COMPANY TAX

Profit tax is paid by resident legal entities both on the profit arising from the activities performed on the territory of Macedonia and from income generated abroad. A legal entity is considered to be a resident if registered in accordance with Company Law, or if it has a head office on the territory of Macedonia. Residents are taxed on the profit they generate both in-country and abroad, while non-residents are taxed only on the profit they generate from business activities on the territory of Macedonia.

The corporate income tax rate is 10%.

Companies are required to make monthly advance tax payments based on the previous year's income.

Corporate tax returns should be submitted to the Public Revenue Office no later than 28/29 February of the following year at the 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 accounts with the Central Registry of the Republic of North Macedonia in an electronic form. Tax is payable in aggregate by 31 March.

Companies that perform economic activities, except for banking, financial, insurance activities and games of chance and entertainment games and whose overall revenue generated in the last three years from any source does not exceed MKD 3 million on an annual basis, shall calculate but will not pay annual tax on total revenue amounting to 1% of the amount of earned total revenue presented in the income statement in the Annual statement for the previous calendar year. For total revenue of up to MKD 6 million the company may voluntary apply for payment of 1% of this amount as corporate tax.

Non-profits are subject to 1% tax on their income from business activities, if such income is higher than MKD 1 million (16.260 euro).

The users of a Technological Industrial Development Zone can benefit from a corporate income tax exemption within the framework of state assistance under the conditions and procedure established by the law for Technological Industrial Development Zones.

There are no specific or separate taxes added by the municipalities for business enterprises in Macedonia.

CAPITAL GAINS TAX

There is no specific tax treatment for capital gains or losses at the level of 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. When making a sale of shares an individual is obliged to pay 15% tax on capital gains. The basis for the calculation of tax is 90% of the difference between cost and sales value of the shares (for details see below under 'Capital gains and losses).

BRANCH PROFITS TAX

Branches of non-resident companies are subject to 10% profit tax, like resident companies. There is no branch remittance tax in Macedonia.

SALES TAX / VALUE ADDED TAX (VAT)

The following sales are subject to Macedonian VAT: sales of goods and services for comsideration in the country within the business activities of the taxpayer and import of goods.

The tax rates are as follows:

• Standard rate: 18%;
• Reduced rate: 10%;
• Reduced rate: 5%.

VAT credit is the amount to be deducted from 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 a 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 a 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;
• Hospitality expenses;
• Transportation of passengers;
• Procurement or import of refrigerators, audio and video appliances, carpets and artworks used for equipping office space;
• Hotel or another 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 for VAT paid on 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 threshold for VAT: taxpayers are obliged to register for VAT purposes in case the total taxable sales during the calendar year exceed MKD 1,000,0000 (EUR 16,260) 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 a VAT refund.

PAYROLL TAXES

Payment of the following social security contributions are to be made on gross salary by the employer, in addition to personal income tax of 10%:

• Pension fund: 18,40
• Health insurance: 7,40
• Insurance in case of unemployment: 1,20
• Occupational and work-related illness: 0,50

Overall one-third of the average gross salary is required to be withheld by the employer and paid for specific funds and taxes. Social security contributions are not levied if they exceed twelve average monthly salaries.

OTHER TAXES

Real estate transfer tax (RETT) at a rate of 2% to 4% is determined by the Council of the relevant municipality or the Skopje City Council. Property tax is levied on owners of immovable property at a rate of 0.10% to 0.20% on the market value of the property determined by the Commission established by the Council of a specific municipality or by the City Council.

FRINGE BENEFITS TAX

In general, fringe benefits are taxable as amounts paid to the employee in cash. A company has the responsibility to pay the income tax on account of the employee. The tax rate is 10%.