of the war in Ukraine on prices.
Companies urgently need to adjust their payroll and re-estimate their costs for labor. We would be happy to assist with any queries and provide support to comply with the changed legislation.
If you have any further inquiries please contact Nevena.Kovacheva@bg.ey.com