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ESTABLISHMENT AND REGISTRATION OF NPOS

Who can create an NPO?

The Constitution of the Republic of Albania guarantees everyone’s right to be organizes collectively for any lawful purpose. According to Law No. 8788 dated 07.05.2001 “On non-profit organizations”, the article 46, point 1 and 2, the registration of organizations or associations in court is done according to the procedure provided by law.

What are the main forms of organization of an NPO?

There are three forms of organization of an NPO: Association, Foundation and Center.

Read more:
→ Law No. 8788, dated 7.5.2001 “On non-profit organizations”.

Is Social Enterprise a form of organization of NPOs?

No, social enterprise is not a separate form of organization of NPOs, and as such it is not registered as a separate entity. Social enterprise is a state-given status, according to the criteria set by Law No. 65/2016 09.06.2016 “For social enterprises in the Republic of Albania” The status is recognized by order of the Minister responsible for social affairs.

What documents are needed to establish an NPO?

Pursuant to Law No. 8788, dated 7.5.2001 “On non-profit organizations”, the main documents necessary for registration are the Establishment Act and the Statute, which must specify the decision-making and executive bodies, in the form of the organization chosen.

Where to register the NPO?

Non-profit organizations, once established, must register at the Tirana Court of First Instance, in accordance with the conditions and procedures provided by law to be subsequently registered with the tax administration. Registration with the tax authorities and equipment with the Tax Identification Number Certificate (NIPT) is done by submitting it to the regional tax office where the NPO activity will take place.

According to Law no. 112/2020 and DCM no. 1088, dated 24.12.2020 from January 2021, non-profit organizations, after registration in court and with the tax authorities will have to register the beneficiary owner / s in the Register of Beneficiary Owners (RPP). Registration will have to be done through the unique e-albania government services portal within 30 calendar days from the date of registration of the organization.

What documentation is needed to register an NPO to the Tax Administration?

The documentation to be submitted for registration to Tax Administration, according to the Law No.9920, dated 19.05.2008 “On tax procedures in the Republic of Albania” amended, is as follows:

  • Notarized Court Decision, Statute and Establishment Act;
  • Photocopy of the ID or Passport of the administrator or legal representative;
  • Headquarters ownership data (lease or ownership act);
  • The registration form (filled by the applicant).

Upon receipt of the Tax Registration Number Certificate (NIPT), to the NPO is provided the password that will serve for online declarations.

Read more on the registration here

Is the process of establishing and registering an NPO costly?

Yes, it bears some costs. The cost range from ALL 7,000 to ALL 30,000 (including printing, notarization, travel, labour costs, etc).

Can changes be made to NPO documents after it has been registered? What changes should be made to the responsible authorities?

Changes made by Court Decision are:

  • Headquarters address;
  • Executives (board / administrator);
  • Name;
  • Legal form.

Changes that are made to Tax Administration are:

  • Reflection of changes made by Court Decision;
  • Opening / closing of secondary addresses and issuance of relevant certificates;
  • Changing tax responsibilities (addition / removal).

Read more Formulari i Ndryshimeve.

If the organization has no activity, can it switch to inactive status?

If the NPO does not declare for a period of more than 12 consecutive months or has decided to terminate its activity for a period of more than 12 months or indefinitely, shall pass to inactive status.

How is transition to inactive status made?

The inactive status of NPOs is made at the request of the entity or by the Tax Administration when the legal requirements are met, specified as following:

  • Upon request of the entity – when the NGO decides to terminate the activity for a period longer than 12 months or indefinitely;
  • By the Tax Administration in case the entity submits declarations of inactivity (with zero) or when it does not declare for a period of more than 12 consecutive months.

For the entire period that the entity is in the “Inactive” status, it is not obliged to submit tax Declarations (the generation of statements is automatically stopped).

How is the NPO reactivated?

Reactivation of the taxpayer is done when:

  • Required by the NPO for reasons of resuming activity;
  • If the Tax Administration field structures find out that the NPO is Active.

In cases when the NPO is active while in the “Inactive” status, it is penalized by the Tax Administration according to the provisions of Law No. 9920, dated 19.05.2008 “On tax procedures in the Republic of Albania” amended.

What are the steps for deregistration an NPO?

The steps to deregistration for an NPO are as follows:

  • The NPO applies to the Court to initiate the deregistration procedure;
  • After receiving the notification from the court, the Tax Administration verifies the taxpayer’s situation regarding its compliance with legal obligations (declarations and payments);
  • Tax Administration notifies the Court of the above (confirms or opposes deregistration).

