Types of Tax Liabilitie

An NPO or Public Entity may and must ensure the registration of other relevant tax responsibilities, according to the legislation in force and in accordance with the activity it exercises.

In the case of conducting a profit-making activity, the tax obligations for which a non-profit organization is held liable are:

• Social Security Contributions: These are mandatory for every employee and employer. They are paid partly by the employer and partly by the employee, according to legal provisions.
• Health Insurance Contributions: These are mandatory for every employee and employer. This type of tax is also paid partly by the employer and partly by the employee according to legal provisions.
• Payroll Tax (Employment Income Tax): This is part of the Personal Income Tax (PIT) and is withheld from income gained through salaries and bonuses arising from employment relationships.

Regardless of the nature of the activity (profit-making or non-profit), social security and health insurance contributions, as well as payroll tax (personal income tax), are mandatory tax responsibilities.
Every NPO falls under the category of “employer.”

Value Added Tax (VAT)

An NPO is obliged to register for VAT if it carries out a taxable economic activity, supplies goods, or provides services for payment, according to the provisions of Law No. 92/2014, “On Value Added Tax.”

Profit Tax

An NPO is obliged to register for the tax responsibility of Profit Tax if it carries out economic activity and generates taxable income, according to the provisions of Law No. 8438, dated 28.12.1998, “On Income Tax.”

Withholding Tax

The application of withholding tax is directly related to the taxation of individuals' personal income. Primarily, this tax payment technique is applied by withholding tax at the source for payments related to various types of services performed by third parties who are not registered as traders with the tax authorities.

Examples include payments for leased premises (rent), benefits from membership in a supervisory board, etc.

NPOs are exempt from the following taxes:

• VAT: For the supply of goods and performance of services as provided for in the provisions of Law No. 92/2014 , “On Value Added Tax.”
• Profit Tax: For cases specified in the provisions of Law No. 8438, dated 28.12.1998 , “On Income Tax.”

Source: General Directorate of Taxes.