In the following article we will analyze the costs APPLIED, other than the net salary (salary collected by the Employee), for an occupation with an average salary in Albania and the Region.
Countries apply obligatory Health contributions; Social Security contributions as protection net for Retirement Pension and Disability, as well as Unemployment Insurance. Beyond the Contributions and the Insurance, individuals also pay Income Tax.
Contributions are shared between the employer and the employee. The tax is paid, meaning is deducted, from the employee’s salary. In both cases, the charges of the employer and the employee, the burden to disburse the payment of the Tax falls upon the employer. Mandatory Contributions and Taxes are costs that must be planned ahead to keep a person employed. Therefore, they are calculated as Employment Costs. In Albania, for an average salary these costs account for up to 40.9% of the Total Gross Salary. For salaries up to 30 thousand ALL, the tax of 13% is not applied, only the Compulsory Insurance of 27.9% is paid.
Source: https://taxsummaries.pwc.com/
Comments and analysis: Open Data Albania
Mandatory contributions SUPPORT two important public schemes: the Social Protection Scheme – Pensions- and the Health Care Scheme. Thus, through the contributions paid by those who work today, the pension for the elderly who once were in the work force are covered. As the Scheme does not fully cover the expenses, the State Budget subsidizes it every year.
The data collected has been updated in January 2022 and was retrieved from the PWC Worldwide Tax Summaries database, also contrasted with the respective fiscal policy of each country.
Comparative Analysis will be performed only in the case of the Average Salary (Wage) for each country. This will be done out of convenience as countries apply mandatory taxes and contributions at different rates for different levels of wages.
Source: https://taxsummaries.pwc.com/
Comments and analysis: Open Data Albania
In Serbia, 25% of the gross salary is deducted for Pensions and Disability, 14% paid by the employer and 11% by the employee, while the health service of 10.3% is divided equally between them. Serbian citizens also pay 0.75% of their salary as a contribution to the Unemployment Fund. In total, the mandatory taxation rate over the Average Wage is 46.5% of the gross salary.
Source: https://taxsummaries.pwc.com/
Comments and analysis: Open Data Albania
Meanwhile, in Kosovo, the payment of pension contributions is divided equally, 5% each, between the employer and the employee. Health Insurance is paid at the rate of 7% by the employer of companies with annual turnover over 50 thousand Euros and only 2 Euros for employers with annual turnover below this level. The categories in need, people with disabilities and war veterans, etc. are excluded from the payment of the social security contributions.
In Northern Macedonia, employers are required to deduct from 18.8% the gross salary for Pension and Disability, 7.5% for Health Insurance, 1.2% for Insurance at work and 0.5% for the mandatory Supplementary Pension.
In Albania, contributions consist of Social Insurance, which is paid at the rate of 15% by the employer and 9.5% by the employee, while Health Insurance is shared equally, at the rate of 1.7% each, 3.4% between the two in total. The wage tax is zero for up to the first 30 thousand ALL. Up to that amount a 13% tax is then applied for the average salary.
In contrast, in Montenegro the highest contribution burden is borne by the employee, who pays 15% of the salary for Pensions and Disability, whereas the employer has to pay the remaining 5.5%. Unemployment Insurance is equally divided at the rate of 1% between the parties.
Bosnia and Herzegovina, meanwhile, is unique in sharing contributions, as Bosniak and Serb communities apply different levels of taxation.
The Federation of Bosnia and Herzegovina holds 17% of salary contributions for the Pension and Disability Fund from employers, 12.5% for Health Insurance and 1.5% for Unemployment Insurance. For the same, the employee pays 6%, 4% and 0.5% of the gross salary, respectively.
In Republika Srpska it is the only employer that pays 18.5% for the Pension and Disability Fund, 12% for Health Insurance and 2.3% for Unemployment Insurance and Child Protection.
Another tax that is deducted from the salary is the one on Personal Income, which in Serbia is taxed at 10%, except when the salary exceeds 6 times the minimum wage, in which case the tax is applied at 15% rate.
In Macedonia, salaries up to 17,530 Euros are taxed at the rate of 10%, and above this level, at the rate of 18%.
In Kosovo, income up to 960 Euros is not taxed, but 4% salary is taxed 960 – 3000 Euros per year; 6% for salaries from 3,000 to 54,000 Euros per year and 10% for salaries that exceed this level.
In Albania, for the salary band up to 30 000 lek this tax is not applied, it is applied 13% for salaries 30,000 to 150 000 lek and 23% plus 15 600 lek for salaries that exceed this level.
In Montenegro, salaries between 701 Euros – 1000 Euros, as well as income from the enterprise 8401 Euros – 12,000 Euros are taxed 9%. Salaries over 1000 Euros and income from the enterprise over 12 000 Euros are taxed 15%.
The only country that applies a flat tax of 10%, without differentiation, is Bosnia and Herzegovina.
The data disclosed up to this point allows us to deduce what percentage of the gross salary is occupied by taxes, listed for each country as follows:
In Bosnia and Herzegovina the percentage of compulsory payments (insurance contributions and taxes) applied upon the average gross salary varies from 42.8% in Republika Srpska to 51.5% in the Federation of Bosnia and Herzegovina
In Albania, taxes occupy 40.9% of the average gross salary.
In Serbia, the taxes applied on the average gross salary are at the of 46.05% rate.
In Northern Macedonia, taxes account for 37.5% of the average gross salary.
In Montenegro Mandatory taxes make up for 21.5% of the average gross salary;
In Kosovo, taxes on the average salary range from 10-17% of gross salary.
The latter also enjoys the lowest level of contributory costs and mandatory taxes, applied on wages, along with Montenegro.
Download excel: Costs on wages, Contributions and Mandatory Taxes on the Average Wage in Albania and Region, January 2022sComments and Analysis: Open Data Albania
Contributed and translated by: Rezarta Caushaj
