Profit Tax is paid by resident legal entities both on the profit arising from the activities performed on the territory of Macedonia and from incomes generated abroad.
A legal entity is considered resident if registered in accordance with the Company Law, or if it has a head office on the territory of Macedonia.
Residents are taxed on the profit they generate both in the country and abroad, while non-residents are taxed only on the profit they generate from business activity on the territory of Macedonia.
The tax year for profit tax purposes is the calendar year. The tax rate is 10%.
Companies are required to make monthly prepayments of tax based on the previous year’s income.
Corporation tax returns should be submitted to the Public Revenue Oﬃce no later than 28/29 February in the following year at latest, after the year for which taxation is performed. The tax returns may be submitted by 15th of March, if the taxpayer has submitted the annual account to the Central Registry of Republic of Macedonia in electronic form. Tax is payable in whole by March 31.
Companies that perform economic activity, except banking, financial, insurance activities and games of chance and entertainment games and their overall revenues earned in the last three years from any source does not exceed MKD 3,000,000 on an annual basis, shall calculate but will not pay annual tax on total revenues in the amount of 1% of the amount of earned total revenues presented in the income statement in the Annual statement for the previous calendar year. For the total revenue up to 6 millions the company may voluntary apply for payment of 1% of this amount as corporate tax.
The user of Technological Industrial Development Zone use tax exemption from corporate income tax within the framework of state assistance under the conditions and procedure established by law for Technological Industrial Development Zones.
There are no special or separate tax added by municipalities for business enterprises in Macedonia.
CAPITAL GAINS TAX
There is no specific tax treatment for capital gains or losses, for business enterprises i.e. any such gains or losses will be included in the profit or loss for the year and taxed if such profits are distributed. An individual on sell of shares is obliged to pay 10% tax on capital gains. The basis for the calculation of tax is 70% of the difference between cost and selling value of the share (for details see below under ‘Capital gains and losses’).
BRANCH PROFITS TAX
Implementation of the profit tax law on foreign company’s branch in Macedonia is equal as for the resident companies. There are no separate provisions for branch profits tax in Macedonia.
SALES TAX / VALUE ADDED TAX (VAT)
Following sales are subject to Macedonian VAT: – Sales of goods and services for compensation in the country within the business activities of the taxpayer and – Import of good.
The tax rates are as follows:
Standard rate: 18%;
Reduced rate: 5%.
VAT credit is the amount to be reduced from the VAT that should be paid on the supplies made in a certain VAT period. The VAT credit refers to the VAT on supplies made by other VAT registered businesses to the taxpayer and to VAT paid upon the import of goods.
The right to VAT credit is available in case the following conditions are cumulatively met:
The taxpayer uses supplied goods or rendered services for the purpose of its business activity; and
The taxpayer is able to present an invoice from the supplier issued in accordance with the VAT law or a customs declaration appropriately recorded in its accounting.
No right to VAT credit exists in respect of the following purchases:
Procurement or import of goods and services for VAT exempted sales;
Procurement, production, and import of bicycles, motor vehicles with less than 4 wheels, passenger cars and services related to their utilization;
Transportation of passengers;
Procurement or import of refrigerators, audio and video appliances, carpets and art works used for equipping office space;
Hotel or other type of accommodation and food expenses.
Taxpayers without headquarters or fixed establishments in Macedonia that do not perform any VAT applicable sales in the country may be refunded the VAT paid for their procurements in Macedonia upon their request.
Tax exemptions and incentives: For donations given in the public activities; and tax exemption on the supply of goods and services for the purpose of implementation of projects funded by foreign donors and by IPA funds.
Registration duty for VAT: Tax payers are obliged to register for VAT purposes in case: – The total taxable sales during the calendar year exceed MKD 1,000,0000 MKD (16.260 euro) or they may choose to register at the beginning of the business activity or at the beginning of each calendar year. If they decide to stay out of the VAT system, they are taxed as final consumers and do not have the right to VAT refund.
Payment of the following social security contributions are to be paid from gross salary by the employer, in addition to personal tax of 10%:
Pension fund – 18,00%
Health insurance – 7,30%
Insurance in case of unemployment – 1,20%
Occupational and work related illness – 0,50%