Personal tax, Withholding tax
Personal income tax is payable by Macedonia resident individuals on their worldwide income, excluding the tax exempt income. Non-resident individuals are only required to pay tax on Macedonian-sourced income. A person is considered a Macedonian tax resident if he/she stays continuously or intermittently on the territory of Macedonia for 183 days or more within any 12-month period.
The tax exempt income are: certain employment related expenses, awards, scholarships granted by the Government, damages, alimony, certain types of interest etc. is exhaustively listed in the Personal Income Tax Law.
The taxable income comprises of the following types of revenues: – Personal earning; – Income from self-employed activity; – Income from property and property rights; – Income from copyrights and industrial property right; – Capital revenues; -Capital gains; Gains from games of chance; – Other income.
Tax base is the positive difference from the gross taxable income obtained throughout the taxable year, and the deductions allowed in the Law on Personal Income Tax, such as the following:
Mandatory social contributions for pension and disability insurance, health insurance and for employment, excluding the contributions paid by farmers upon their cadastral income;
Contributions for voluntary pension and disability insurance paid by the taxpayer;
The annual personal exemption which amounts MKD 88,472 (1.439 euro) for 2017;
Administrative fees and other public revenues paid out of the taxpayer’s income.
The personal income tax rate is 10%.
The tax year is the calendar year.
Income from salary
Collective bargaining agreements are negotiated between the representative labour unions and the Government for the general collective agreement for the public sector and between the representative labour unions and representative employers association for the general collective agreement for the commercial sector. These two collective agreements represent the two pillars under which industry branch and employer level collective agreements can be negotiated and signed.
Collective agreements define a minimum salary for each professional activity. Salaries are computed and paid at least once monthly. Social Contributions and personal taxes are withheld by the employer along with the payment of salaries to employees.
As of January 2017, the average monthly net salary was MKD 22,750 (c. EUR 370),
Income property and property rights
A statutory deduction of 25% of gross rent for unfurnished and 30% for furnished premises is given to account for income-generating expenses. Alternatively, taxpayers can opt for itemized deduction instead of availing the standard deduction.
Income from copyrights and industrial property right
Based on type of the original work different statutory deduction are given from 25 % form performance art related to popular music up to 60% for sculptors. Alternatively, taxpayers can also opt for itemized deduction instead of availing the standard deduction.
Capital gains for individuals
Refer to the gains from sales of securities, share of capital and real estate i.e. the difference between their sales price and purchase price. The tax base is 70% of the earned capital gains. Capital gains are subject to 10% tax payable in advance. Capital losses from sale of securities could be offset against capital gains in the next three years. Capital gains from sales of immovable property sold after three years as of the acquiring date are not subject to taxation.
Gains from games of chance for individuals
income from games of chance and other prize games (TV quizzes, competitions, etc..) are taxable income, the tax is payable on the total gain at 10% tax rate. The tax is not paid in case the single realized gain is under MKD 5,000 (c. euro 81,0), and
income form games of chance from casino, betting and slot machine clubs are taxable income. Tax base is single payment of income less the amount of the single payment on the basis of which realized income.
Legal entities-resident on Macedonia, registered for carrying out an activity – as well as a foreign legal entity having a branch in Macedonia are obliged, when paying certain types of income to a foreign legal entity, to withhold tax and to pay the tax withheld to the revenue authorities simultaneously with the payment of the income.
Withholding tax is applied on the following incomes payable abroad: dividends; interest; royalties; income from entertainment or sporting activities in Macedonia; income from management, consulting, financial services, services related to research and development; income from insurance or reinsurance premiums; income from telecommunication services between Macedonia and a foreign country; income from lease of immovable property in Macedonia.
Tax shall not be withheld on the following revenues: transfer of the profit of the permanent establishment/branch of a foreign legal entity in Macedonia, for which profit tax has been previously paid; revenue from interest on debt instruments issued and/or guaranteed by the Macedonian Government, the National Bank of Macedonia and banks or other financial institutions acting as a representative of the Macedonian Government; income from interest on deposits in a bank located in Macedonia; and income from intermediation or consulting regarding government securities on the international financial market.
The withholding tax rate is 10% and is levied on the gross income.