Freelancers: increasing tax rates and cutting costs

Profit tax 15%-20%, minimum income 10,000 euros, electronic invoices, books, invoices and in the background the cancellation of imaginary fees and confirmation of residence.

For the model of taxation of freelancers and the self-employed, with intervention in their tax rates, especially for those classified as “poor” (income up to 10,000 euros per year), the “reduction” of expenses that will be recognized by the tax office for deduction from their turnover. In addition, incentives and disincentives are being introduced for mandatory electronic invoicing and maintaining myDATA electronic books, which, according to the authorities, will put the financial statements of entrepreneurs in order.

Since more than 60% of freelancers declare extremely low incomes, not exceeding 10,000 euros, i.e. incomes are lower than those of a worker receiving the minimum wage, the government plans to switch to a “carrot and stick” approach. Measures to combat tax evasion will be implemented first, followed by Mitsotakis’ election promises to gradually abolish income taxes and a 30 percent “cut” in the cost of living – measures that will be “unblocked” from 2025.

Until today, the first tax bracket for freelancers was up to €10,000 with a tax of 9%. From 2024, the new rate will be up to 10,000 euros with a tax of 15-20%.

In the tax area, the Ministry of National Economy and Finance plans the following steps: andChanges in the tax regime for freelancers and self-employed persons.

Those who declare an annual income of up to 10,000 euros to the tax office come to the fore. Many scenarios are being considered, but economic workers will come to a conclusion when they receive the results of the cross-checks that the AADE is already “carrying out” on the 3.8 million tax returns of households claiming to have earned income of up to €10,000 in 2021.

1. Increase in tax rate. One of the proposals being considered would increase the tax rate for income between 7,000 and 10,000 euros. Currently, a single tax scale is applied to employees, pensioners and those who receive income from business activities. The first rate of 9% applies to income up to €10,000.

Consideration is currently being given to increasing this rate to 15% or 20% for professionals, with the possibility of interfering with other tax bracket rates. It should be noted that freelancers were the biggest winners of the 2020 tax reform, as their tax burden was reduced by 60% after the first rate was reduced to 9% from 22%.

There is even a plan on the agenda to introduce special criteria to determine the income of this category of taxpayers. A new tax system for professionals and the self-employed will be presented to parliament in the coming months.

2. Electronic invoices. They will become mandatory in 2024 so that transactions can be cross-checked and verified in real time. At the same time, control by tax authorities is strengthened, automated and digitized. For e-invoicing, consideration is being given to maintaining until the end of 2024 the incentives currently provided to those using e-invoicing through a provider, including express tax refunds, a 2-year reduction in the statute of limitations, and greater discounts on certain expenses.

3. Widespread introduction of electronic books (myDATA). Reported revenue cannot be less than revenue collected through electronic reporting (myDATA, cash – POS), and only those invoices submitted electronically to myDATA will be recognized as expense invoices for deduction from gross revenue. The expansion of myDATA is currently underway and full implementation will be completed during 2024.

4. Fines for using cash. The fine for using cash in excess of €500 has been increased to twice the amount of the transaction, and control over the implementation of this measure has been strengthened through digital reporting.

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