Foreign tax relief, Corporate groups, Related party transactions
FOREIGN TAX RELIEF
Macedonian resident taxpayers have the right to credit tax paid abroad in accordance with the provisions of the respective Double Tax Treaty (DTT) up to the tax determined by applying the domestic tax rate of 10%.
There is no possibility for parent and subsidiary companies to be recognised as a group for corporate tax consolidation purposes
Grouping is possible for VAT purposes. Two or more entities may be registered as one based on relations from ownership, management and organisation.
RELATED PARTY TRANSACTION
Transactions between related parties are recognised for tax purposes at arm’s length, i.e. should transactions deviate from the market level, the differences could lead to additional income being assessed or an expense being disallowed for tax purposes.
For the purpose of determining the market level, as per the Profit Tax Law the comparative uncontrolled price method or the cost plus method could be used.
Taxpayers, on the request of the Public Revenue Office, are obliged to present satisfactory information and evidence to substantiate whether related party transactions have been performed at arm’s length.
Furthermore, interest on loans granted between related parties (except for loans granted by banks or other financial institutions) is recognised for tax purposes at arm’s length. In case the taxpayer cannot produce satisfactory evidence that the interest on related parties loans is on an arm’s length basis, the interest income/expense from these loans will be determined for tax purposes by applying EURIBOR plus 1% (SKIBOR plus 1% for loans extended in MKD).
Penalty interest between related parties is not recognized for tax purposes (except penalty interest incurred with regard to a bank or other financial institutions).