Personal income tax is a tax paid by individuals on the income they earn during the year. Understanding the tax system is important to know how much you have to pay and how to take advantage of statutory deductions.
This guide will help you understand the basics of personal tax, how to complete a tax return and what are the payment deadlines.
Income subject to tax
Personal income tax is paid on several types of income: income from employment (salary), income from independent activity, income from ownership and property rights (lease), income from capital (dividends, interest) and income from insurance and other income.
The most common type of income is income from employment. The tax on these incomes is calculated and withheld directly by the employer before the salary is paid. The personal tax rate is 10% of the gross salary, while social security contributions total 27% (18.8% of the employee's burden and 8.2% of the employer's burden).
If you earn income from independent activity, you need to calculate and pay tax yourself. For self-employment income, you can choose between paying tax on net annual income (income minus expenses) or a flat-rate tax.
Tax return and deductions
The tax return is a document in which you report your income and calculate your tax liabilities. If you only earn income from an employment relationship, you are not obliged to submit an annual tax return because the tax has already been calculated and paid through the employer.
However, if you generate income from independent activity, property rights, capital or other sources, you are obliged to submit an annual tax return. The application is submitted by April 30 for the previous calendar year. The application can be submitted electronically through the e-Tax system or physically at the tax administration.
There are several types of deductions that can reduce the tax base. The personal deduction is a basic deduction that every taxpayer has. Additional deductions exist for dependent family members, personal premiums for supplementary voluntary pension insurance and donations for humanitarian and public purposes.
Deadlines and penalties for non-payment
The deadline for submitting the annual tax return is April 30. If, according to the calculation, you have additional tax to pay, it should be paid in two equal installments: the first installment by May 15, and the second installment by November 15.
If you do not submit a tax return within the stipulated period, you will be fined. The fine is from 300 to 3,000 euros in Denar equivalent. If you do not pay tax within the deadline, late payment interest is calculated on the unpaid amount.
The Public Revenue Administration controls tax returns and can perform tax audits. If the audit finds that you have not reported all of your income or claimed an unreasonable deduction, you will be assessed additional tax along with a penalty and interest. Therefore, it is important that you report all income accurately.
Understanding tax and correct fulfillment of tax obligations is important to avoid fines and problems with the tax administration. If you are not sure how to fill out the tax return, consult a tax advisor.
Regular payment of taxes is a social obligation and contributes to the financing of public services. Take advantage of statutory deductions to reduce the tax you have to pay.
