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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.