TAX LIABILITIES FOR NPOs

What are the types of tax liabilities for an NPO?

The tax liabilities for an NPO are:

• Social security contributions are an obligation for every employee and employer. They are paid partly by the employer and partly by the employee, as required by law (Read more the Related Documents);

• Health insurance contributions are an obligation for every employee and employer. Even this kind of tax is paid partly by the employer and partly by the employee as required by law (Read more the Related Documents);

• Employment Income Tax (part of personal income tax), is withheld for the purpose of earning income from salaries and bonuses arising from employment relationships (Read more of Law No. 8438, dated 28.12.1998 “On income tax”, amended);

• Value Added Tax: The NPO is obliged to register for VAT in case it carries out economic, taxable activity, supplies goods or provides paid (fee-for) services according to the provisions of DCM No. 953, dated 29.12.2014 “On the Implementing Provisions of Law no. 92/2014, “On Value Added Tax in the Republic of Albania”;

• Income tax: NPOs are required to register with the tax liability for Income Tax if they carry out economic activity and realize taxable income according to the provisions of Law No. 8438, dated 28.12.1998 “On income tax”, amended;

• Withholding tax is related to taxing the personal income of individuals. Mostly, this tax payment technique applies to withholding tax for payments related to services of various kinds performed by third parties, not registered with the tax authorities, in the capacity of the trader. Such may be: payment for rented premises, benefits of membership in a supervisory council, etc. (Read more of Law No. 8438, dated 28.12.1998 “On income tax” amended)

How to make the tax declaration?

All tax declarations are made ONLY electronically.

What are the types of tax declarations, the frequency and deadlines for filing them?

Do newly registered NPOs have the obligation to prepare and submit financial statements?

Regardless of when registered during a calendar year, it is required to submit the financial statements that make up the balance sheet by March 31 of the following year.

What is the individual income statement, when it is completed and by whom?

The Annual Income Statement is completed by the individual who is required to file no later than April 30 of the following year. Individuals are required to complete and submit the Annual Individual Income Statement if they generate gross annual income from all sources (within and outside the Republic of Albania), in the aggregate amount over ALL 2 million.
The individual has the obligation to complete and submit in person the individual annual statement of personal income, but also has the right to appoint his legal representative to complete or submit his statement.

Are there penalties for failing to comply with tax liability filing deadlines?

Failure to declare and pay tax dues on time is penalized according to the provisions of Law No. 9920, dated 19.05.2008 “On tax procedures in the Republic of Albania” amended.

FINANCIAL STATEMENTS AND ACCOUNTING STANDARDS FOR NPOS

Which are the financial statements for NPOs?

Based on Law No. 25/2018 dated 10.05.2018 “On accounting and financial statements” , the financial statements for NPOs are:

  • Statement of financial position;
  • Statement of activities;
  • Cash Flow Statement;
  • Notes to the financial statements.

Is there a difference in reporting between small and large NPOs?

NPOs with an asset or income figure of more than ALL 5 million apply accrual accounting and prepare all financial statements under paragraph 25 of the “National Accounting Standard for NPOs”.  NPOs that do not meet these criteria apply cash accounting and build only the cash flow statement accompanied by explanatory notes on the type of activities or services they offer.

Is it mandatory for an NPO to certify its financial statements by a certified accountant or audit firm?

According to Law No. 10 091, dated 5.3.2009 “On the legal audit, organization of the profession of the registered accounting expert and the certified accountant” NPOs are not obliged to perform statutory audit of their annual financial statements.

Do NPOs have a legal obligation to publish financial statements?

Starting from January 1st 2019, with the entry into force of the Law Nr.25/2018 “On accounting and financial statements” all NPOs in excess of ALL 30 million in assets or income in the financial statements, are obliged to publish their financial statements on their official website.

ECONOMIC ACTIVITY OF NPOS

Can NPOs carry out economic activity? If yes, is there a limit?

NPOs, as part of their activity, can carry out economic activity. Economic activity should NOT be the primary activity of NPOs (non-economic activity should prevail). The annual income from economic activity should not exceed 20% of the total annual income.

Read more:
→ Law No. 92/2014 “On value added tax in the Republic of Albania”, as amended.
→ DCM No. 953, dated 29.12.2014, On the implementing provisions of Law No. 92/2014, “On value added tax in the Republic of Albania” as amended.

