Key changes to the personal income tax declaration (DIVA) process for tax year 2024 and beyond

The changes to the 2024 income tax declaration process have a clear approach towards broadening the tax base and improving information collection. However, individuals and the tax administration must address the practical challenges associated with implementing and supporting the new process.

1. New submission deadline

What changes?

The deadline for submitting the individual income tax declaration for 2024 is one month earlier, from April 30 to March 31, 2025.

Impact?

This requires individuals to prepare earlier, reducing the possible time for collecting documents and preparing the declaration.

2. Declaration obligation threshold

New threshold

Individuals with gross income above 1.2 million lek per year are now obliged to declare (instead of the previous threshold of 2 million lek).

Goal

Broaden the taxpayer base to increase transparency and tax revenue collection.

Challenge

More individuals need to become familiar with the declaration procedure, potentially increasing the administrative burden.

3. Inclusion of untaxed income above 50,000 lek

New obligation

Individuals who earn over 50,000 lek of untaxed income (e.g., from rent, capital gains, or income abroad) must also declare, regardless of whether their total annual income is below 1.2 million lek.

Innovation?

Includes more categories of income that were not previously subject to taxation or formal declaration.

Effect?

Helps formalize unregulated sectors and reduce tax evasion.

4. Exemptions and deductions from the tax base

Expenses for dependent children

Deduction of 48,000 lek for each child under 18 years of age.

Education expenses

Up to 100,000 lek per year for individuals with gross income under 1.2 million lek.

Conditions

Children must be registered in the personal certificate and education expenses must be documented.

Validity

The application starts from January 1, 2025 and will be reflected in the 2025 declaration (with submission by March 31, 2026).

Positive impact

Encourages support for education and increases assistance for families with dependent children.

5. Technical changes and sanctions

The return is pre-filled

The e-Filing system now offers pre-filling with data recorded at the source (e.g., salary and tax withheld).

Penalties for late filing?

The fine is 3,000 lek for late filing.

Effect?

Requires less manual effort, making it easier for individuals to complete and submit.

5. Benefits and challenges for the tax administration

Benefits:

– Increase the base of individual filers.

– Increase data for fiscal analysis and risk identification.

Challenge:

– Support and educate new groups of taxpayers to meet new obligations.

To make a more detailed comparative analysis between the personal income declaration process before and after the 2025 changes, let’s look at the main aspects as follows:

1. Submission deadline

Before the changes, the deadline for submitting the DIVA was until April 30 of the following year.

After the changes, the deadline has changed to earlier, on March 31.

Argument Pro

The tax administration will have more time to analyze the declarations and conduct audits.

Arguments Against

Individuals have less time to collect documents and may face delays due to the shorter deadline.

The change requires early adaptation by individuals and professionals assisting with declarations.

2. Income threshold for declaration obligation

Before the changes, Individuals with gross income over 2 million lek per year were required to declare.

After the changes, the threshold has been reduced to 1.2 million lek.

Argument Pro

More individuals are included in the process, increasing fiscal transparency and formalization of the economy.

Argument Against

The new category of taxpayers may not be familiar with the procedures, creating administrative challenges.

In previous years, many individuals with average incomes (1.2–2 million lek) were not required to declare. The change brings a more comprehensive approach to fiscalization.

3. Inclusion of untaxed income above 50,000 lek

Before the changes, individual income declaration focused mainly on gross income and withholding tax.

After the changes, any income above 50,000 lek that has not been taxed at source must be declared (e.g., rent, income abroad, income from virtual assets).

Pros

Helps formalize distributed income sectors and reduces the possibility of tax evasion.

Cons

Individuals may face greater complexity in collecting documentation and calculating tax.

Previously, this income often remained undeclared due to lack of oversight or lack of legal obligation.

4. Exemptions and deductions from the tax base

Before the changes, deductions from the tax base were more limited and mainly oriented towards employment and social security expenses.

After the changes, the deductions are:

48,000 lek for each child under 18.

100,000 lek for educational expenses, for individuals with incomes below 1.2 million lek.

Pros

Support for families and inclusion of educational expenses encourages investment in education.

Argument Against

Benefits are limited to lower-income individuals, excluding the higher-income portion of the population.

Previously, deductions for children and education were either impossible or much more limited.

5. Income Tax and Fees

Before the changes:

The payroll tax was 13% to 23%.

The dividend tax was 8%.

The other income tax was 15%.

After the changes, the rates remain the same, but individuals with untaxed income must calculate the tax and pay it based on the system.

Pros

Increases tax equality between different sources of income.

Cons

Individuals with untaxed income face an additional administrative burden to maintain records.

6. Pre-Filing System (e-Filing)

Before the changes, returns were pre-filled with data from payrolls.

After the changes, the system will include additional data from other sources, further automating the process.

Pros

Makes the process easier for taxpayers.

Arguments Against

There may be technological challenges in ensuring an accurate and comprehensive system.

Technological improvement has the potential to reduce errors, but requires ongoing maintenance and updates.

7. Penalties

Before the changes, the Penalty for late declaration was also 3,000 lekë.

After the changes, the Penalty remains the same, but a larger base of individuals will be included in the risk of non-declaration.

There is no increase in the penalty, but the focus is on more rigorous enforcement and control.

Benefits and Challenges

Benefits:

– Increased formalization of the economy and inclusion of more income categories.

– Support for families and education.

– Increased analytical capacity of the tax administration.

Challenges:

– Administrative burden for individuals and accounting professionals.

– Complexity for individuals with untaxed income.

– Need for public education and awareness to understand the changes.

The changes to the tax filing process for 2024 and beyond reflect an effort to modernize the tax system and increase fiscal transparency. However, the success of these measures depends on well-organized implementation, support for individuals, and efficient administration of the modernized tax system.