Tax Health Check

  1. Introduction

KosInvest is an NGO/IMF licensed by the Central Bank of Kosovo, which was established as an entity in January 2007 by World Vision International, but operated in Kosovo since 2001 as a microfinance project under World Vision International.

The mission of MFI KosInvest is to provide financial inclusion for the communities living in the Republic of Kosovo and improve their living standard, through the wide range of products and services.

Vision of MFI KosInvest is to aid the economically marginalized communities. Therefore, through the sustainable financial services improve their living conditions.  This is achieved through the implementation of organizational principles which are: transparency, integrity, competence and professionalism.

KosInvest main activity is:

  • Lending to economically active entrepreneurs
  • Access to markets
  • Business skills development for economic active entrepreneurs

KosInvest has a total of 85 employees and it has 4 branches and 5 sub-branches, through which it operates in the territory of the Republic of Kosovo. The areas of market penetration are: Prishtina, Vushtrri, Drenas, Graçanica, Ferizaj, Viti, Klina, Prizren, Rahovec.

The services that KosInvest offers are: Business Loans; Agro Loans; Livestock Loans; Renovation Loans; Consuming Loan; Personal Loans; Loans for Women Entrepreneurs; Auto Loans and Express Loans.

  1. Request

The MFI is requesting a reputable and experienced tax consultancy firm to conduct a tax health check in order to identify and quantify the MFI’s potential tax liabilities for all open Tax periods advise on the way forward regarding the identified exposures.

The tax health check review will be covering but not limited to the following taxes:

  • Employment taxes – approx. 80 employees;
  • Withholding tax;
  • Corporation tax;
  • Stamp Duty;
  1. Terms of reference

The terms of reference include:

3.1 Scope

  1. Review of MFI’s compliance with respect to the following taxes but not limited to for all open periods:
    1. Corporate Tax (Income Tax): Understanding practice on income, written-off loans, capitalization of expenses, donations, transfer pricing, and reconciliation.
    2. WHT (Repatriation Taxes)t: Understanding practice on imported services, interest expenses, reduced interest expenses, local services, underpayments, time differences, annual return and others.
    3. VAT (sales tax) Understanding practice on financial services, non-financial services and reverse VAT.
    4. Employment taxes: Understanding practices on payroll staff, non-payroll staff, salaries and benefits, gratuities, transport, phone benefits and allowances, termination dues, quarterly returns, payroll reconciliations, compliance with the employment act.
    5. Municipal and local taxes and stamp duties.
  2. Identification and quantification of MFI’s potential exposures (if any)
  3. Preparation of a report of your findings for discussion with the Management of the MFI; and
  4. Recommendations to the Management on the way forward regarding any exposures identified.

3.2 Engagement Team and Economic Proposal

Provide the characteristics and qualifications of tax consultancy firm and the justification to complete the engagement including the years of experience.

Provide a list of consulting engagements similar to the one requested in the last two years.

Provide the names and qualifications of all members of the team of tax experts that will be engaged in the investigation and preparation of the report.

Provide fee proposal for the engagement.

3.3 Methodology

We require that you conduct your work with the following tests during your review:

3.3.1 Employment taxes

  • Review sample employment contracts to ascertain the nature of employment, benefits, and any other issues that could have tax implications
  • Perform a review of the staff handbook/HR Manual to determine the exact nature of the benefits provided to employees
  • Check the payroll records, on a sample basis, maintained by the Accounts team, including procedures for calculation and payment of statutory deductions.
  • Discuss with key staff to establish the nature of staff costs, and ascertain whether these are taxed in accordance with applicable laws and regulations.
  • Check whether all staff benefits were accorded the correct tax treatment. Such benefits included mobile phone benefits and healthcare, any other taxable employee benefits
  • Review the income statement to determine whether there were any expenses with tax implications on the employees and directors
  • Quantify the employment tax exposures

3.3.2 Corporation tax

  • A high level review of the financial statements, to check whether the items therein were accorded the tax treatment as required by the applicable tax legislation
  • Review the company’s fixed assets register and capital allowances schedule, to check whether the capital allowances were correctly computed

3.3.4 Withholding tax

  • Reviewed supplier invoices for the period under review
  • Reviewed Partnership fees paid in the period under review
  • Reviewed expense ledgers to identify which expense items qualified for withholding tax

3.3.5 Stamp Duty

  • Obtained a sample of the various contracts and loan agreements disbursed to clients to determine the stamp duty implications
  • Performed a walkthrough of the loan process from the moment of applying for one to the time it is disbursed to verify any stamp duty implications on a sample basis
  • Reviewed management workings in respect to stamp duty

3.3.6 Other applicable taxes

  • Review any processes linked with other applicable taxes

3.4 Report

The Report to be submitted must include the following:

Executive summary of conclusions and recommendations, with a table showing the type and amount of tax, possible penalties and interest if applicable, and recommendations

Scope of work performed and methodology employed, revised accounting evidence and any other information relevant to the work

List of all taxes analyzed with narrative of what is right and what represents an actual or potential obligation of taxes that may affect the MFI and that have not been paid or recorded.

Taxes that do not affect the MFI in the present but that may affect the MFI in the future.

Final considerations for the present and for the future.

3.5 Responsibilities

  • The consulting firm is asked to maintain absolute confidentiality of the work done and the materials used throughout the duration of the work and up to one year after the end of the process.
  • Have discretion and secrecy during the process of investigation, preparation of the report and accompanying materials, respecting the security policies and safeguarding of the information of VFI. In both cases, a confidentiality agreement must be signed.

The offers should be sent in enclosed envelopes by Wednesday 07.06.2023, time: 15:00.

In address: Suteren, Llamella D, Arbëria 3, Nr. 01, 02, 03, Prishtina, 10000, Kosovo

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