A number of entrepreneurs in our country complained in the previous period regarding flat-rate tax paying. In addition to a series of obstacles they identified as illogical and distracting, the biggest issue flat-rate taxpayers stipulated was the confusion on the amount of taxes and contributions they will pay next year, since the decision made by the tax administration were delayed a few months.
The novelties are introduced as of 01 January 2020, related to the adoption of the new version of the Individual Income Tax Law. In line with the new amendments, entrepreneurs can only register in the BRA, after which this application is sent electronically to the Tax Administration and it shall automatically issue a decision on the amount of flat-rate tax and contributions for that year.
Namely, Electronic decisions shall be published at the portal of the Tax Administration for a maximum period of 48 hours after the application, upon downloading the BRA application, and it will be accompanied by the decision of the Tax Administration on the amount of taxes and contributions, while the current entrepreneurs will receive their decisions quickly at the beginning of the new business year, between January 10th and 15th. What is important is that it is expected that the tax decisions for the next year will arrive sooner in the future, that is, in December of the current year for the next year.
One of the novelties of the amended law is the entrepreneur Independency Test that drew a lot of attention and initiated debate related to its occurrence. Namely it will serve the Tax Administration as a simple way to determine is the entrepreneur (whether flat-rate or self-taxation with salary) really independent in the business he/she conducts or, it is merely a coverage of the working relationship where the entrepreneur is working only for that employer. This fact will be determined by inspectors, through 9 prescribed criteria, and in case of meeting 5 out of 9, the entrepreneur, as a natural person, will have to pick another category of income taxation.
One of the novelties introduced by this law is that there is an objective public calculator for flat-rate taxation. Previously, the tax amounts for entrepreneurs that were in similar or identical business could have been different, which depended on the decision of the tax official preparing the decision on flat-rate tax, and now a computer will calculate, for each taxpayer, the amount of tax and contributions in flat-rate monthly installments. However, as it was pointed out, there will be no significant leaps in the amount of monthly installments, a maximum increase may be up to 10%, while it is realistically expected that the increase will be 2-3%. The amounts will be similar to current amounts, with changes depending on the annual inflation.
Tax calculator is public and you can find it here.
When completing pay attention to the address field: you must pick an address from the drop-down menu the calculator offers. You cannot enter an address you wish, since it is related to the automatic calculation of the zone within the municipality of your seat, and the zone is related to the amount of tax and contributions monthly installment.
The new law prescribes certain relief for entrepreneurs that paid flat-rate taxes and contributions. Previously, for entrepreneurs that employed workers taxes and contributions were increased up to 5%. This is cancelled now, and there is a set of benefits related to employment of persons under 30 and above 55, as well as start-ups. When it comes to entrepreneurial start-ups, there are also benefits for payments.
Depending on whether they have just started their business or it is their first year of business, the obligations are reduced by 20, 15 or 10 percent compared to the base that would have been valid if they were in business for 10 years.
The purpose of introducing these amendments is more transparency in the tax system and encouraging employment with entrepreneurs.