If the NPO carry out an economic activity, should it issue a tax receipt?

Like any other entity that conducts economic activity, NPOs are considered a “taxable person” and as such have the obligation to issue tax invoices if they carry out economic activity. Link

Read more:
→ Instruction No.24, dated 02.09.2008, “On tax procedures in the Republic of Albania”.

When does the NPO's obligation to have the cash register arise?

If the NPO circulates goods and services for which payments are not made through the bank but in cash, the obligation arises to install and operate the fiscal system through the use of fiscal equipment (fiscal cash register) for the registration of cash payments and compulsory issuance of tax voucher.

Read more:
→ Instruction No.24, dated 02.09.2008, “On tax procedures in the Republic of Albania”.

Are NPOs entitled to participate in public tenders?

NPOs, like any other legal entity, have the right to participate in the tendering and procurement processes of grants, contracting and sales transactions by state bodies of public services, goods and public assets, as well as the transfer of public services and related public sector assets to non-profit organizations.

Are NPOs subject to VAT law and if so is VAT refunded?

If the annual turnover of the NPO exceeds the limit of 2 million ALL, they are obliged to register for tax liability for VAT according to the law of tax procedures amended in 2018. Like any taxable person, NPOs have the right to claim VAT reimbursement for their economic activity, if they meet both criteria set forth in the VAT law:

  • has a VAT credit surplus for three consecutive months.
  • the amount of VAT required must exceed 400,000 ALL.

Read more:
→ Law No. 92/2014 “On value added tax in the Republic of Albania”, as amended.

When NPOs are exempt from VAT?

NPOs have the right to benefit from the exemption of VAT for certain economic activities considered as “activities of public interest”. To benefit from the VAT exemption, NPOs must meet three criteria:

  • NPO decision-making bodies should not have interests directly related to the organization’s activity;
  • The non-economic activity of the organization should prevail significantly in relation to the rest of the activities.The economic activity cannot exceed 20% of the non-profit organization’s annual income;
  • Products or services provided by NPOs should not compete with the non-profit sector. NPOs that meet these criteria must submit a request together with the list of required documents at the relevant Regional Tax Directorate for VAT exemption. The decision to exempt from VAT is approved and signed by the General Director of Tax Administration, for a period of three years, with the right of renewal.

Read more:
→ DCM No. 953, dated 29.12.2014 On the implementing provisions of Law No. 92/2014, “On value added tax in the Republic of Albania”, as amended.

Are grants exempt from VAT?

Any NPO that receives payments as grants from donors for the purposes of the non-profit’s activity, in accordance with the law on non-profit organizations and in return for such payments, does not make a supply of goods or services to the donor, but use the payment to realize the purpose of its nonprofit activity, then these amounts received are not in the scope of VAT application.

Read more:
→ Law No. 92/2014 “On value added tax in the Republic of Albania”, as amended.

PROCEDURES FOR REGISTRATION OF BENEFICIARY OWNERS

How is the owner / beneficiary registered in the Register of Beneficiary Owners (RPP)?

– The authorized person after being electronically identified in e-Albania must choose the type of registration he will do (initial registration and/or updating or changing the data for the beneficiary owners) and then the relevant application form will be displayed and completed.

– In the application, the necessary accompanying documentation must be attached, such as: the identification document of the individual registered as beneficial owner and the extract of your subject; the extract of the legal entity that is owned by the registered individual and is the founder of your entity, the statute/internal acts of the non-profit organization; contract or any other document proving that the registered individual is the beneficial owner of your entity.

– The documentation deposited in the Register must be drafted no later than 30 calendar days from the date of initial registration of the beneficial owner and translated into Albanian. Private acts and official documents of foreign jurisdictions must be legalized.

– The application and accompanying documentation is confirmed to be accurate by electronic means that guarantee the authenticity of the origin and the inviolability of the content of the documents in electronic form, at least through the advanced electronic signature of the application form. National Registering Center, reviews the application within two working days, according to the requirements of the Council of Ministers Legal Acts – DCM, after verification of which decides its approval or rejection, a decision which is published in the RPP and also notified via e-mail declared by each non-profit organization, in e -albania.

– The application will be reviewed by the National Registering Center no later than 2 working days from the receipt of the application by the reporting entities. The decision to approve or reject the application will be notified through publication in the Register and will be sent to the authorized person via email.

What information should be recorded?

