The reintroduction of VAT compensation in agriculture confuses farmers/ How will the scheme work?

2025-11-20 07:10:42, Ekonomi CNA

The reintroduction of VAT compensation in agriculture confuses farmers/ How will

The new fiscal package, which will bring changes to the VAT law, has begun to confuse farmers regarding its implementation.

Managers of milk processing factories, especially in the Southeast area, claimed that farmers with NIPT are misunderstanding the operation of the scheme, claiming that the compensation will be 10% of the value of the invoices issued by the processors.

But this claim of the farmers is not correct, since the invoices that will be submitted to the tax administration only aim to document the formalization of sales between the farmer and the collector. After the formalization of sales document, with the new scheme the farmer will receive back 10% of the VAT he paid when he purchased chemical fertilizers, seeds, pesticides and seedlings.

"The flat-rate compensation of agricultural producers is a VAT mechanism for those farmers who are not subject to VAT and as such, neither charge VAT to the buyers of their agricultural products, nor are they entitled to deduct the VAT paid on purchases. The 10 percent compensation rate for agricultural producers is intended to compensate them for a portion of the VAT they pay on inputs, in function of the realization of their agricultural products," the report states.

To benefit, the farmer must submit the request to the tax administration, along with invoices issued by the processor, collector or a certified agritourism that show his NIPT and bank account number.

The request for compensation will be submitted twice a year. It will be submitted by December 31, for supplies made during the January-June period of the respective year. By June 30 of the following year, for supplies made during the July-December period of the previous year. The request will be sent by post or electronically. The tax administration performs the compensation within 30 days from the date of submission of the request.

The implementation of this, in addition to the formalization of the trading of agricultural products, aims to reduce the cost of production for farmers, facilitating it with compensation for VAT paid on agricultural inputs. From 2019 to December 2021, VAT on agricultural inputs was zero. From January 1, 2022, with the entry into force of fiscal changes, the implementation of 10% VAT on agricultural input prices began.

How did the previous scheme work?

Until 2017, the 20% VAT refund for the farmer went through the processors, which means that e.g. for every purchase with a tax invoice from the farmer, the processor could credit this value to the deductible VAT. This scheme made it economically advantageous to purchase even at a high price for the farmer and ensured a stable profit margin for the industry.

From 2019 to 2022, the scheme changed. Initially in 2019, VAT on purchases (by farmers) was reduced from 20% to 6%. The scheme was then completely abolished from January 2022.

Instead of VAT reimbursement, the government applied direct subsidies of up to 10,000 lek per head of cattle/cow to farmers.

In the report on the draft law "On some amendments to Law No. 92/2014, 'On Value Added Tax in the Republic of Albania', as amended", the Ministry of Finance emphasizes that since 2022, when the 0% compensation rate for farmers was established, there has been a twofold increase in the number of farmers benefiting from subsidies and a twofold increase in the amount of subsidy provided.

For 2024, there are about 14 thousand farmers who have received 2.64 billion lek in subsidies. Since 2022, oil subsidies have been included in the support measures, from which in 2024 about 31,500 farmers have benefited in the amount of 1.25 billion lek./ Monitor.al