Mazars Cinotti Consulting d.o.o.
Strojarska cesta 20, II. Floor, 10 000 – Zagreb
(+385) 1 4864 420
(+385) 1 4864 429
(+385) 1 4864 420
(+385) 99 4877 112
The general corporate income tax rate for all taxpayers in the Former Yugoslav Republic of Macedonia is flat and amounts to 10%. Exceptionally, companies with a total revenue up to 3 million denars (MKD) are exempted from the payment of CIT, and companies with a total revenue between 3,000,001 and 6,000,000 denars have the option to pay CIT in the amount of 1% of the total revenue.
The tax base is the pre-tax profit modified by several increasing and decreasing items. Losses can be carried forward within a limited period of 3 years. Loss carry-back is not permitted. No special limitations are applicable in case of M&A transactions. There are tax exemptions for investments in tangible and intangible assets (reinvested earnings) and also for taxpayers who perform their activity in a Technological Industrial Development zone for a period of 10 years (from the commencement of performance).
FYROM applies thin capitalization (3:1). Thin capitalization rules do not apply to loans received from banks and other financial institutions and for newly established companies, within first three years. In the FYROM, there is a withholding tax at the rate of 10% on dividends, interests, royalties and other incomes paid by a FYROM company to a foreign company. FYROM has a wide international treaty (DTT) network with 45 double tax treaties, and the withholding tax rate can be reduced or abolished under the active DTT. Taxpayers are obliged to obtain approval from the Macedonian tax authorities prior to applying the tax rates from DTT.
The tax rate on sales and other transfers of real estate and rights to real estate is 2 to 4% of the market value of the property. There is also a property tax (the rate is 0.1-0.2%) paid annually by owners of immovable properties.
|Transfer pricing in FYROM|
|Arm’s length principle||since 2009|
|Documentation liability||Upon request by the Macedonian tax authorities|
|APA||The tax legislation does not provide for a binding APA. Companies are entitled to file an application to the tax authority for a ruling with respect to the tax position they intend to take, to which the tax authority is obliged to reply|
|Lack of documentation||~ EUR 2.500-3.000 / missing documents doubled on recurrent basis and tax authorities are entitled to suspend the taxpayer's business activity for 3 to 30 days.|
|Tax shortage||Up to 10 times the amount of the understatement of tax|
|Related parties||- individuals and legal entities with control or significant influence
- family members of owners or members of the Management Bord
- all nonresident legal entities registered in low-tax jurisdictions, irrespective of whether they have control or are of significant influence to the taxpayer
|Safe harbours||Interest income/expense from the loans as EURIBOR + 1% (or SKIBOR +1% for loans extended in MKD)|
Level of attention paid by Tax Authority:
The general rate is 18%; a reduced rate of 5% applicable to food products, pharmaceuticals, production equipment, computers and public transportation. Exports are zero-rated. VAT-exempt services are mainly banking services, insurance, the rental of real estate, certain services provided by medical doctors and dentists, certain types of education and training, as well as some other activities which are tax exempt with regard to their public interest or their special character. Thresholds are as follows:
Other indirect taxes in FYROM are fuel tax and excise duties.
|VAT options in FYROM||Applicable / limits|
|VAT group registration*|
|Import VAT deferment|
|Local reverse charge||Construction including maintenance, electrical installation, plumbing, etc.|
|Option for taxation|
|- letting of real estate|
|- supply of used real estate|
|VAT registration threshold**||MKD 1 milion per year|
* related parties
** voluntary registration is possible
There is a flat PIT rate of 10%, and it is generally applicable on the active (e.g. employment, assignment fee) and passive income (e.g. capital gains, dividend and interest). Social security contributions payable by employees altogether amount to 27% of the gross salary: pension contribution is 18%; health care insurance is 7.30%; unemployment insurance is 1.2%; and health care at work insurance is 0.5%. The examples below show the cost of the employer and the employee in case of minimum wage level and the average wage. The personal allowance is MKD 89.472 (EUR 1.453) on an annual basis.
The minimum base for social security contributions equals 50% of the average monthly salary for the current month. The highest base for payment of mandatory social security contributions on a monthly basis is 12 average salaries paid in Macedonia.
|2016 in Macedonia||Minimal wage in MAC||Average wage in MAC|
|Exchange rate MKD/EUR61,62||in EUR||in MKD||in EUR||in MKD|
|195||12 000||558||34 374|
|Total wage cost||195||100,00%||558||100,00%|
|Social contribution on salary||-||0,00%||-||0,00%|
|Personal income tax*||2||1,09%||29||5,13%|
*Personal income tax base differs from gross salary, deductions apply.