– The information to be recorded consists of (i) data on the reporting entity (NUIS; name), (ii) mandatory data on the beneficial owner (identification data; date of designation of the individual as beneficial owner; type and percentage of ownership). For beneficial owners who are Albanian citizens the required data are name, surname, identification number, date of birth, citizenship, address of permanent residence. In addition to the above information, foreign nationals must also declare their passport number, date of issue and date of passport expiration.

How should the beneficial owner / s be identified?

You should keep in mind that the beneficial owner of non-profit organizations, which includes foundations, associations, centers, as well as branches of non-profit organizations, is:

– The founder or
– legal representative or
– the individual who exercises the ultimate effective control over the administration and control of non-profit organizations.

The last effective control is the relationship in which a person:

– determines the decisions taken by the non-profit organization;
– controls in any way the election, appointment and removal of most of the decision-making bodies and / or executive bodies of the non-profit organization.

By control, meanwhile, is meant, control or ownership in a legal person, trust or other legal arrangement. In the event that control is exercised through a trust, you must identify and register as a beneficial owner:

– The Creator;
– supervisor/trustee;
– counsel, if any, and
– beneficiaries or when the persons benefiting from the legal agreement or entity have not yet been identified, the class of persons for whose main interest the legal agreement or entity is established or operates;
– or any other individual exercising ultimate control over the trust through direct or indirect ownership or other means.

Does the law apply to non-profit organizations that have moved to Passive Status?

Every reporting entity, regardless of its status, has the obligation to register the beneficial owner.

Who can register as an NPO owner?

Beneficiary owner of non-profit organizations, including foundations, associations, centers, as
and branches of non-profit organizations, is:
*The founder or
*legal representative or
*individual who exercises the ultimate effective control over the administration and control of organizations non-profit.

The last effective control is the relationship in which a person:
-determines the decisions taken by the non-profit organization;
-controls in any way the election, appointment and removal of most decision-making bodies and/or the executive bodies of the nonprofit organization

Time required to receive the service

3 working days

Period of validity

1-year for profiles: Freelancer, Employee Professional, Administrator and Technical Manager.
1-week for Electronic Signature 1 week

Cost

4800 ALL for: Freelancer, Employed professional, Administrator and Technical Manager
(Download the invoice)
Free for Electronic Signature 1 week.Law No. 92/2014 “On value added tax in the Republic of Albania”, as amended.

For more

For any questions or ambiguities regarding the use of the service you can contact helpdesk@ealbania.al  or visit https://akshi.gov.al/nenshkrimi-elektronik-per-subjektet-private/

The application form is the same for all reporting entities. Terms owner, direct / indirect ownership, quota etc. do not correspond to the legal nature of NPO. This creates a problem when filling out the application for these entities, which does not easily validated.

Referring to the different nature of an NPO from commercial entities and identification of their beneficial owner who by law is different; Application forms are designed in two types: for NGOs and commercial entities.

What does the written statement of the founder of the NPO or the president mean, when his position is well defined in the statute of the association itself?

Referring to DCM no. 1088/2020, the written statement of the representative is charged in case after exhaustion of all possible means of identifying the owner beneficiaries and if there is no reason for suspicion, the reporting entities fail to identify as beneficial owner the individual who owns or controls the latter a legal entity, through direct or indirect ownership of 25% or more of shares / quotas of capital or ownership interests in an entity rapporteur according to the provisions of the law “On the register of beneficiary owners”. So it is an act that does not define its position in the reporting entity, but the steps that
he undertakes to identify the beneficial owner as well as the reasons for identifying the person of registered as beneficial owner.

FISCALIZATION-IMPLEMENTATION PROCESS

What is fiscalization?

Fiscalization is a set of measures used to reduce tax evasion in transactions with and without cash. In the fiscalization process, all transactions (invoices) are reported in real time in Tax Administration. For the purpose of identifying and tracking each transaction, each invoice is given special invoice identification number (NIVF).

Are NPOs subject to fiscalization?

Pursuant to Law no. 87/2019, dated 18.12.2019 “On the invoice and the circulation monitoring system”, published in the Official Gazette no. 3, dated 20.01.2020, the subject of invoice fiscalization will be:
1. all taxpayers who issue invoices, according to this Law and the legislation in force on taxation value added;
2. public bodies;
3. banks, non-bank financial institutions and other entities that provide payment services electronic invoices.

