Tax Office: Low turnover is a trap for freelancers

The turnover averages per activity code number, i.e. per branch, were published by tax administration. The average turnover is one of the factors taken into account in finding the imputed income of professionals and businesses with simple books. From the data made public, it is established that in many categories of professionals particularly low turnovers are recorded, a development which obviously leads to a much lower taxable income.

A look at the statistics shows a slight increase in the average gross income in 2022 compared to the reported gross income in 2021. In most cases of professionals high on the list of tax evasion the gross revenues they showed in 2022 were higher than in 2021. This development may be due to the increase in electronic transactions. However, even so, the figures show that net profits make up 1/3 or 1/4 of gross revenues.

As mentioned above, the average turnovers are used to calculate it imputed income. In particular, a 5% surcharge is made on the amount by which the debtor’s turnover exceeds the average annual turnover of the credit union in which the debtor generates the highest revenue. For example, a self-employed person with an annual turnover of 35,000 euros exceeds the average annual turnover of the CAO by 10,000 euros (annual turnover of 35,000 euros – average annual turnover of the CAO of 25,000 euros = 10,000 euros).

Therefore, the 5% surcharge will be applied to the amount of 10,000 euros. If we assume that in the above case the presumptive income amounts to 18,000 euros for the professional (taking into account payroll, etc.) an additional 500 euros (5% X 10,000) will be added, so the minimum taxable income is 18,500 euros.

According to the data published by AADE:

• Taxi operators. They amount to 29,108 and the gross income they declared for 2022 amounts to 16,281 euros. In the previous year they had declared a gross income of 11,743 euros and a net profit of 3,726 euros

• Lawyers. They amount to 35,967 and the gross income of 2022 amounted to 22,890 euros. In 2021 they had declared gross revenues of 18,960 euros and net profits of 14,405 euros.

With the new tax regime the average gross receipts is used to calculate imputed income.

• Doctors (activities of practicing special medical professions). The 23,471 doctors in this category declared a gross income of 46,640 euros in 2022 compared to 43,541 euros in 2021.

• Dentists. They amount to 10,907 and declare a gross income of 28,289 euros. Their average gross income was 25,752 euros and their net income was 8,121 euros. They paid a tax of 1,881 euros. Net profits are 26% of gross.

• Bar owners. The 29,775 bar owners declared a gross income of 37,777 euros, while in 2021 it was 28,734 euros. The average net income was 6,860 euros.

• Plumbers. 8,506 natural persons are employed in the sector. The gross income of 2022 had reached 29,463, while in 2021 at 27,004 euros. The net profits they declared in 2021 were 7,617 euros.

• Carpenters. The 4,904 carpenters declare gross profits of 32,913 euros. In 2021 they had declared 30,996 euros. Their net profits had reached 7,993 euros in 2021.

• Electricians. 8,473 natural persons are active in the sector. The average gross income in 2022 amounted to 32,635 euros. In 2021, the average gross income was 32,785 euros and the net income was 9,431 euros.