TAX LIABILITIES FOR NPOs

What are the types of tax liabilities applicable to an NPO?

The tax liabilities applicable to an NPO are as follows:

Social security contributions are an obligation for every employee and the employer. They are paid partly by the employer and partly by the employee, according to legal provisions (read more in the Supporting Documents).
Health insurance contributions are an obligation for every employee and the employer. They are also paid partly by the employer and partly by the employee according to the legal provisions (read the Supporting Documents for more).
Employment Income Tax (one of incomes subject to personal income tax) – is withheld from the salary and bonuses, which are generated from employment relationship (read more Law no. 8438, dated 28.12.1998 “On income tax”, as amended ). This tax is an obligation of the employee, but is withheld, declared and paid by the employer to the relevant tax authorities.
Value Added Tax – An NPO is obliged to register for VAT and become a VAT taxpayer in the case it performs an economic activity, supplies goods or services against payment according to the provisions of Law no.92/2014 “On Value Added Tax in the Republic of Albania”, as amended, and the corresponding implementing secondary legislation.
Income/Profit Tax – An NPO is obliged to register for the tax liability for Profit Tax, in the case it performs an economic activity and generates taxable income which are not used to support the non-economic non-for-profit activity of the NPO according to the provisions of Law no.8438, dated 28.12.1998 “On the income tax”, as amended, and the relevant implementing secondary legislation.
Withholding Tax – Withholding tax is a tax applicable to the personal income of individuals which are not generated from employment. Mainly, this tax liability is applicable to lease payments, when the lessor is an individual, incomes generated from membership in a supervisory council, when the latter does not have the status of a sole entrepreneur, etc. (read more Law no.8438, dated 28.12.1998 “On income tax”, as amended, and the corresponding implementing secondary legislation.

Supporting Documents

→ Law no.7703, dated 11.05.1993 “On Social Security in the Republic of Albania”, as amended.

→ Law no.7870, dated 13.10.1994 “On Health Insurance in the Republic of Albania”, as amended.

→ Law no.9136, dated 11.9.2003 “On the collection of mandatory social security and health insurance contributions in the Republic of Albania”, as amended.

→ Law no.7961, dated 12.07.1995 ” Labor Code of the Republic of Albania”, as amended.

→ Decision nr.1114, dated 30.7.2008 “On some issues in implementation of laws no.7703, dated 11.5.1993 “On social security in the Republic of Albania”, as amended, no.9136, dated 11.9.2003 “On the collection of mandatory social security and health insurance contributions in the Republic of Albania”, as amended, of Law no.10383, dated 24.2.2011 “On mandatory health care insurance in the Republic of Albania”, as amended.

→ Decision no.77, dated 28.1.2015 “On mandatory contributions and benefits from the social security system and health care insurance”, as amended.

→ Instruction no .23, dated 09.12.2014 “On the collection of mandatory social and health insurance contributions”, as amended.→ Law no.9920, dated 19.5.2008 “On tax procedures in the Republic of Albania”, as amended.

→ VKM 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.

→ UMF no.6, dated 30.01.2015 “On value added tax in the Republic of Albania”, as amended.

→ UMF no.5, dated 30.01.2006 “On income tax”, as amended.

How to make the tax declaration?

All tax declarations/returns are made ONLY electronically.

What are the types of tax declarations/returns, their frequency and the submission deadlines?

VAT declaration (by the 14th of the following month).

Declaration of social security and health insurance contributions (by the 20th of the following month).

Purchase books and sales books do not declare when there is non-economic activity. Over 10,000,000 Lek, when performing non-profit economic activity (within the 10th of each subsequent month).

When the NPO has a tax liability for profit tax, the payment of profit tax (advance payments or profit tax), if any, is paid when a payment mandate is generated every month by the electronic tax system.

Withholding tax declaration (within the 20th of the following month).

From July 1, 2022[1], the sales/purchase books and the VAT declaration will be automatically completed, according to the data of the fiscalisation system.

The General Tax Directorate has clarified to taxpayers that the submission of the VAT declaration or sales and purchase books will continue to be carried out through e-filing accounts.According to General Tax Department, during months April to June 2022, taxpayers will be offered a dedicated space to report any problems they have encountered during manual e-filing submissions, with the aim of solving any problems and improving the service.

The General Tax Directorate (‘GTD’)informs: “Aiming to address and solve any problems encountered during the completion of purchase or sale invoices on the SelfCare portal, in the menu: “Purchase book item and Sales book item”, GTD makes calling on taxpayers to report on all communication channels of the Tax Administration, such as through the Help Desk platform, on the official website: http://helpdesk.tatime.gov.al and through the official e-mail addresses of the regional tax offices, where the taxpayer is registered ( https://www.tatime.gov.al/c/9/157/drejtorite-rajjonale )“.

[1] Normative Act no.36, dated 24.12.2021 “On an addition to Law no.9920, dated 19.5.2008 “On Tax Procedures in the Republic of Albania”, as amended”.

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

Regardless of when the NPO was registered during a calendar/fiscal year, until March 31 of the following year, the NPO has the obligation to submit the financial statements that constitute the NPO’s annual balance sheet.

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

The annual Personal Income Tax statement is not an obligation for the NPO.

The annual Personal Income Tax 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 Personal Individual Income Tax 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.

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

Non-declaration and non-payment of the tax liability within the deadline is subject to penalties as provided by Law no.9920, dated 19.05.2008 “On Tax Procedures in the Republic of Albania”, as amended.