NPOs are subject to law Law no. 87/2019, dated 18.12.2019 “On the invoice and the monitoring system of turnover ”both in the role of receiver of invoices and in the role of issuer of invoices. For NGOs that do not carry out economic activity, (do not issue tax invoices), the obligation arises only for registration in Central Invoice Platform / Self-Care Portal.

What are the main steps for an NPO to meet the requirements of the fiscalization process?

You should keep in mind that the beneficial owner of non-profit organizations, which includes foundations, associations, centers, as well as branches of non-profit organizations, is:

– The founder or
– legal representative or
– the individual who exercises the ultimate effective control over the administration and control of non-profit organizations.

The last effective control is the relationship in which a person:

– determines the decisions taken by the non-profit organization;
– controls in any way the election, appointment and removal of most of the decision-making bodies and/or executive bodies of the non-profit organization.

1. NPOs must register on the Central Invoice Platform / Self-Care Portal accessible in e-albania and declare the data required by the platform.
2. NPOs must apply to be provided with an electronic certificate for the fiscalization project by National Agency of ICT and then upload it to the Self-Care portal.
3. Should NGOs provide the conditions for using the IT software solution?

What is the data that must be declared on the central billing platform / self-care portal by a non-profit organization?

1. Locations of exercising the activity
2. Uploading the Electronic Certificate for the fiscalization project
3. Operators that will issue electronic invoices
4. Registration of electronic billing equipment
5. Registration of the manufacturer and maintenance of the software solution

Non-profit organizations that do not issue tax invoices need to take only the first two steps.

Equipment with electronic certificate for the fiscalization project from National Agency of ICT through the e-albania portal

Regardless of the issuance or not of tax invoices by non-profit organizations, according to the law of Fiscalism will need to be provided with an Electronic Certificate. This digital certificate is uniquely linked with the nonprofit organization as the entity. Application for an electronic certificate for the fiscalization project enabled through the e-albania portal.

Application steps
– Log in as a business on the e-Albania portal;
– Select the service “Application for an electronic certificate for the fiscalization project”;
– Click the “Use” button;
– Fill in the required data in the relevant electronic form;
– Click the “Send” button at the bottom of the form;
– The request will be sent to the e-Gov Security Directorate, PKI field sector and will be processed by specialists in the field of Infrastructure and Public Keys;
– The Electronic Certificate will be sent to you at the email address you completed during registration business on the e-Albania portal.
* Caution – make sure the e-mail address registered on the portal is securely accessible from your side.
The required time to receive the service is 3 working days.
The validity period of the certificate is 1 year from the time of certificate generation.
Costs for this service is 4000 Lekë (Download the invoice)

Providing software solutions for NPOs

Every non-profit organization that issues tax invoices, starting from:
· July 1, 2021 for all WITHOUT cash transactions
· And from September 1, 2021 for all WITH Cash transactions will have to issue them through the online Fiscalization system, regardless of their fiscal regime
(with VAT or without VAT).

All non-profit organizations that do not issue tax invoices are not required to provide software solutions. These organizations can receive fiscalized invoices through the Self-Care portal.

Non-profit organizations issuing invoices for WITH or WITHOUT cash transactions can issue invoices and perform the fiscalization procedure through the use of the central invoicing platform / Self-Care, if they meet the following criteria:
a) They are not subject to VAT;
b) They have not found any violations related to the non-issuance of the invoice in the last 3 years;
c) Do not have more than one place of business activity;
d) There is only one employee / self-employed.
Organizations that issue tax invoices and do not meet the above requirements will need to be provided with a software solution by entities certified by the Tax Directorate.

Caution: the choice of the company that offers software solutions should be made based on the type of transaction that the organizations will perform, WITH or WITHOUT cash.
Here you can find the list of entities certified by the Tax Directorate Web list of companies (tatime.gov.al)

How can we verify whether the reveal invoices are fiscalized?

All buyers or recipients of invoices can verify if their invoice is fiscalized and sent to the Tax Administration, within 60 days from the date of the invoice. Verification is performed through the central invoice platform or through a special application by scanning the QR code on the invoice. It can also be verified at the Tax Administration office.

If the buyer is a taxable person, he can verify from the central invoice platform if the invoice is fiscalized, as the invoice must be recorded in his purchase book.
If the invoice does not contain NIVF at the time of issue, then it means that it was not fiscalized before issuance.

Where can I address for questions and clarifications about fiscalization?

For questions and ambiguities regarding the fiscalization process, you can write to the address Fiscalization.Helpdesk@tatime.gov.al.