The application of VAT is clarified: The 10% compensation for farmers will be calculated on the value of the self-invoices

After the confusion created among farmers and processors regarding the implementation of the VAT compensation scheme foreseen in the fiscal package, Monitor clarified with fiscal institutions how the scheme is expected to be applied in practice and on which invoices the compensation will be calculated.

According to them, for example, if a farmer with a NIPT sells agricultural products worth 1,000 euros, and for this sale the collector or processor issues the corresponding self-invoice, then the farmer will receive compensation of 10%, meaning 100 euros.

Thus, the 10% VAT compensation paid for agricultural inputs will not be calculated directly on the farmer’s purchases of chemical fertilizers, seedlings, or seeds, but on the value of the self-invoices issued by the collector for the agricultural products sold by the farmer. According to VAT law, farmers with a NIPT do not issue sales invoices when selling agricultural products to taxable persons; instead, the latter issue self-invoices on behalf of the farmer.

The aim of the new compensation scheme is to cover the 10% VAT that farmers have paid when purchasing agricultural inputs such as chemical fertilizers, seedlings, and seeds, but the compensation calculations will be based on the value of the self-invoices issued for each farmer by the processor or collector.

According to data from the tax administration, in 2024 there are about 9,875 farmers who sold their products to 659 buyers.

Why was this mechanism chosen? According to tax expert Artur Papajani, the farmer compensation scheme with 10% VAT follows the same model applied in European Union countries. He explains that the main purpose of this scheme is to compensate the VAT that farmers pay on their agricultural input purchases.

Since direct VAT reimbursement to farmers is technically impossible, the most practical and legally applicable solution is for the compensation to be calculated based on the value of the sales invoices, which are issued by collectors, processors, or certified agritourism businesses.

“Farmers, for the needs of their activity, make various purchases throughout the year (agricultural inputs, fuel, agricultural machinery equipment, etc.), and they also pay VAT on these purchases.

In reality, including farmers in the VAT scheme presents difficulties, even impossibilities, depriving them of the right to deduct or refund the VAT paid on their purchases.

However, a compensation method had to be found—and has been found—for them. To understand this procedure clearly and simply, first, one must understand the purpose of the scheme and, second, the mechanism chosen for its implementation.

The purpose of the compensation scheme is to partially reimburse farmers for the purchases they make, purchases made in function of their economic activity. It should be understood that the VAT related to these purchases is technically and legally impossible to return directly to them, as happens with a normal refund.

As a tool or method for achieving this purpose, the state budget will compensate farmers at a rate of 10 percent, applied on the value of the invoices issued for farmers by taxable persons, collectors, and processors.”

How the scheme will be applied in practice

In the first year of implementation of the VAT compensation scheme, the financial effects are estimated at 1.5 billion lek, or about 15 million euros.

According to fiscal institutions, in practice the scheme will operate through a database where the self-invoices issued by collectors will be recorded, but in order to receive the compensation, the farmer must confirm these self-invoices online.

This means that the farmer must first submit the compensation request through e-Albania. Alongside the submission, the farmer must also confirm online each self-invoice issued by the collector in his or her name, in order to prevent fraud and ensure the traceability of products in cases of violations of food safety.

The compensation request will be made twice a year, and the compensation will be calculated based on the value of the self-invoices issued for the periods January–June and July–December.

The compensation will be received within 30 days of submitting the request. The farmer must also provide the bank account number where the compensation funds will be deposited.

Beneficiaries of the scheme will be farmers who are not subject to VAT and, as such, do not charge VAT to buyers of their agricultural products but also do not have the right to deduct the VAT they pay on their own purchases.

Dorina Azo

“KORÇA BOOM”