Macedonia Highlights 2019

International Tax FYR Macedonia Highlights 2019

Updated April 2019

Investment basics: Losses – Losses may be carried forward for up to three years from the year in which the loss was recorded. The Currency – Macedonian Denar (MKD) carryback of losses is not permitted. Foreign exchange control – Foreign exchange is Rate – 10% regulated by the Foreign Exchange Law. Residents are required to report loan transactions with nonresidents to Surtax – No the national bank. Alternative minimum tax – No Accounting principles/financial statements – Foreign tax credit – A unilateral foreign tax credit is IAS/IFRS. Financial statements must be prepared available for foreign tax paid, up to the amount of annually. Macedonian corporate tax due. Principal business entities – These are the state- Participation exemption – No owned company, joint stock company, limited liability Holding company regime – No company, general and limited partnership and branch of a Incentives – Taxable income is decreased by the nonresident entity. amount of profit reinvested in fixed assets. Corporate taxation: A 10-year profit tax holiday is available for companies Residence – A company is resident if it is established operating in a free economic zone. under Macedonian law or if its legal seat is in Macedonia. Withholding tax: Basis – Resident companies are subject to tax on their Dividends – Dividends paid to a nonresident are subject worldwide income. Legal entities that derive profits from to a 10% withholding tax, unless the rate is reduced a business activity in Macedonia also are subject to profit under a tax treaty. tax. Interest – Interest paid to a nonresident is subject to a Taxable income – Taxable income is calculated as the 10% withholding tax, unless the rate is reduced under a difference between income and expenses, increased by tax treaty. certain costs that are not deductible for tax purposes. Royalties – Royalties paid to a nonresident are subject Taxation of dividends – Dividends paid between to a 10% withholding tax, unless the rate is reduced resident companies are tax-exempt. under a tax treaty. Capital gains – Capital gains derived by companies are treated as ordinary income.

FYR Macedonia Highlights 2019

Technical service fees – Management, consulting, Rulings – A taxpayer may request an advance ruling on financial, R&D and telecommunications service fees paid the tax treatment of a transaction, but the ruling is not to a nonresident are subject to a 10% withholding tax, binding on the tax authorities. unless the rate is reduced under a tax treaty. Personal taxation: Branch remittance tax – No Basis – Resident individuals are subject to tax on their Other – No worldwide income; nonresident taxpayers are subject to Other taxes on corporations: tax only on Macedonia-source income.

Capital duty – No Residence – Individuals who have a permanent dwelling available in Macedonia or who have been present in Payroll tax – No Macedonia for more than 183 days within any 12-month Real property tax – Owners of real property are subject period are considered resident for tax purposes. to a municipal-level tax, at rates ranging from 0.1% to Filing status – Individuals required to file a return must 0.2%. do so individually; joint returns are not permitted. Social security – Employers are required to make social Taxable income – Taxable income includes income from security contributions on behalf of their employees, at a employment, income from professional activities, income rate of 7.3% for health insurance; 0.5% for additional from property and property rights, income from royalties, health insurance contributions; 18% for the pension and income from capital, income from games of chance and disability fund and 1.2% for unemployment. other income. Stamp duty – No Capital gains – Capital gains derived from the sale of Transfer tax – The transfer of real property is subject to immovable property, securities and equity participations a municipal-level transfer tax, at rates ranging from 2% in companies are subject to a 10% tax, levied on 70% of to 4%. the gain. Anti-avoidance rules: Deductions and allowances – A personal allowance of MKD 90,372 annually or MKD 7,531 monthly may be Transfer pricing – The arm’s length principle applies to deducted from salaries. The allowance is subject to transactions between related entities. Taxpayers should indexation each year. provide documentation if so requested by the tax authorities to prove that a transaction complies with the Rates – 10% arm’s length principle. Other taxes on individuals: Thin capitalization – Interest expense incurred on loans Capital duty – No granted by shareholders holding at least 25% of the capital of the company is nondeductible if the total Stamp duty – No amount of the loan exceeds three times the interest of Capital acquisitions tax – No the shareholder. The thin capitalization rules do not apply Real property tax – Owners of real property are subject to financial institutions. to a municipal-level tax, at rates ranging from 0.1% to Controlled foreign companies – No 0.2%. Disclosure requirements – No The transfer of real property is subject to a municipal- level transfer tax, at rates ranging from 2% to 4%. Compliance for corporations: Inheritance/estate tax – Inheritance and gift tax are Tax year – Calendar year levied at rates ranging from 2% to 5%, depending on the Consolidated returns – Consolidated returns are not degree of succession. permitted; each company must file a separate return. Net wealth/net worth tax – No Filing requirements – Companies must file a tax return Social security – Employers are required to make social by the end of February following the tax year. Companies security contributions on behalf of their employees. must make monthly advance tax payments based on the tax paid for the previous year. Compliance for individuals: Penalties – Monetary penalties are imposed for failure to Tax year – Calendar year comply with the profit tax law. The authorities can suspend business activities for up to 30 days.

FYR Macedonia Highlights 2019

Filing and payment – Employers must withhold tax on production equipment, computers and public behalf of their employees and remit the tax to the state transportation. Exports are zero-rated. Exemptions budget. include the supply of banking and financial services, Individuals who earn foreign income (including salary and insurance, health and education. benefits paid by nonresident entity), capital gains, rental Registration – A taxpayer must register for VAT income and income from agricultural production are purposes if its turnover exceeds MKD 1 million per year. required to report their income via the e-tax filing Voluntary registration also is possible. platform on a monthly basis. Based on the information Filing and payment – The VAT return must be reported, the tax authorities generate the annual tax submitted and any difference paid by the 25th day of the return for the preceding tax year by 30 April following the month following the tax period (which can be monthly or year-end. Individuals must review and confirm the quarterly, depending on turnover). accuracy of the annual return or make any necessary amendments via the online platform by the end of May. Source of tax law: Profits Tax Law, VAT Law, Personal Where additional tax is payable, the tax authorities will Income Tax Law issue an assessment and the tax due must be paid within Tax treaties: Macedonia has 48 tax treaties. 15 days of issuance. Tax authorities: Ministry of Finance, Tax Administration, Penalties – Monetary penalties are imposed for failure to Customs Administration comply with the personal income tax law.

Value added tax: Contact:

Taxable transactions – VAT is levied on the supply of Tamara Dmitrovic ([email protected]) goods and the provision of services in Macedonia, and on Borce Smilevski ([email protected]) the importation of goods.

Rates – The standard rate is 18%, with a reduced rate of

5% applying to food products, pharmaceuticals,

orce

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