Types of payment for NGO members

The “payment” issue (it refers to the payment of NGO’s members) is one of the most common issues an NGO faces, due to the fact that distribution of profit to NGO’s members is prohibited, as well as due to the fact that the payment of NGO’s members, without any breach of the conditions spelled out in their article of incorporation, is a necessity which emerges very often.

First and foremost, this is something that should have been predicted by the NGO’s article of incorporation. More precisely, the article of incorporation should provide information on the payment of an NGO member, as well as for the conditions under which he/she can receive this payment.

For example, an NGO member can be a trainer or accountant at the same time. This status can correspond to a certain payment, under the condition that this payment does not relate directly to his/her contribution to the creation of the NGO.

Next, we are going to discuss the ways in which an NGO can pay its members. Three options are presented below:
1)Paid job
2)Provision of services
3)Title deed

1) Paid job
Any dependent working relation can be considered to be a paid job. In this case a fixed salary and relevant social security contributions should be paid to the Single Social Security Entity, on a monthly basis. Relevant social security contributions range according to package coverage and the specialization of the employee. A common example is presented below:

Among the most common specializations is the one of “office employees”. It does not differ from this of an accountant, or a Marketing Manager or a Project Manager. Each and every one of them is entitled to the same package coverage, according to which contributions constitute a 41,06% of mixed admissions. This percentage can be taken apart in two halves, one that constitutes the 16%, the deductions of the insured and one that constitutes the 25,06%, the deductions of the employer. The cost falling on the employer equals to the sum of mixed admissions plus employer’s admissions.

A simple example can be found below:
How much will a member, receiving a mixed monthly revenue of 1.000€, cost to the organization?
1.000€ + 1.000€ * 25,06% = 1.250,60€
The member would have costed 1.250,60€ social security contributions included.

2) Provision of services
We can only talk about payment related to the provision of services in the case that the member is also a freelancer. In this case, as mentioned above, the member issues an invoice for the provision of services concerning the services he/she provides as a freelancer and for which he/she gets paid accordingly. The person issuing that invoice should add the VAT that corresponds to the type of service he/she provides. Nevertheless, not all services are liable to VAT and this is something the provider of service is supposed to know (e.g. several services for the education sector).

Another important thing we should know is the withholding of a 20% of tax. This 20% withholding refers to certain cases, to be more precise to the ones that involve the payment of technical services, administrative services, consultative services, accounting services, legal services, as well as other services similar to the previous ones, under the condition that the receiver of the payment is a natural person. Thus, only the payment natural persons engaging in business activity receive is liable to a withholding of tax. This includes single-person enterprises, as well as persons who are not obliged to keep books, engaging in business activity and who provide the aforementioned services to legal and natural persons engaging in business activity.

A 20% deduction is applied to fees exceeding the 300€ limit on the net value and the final amount to be paid, is the amount remaining after the VAT is added and deductions are removed. Several examples can be found below:

1st Example
An accountant provides services at the price of 100€ + VAT. Since the amount of money is less than 300€, there is no withholding of payment, thus the final amount to be paid is 124€.

2nd Example
A business adviser provides services at the price of 400€ + VAT. In this case we face the accuse of a withholding of payment, due to the fact that the amount of money is more than 300€. Therefore:
Net value: 400€
Corresponding VAT: 96€
20% withholding: 80€
Final amount to be paid: 400€ + 96€ – 80€ = 416€

3rd Example:
An educator provides services at the price of 500€. This type of services is not liable to VAT. We assume that our example corresponds to this case. Therefore:
Net value: 500€
Withholding: 100€
Final amount to be paid: 400€
More information on cases concerning a withholding of payment is included in circular number 1120/2014.

3) Title deed
Payment by title deed concerns non-freelancers who are supposed to provide services no more than 2-3 times per year, since the regular provision of services equals freelance labor (issuing of 2-3 titles deed).
In this case a payment limit of 10.000€, concerning the amount of payment one can receive per year (the member of an NGO according to our example), is applied.

A 20% tax deduction and a 3,6% stamp duty are applied on the gross remuneration. A 20% tax is included in the statement of taxation at the end of the year, while a 3,6% is “lost”.

A simple example can be found below:
Let’s assume this member receives a mixed payment of 500€.

Tax stamp 3%: 15€
Organization of Welfare Benefits and Social Solidarity contribution to stamp 0,6%: 3€
20% Tax: 100€
Total of withholdings: 118€
Net income: 382€
Mixed income: 500€

So, these are the options an organization can choose from for the payment of its members. We have examined the cases to which these options can be applied, above. Each one’s needs are different and should be evaluated separately, if one wants to reach the optimum decision.

All this is about to change in the first months of 2018, probably in February. First the legal provision concerning titles deed. According to this, all professionals (no exception made), salaried employees, pensioners, even students who will get paid in 2018 by title deed, should pay a 26,95% contributions for social security and health insurance. These contributions will be withheld at the source, deducted from the remuneration of the person receiving the title, and will be paid to the Single Social Security Entity by the contractor – employer. Actually, to begin with a 20% tax will be removed, then the contribution will be calculated. Especially the ones who are not insured as salaried employees or freelancers, mainly the unemployed, will be obligated to sign a contract, defining the time of insurance to which the payment by title deed will correspond.

Jenny Fetokaki,
Accounting Specialist

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HIGGS Newsletter Team

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