TAXES

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Category: BUSINESS ENVIRONMENT IN THE REPUBLIC OF MACEDONIA

ENVIRONMENT FOR BUSINESS IN REPUBLIC OF MACEDONIA

TAXES

 
TYPES OF TAXES

The companies that work in Republic of Macedonia are obliged to pay tax rate on the basis of:

  • Value Added Tax;
  • Profit Tax;
  • Personal Taxation; and
  • Excise Duty.
VALUE ADDED TAX
Definition of Value Added Tax (VAT)

The Value Added Tax (VAT) is general tax on expenditure calculated and paid during the phases of production and trade, as well as for services and export.

VAT-tax payers

VAT tax payer is a legal and physical entity which performs an activity on the territory of Republic of Macedonia. All tax payers, which in the previous calendar year came to:

  • the amount of tax turnover of 1.000.000 MKD (30.000 EUR), are obliged to register the VAT (including the tax exemption, except the turnover exempted without the right to profit of previous tax); or entities whose turnover is projected, before even the start of the activity, to exceed the amount of 1.000.000 MKD; or entities who during the year exceed the amount of 1.000.000 MKD.
  • Small trade subjects are given the opportunity to decide whether they want to be registered as VAT payers. In case they decide to stay outside the VAT system, they are taxed as final consumers and they have no right to the exemption of personal tax..
Time of taxation occurence

The tax debt is paid at the moment when the turnover of goods is completed, i.e. the moment

when the service is fully completed. In case the payment is conducted before the turnover, the taxation takes place at the moment when the payment is received. During the import of goods, taxation takes place on the day, when this obligation is accompanied with an obligation to pay the customs and other import expenses, i.e. the day when the goods enter the country, when we have goods which are not subject to customs payment.

Tax rates for the VAT

The Value Added tax is calculated by applying proportional tax rates on the tax basis for the tax turnover of goods and ser vices and import:

  • According to the general VAT rate of 18%;
  • According to preferential rate of 5%.

The preferential VAT rate is applied to the import of food for human consumption, portable water from public systems for water-supply, drainage of urban wastewater and melioration of agricultural land, publications (mainly used for advertisement purposes, as well as publications with pornographic content), seeds and planting materials for production of agricultural crops, fertilizers, materials for plant protection, foils made of plastic for agricultural use, agricultural machines (Note: It shall be applied until the accession of R. Macedonia to EU), pharmaceuticals and medical devices, intended to alleviate or treat certain disability, exclusively for personal use by the person having that disability, raw oil for production of food for human consumption, first sale of apartments used for living, within the first five years from the construction (Note: this shall be applied from 01 January 2012, to 31 December 2015), transportation of persons and their accompanying luggage, computer software for machines for automatic processing of information and their accompanying parts (computers), public cleaning services and waste management services, and accommodation services with breakfast, halfboard or full-board with all types of commercial catering objects.

Tax exemptions

There are certain VAT exemptions. The VAT laws in R. Macedonia envisage certain tax exemptions, which include the import. Taking into account that the small businesses are not tax payers, they are given the opportunity to choose whether they will oblige themselves to pay VAT. In case they chose this alternative, they lose the right to tax exemptions.

List of all other tax exemptions can be found on the website of the Public Revenue Office.

PROFIT TAX
Tax payers who pay profit tax

Legal entities- residents or non-residents, pay profit tax on realized profit for the performance of activities on the territory of R. Macedonia.

Legal entity is a resident who is registered in accordance to the Company Law, or if one owns a place on the territory of the Republic of Macedonia.

Residents submit taxation for the realized gain in the country and abroad, while non-residents submit taxation only for the gain received by business activities on the territory of the Republic of Macedonia.

Tax basis for calculation of profit tax

The tax basis of a gain for the adequate tax period (one calendar year) represents the amount of unrecognized expenses and understated incomes.

Tax rate

The rate for profit tax is 10%.

Tax deductions and exemptions regarding the profit tax

Under the regulations and acts determined by the Law on Technological Industrial Development Zones , the tax payer, who uses a technological industrial zone, is released from paying profit tax, as well as personal taxation (meaning the effective rate is 0%) for the period of 10 years, from the beginning of their activity performance in the zone.

The tax payer who is obliged, according to the Law on Cash Payment Registration, to introduce and use an approved system of equipment for the registration of cash payments, pays a deduced tax for the supply of ten fiscal machines to the amount of their purchase value.

Simplified tax regime for trade companies

Trade companies classified as small or micro businesses are relieved from the obligation to pay profit taxation for a total income reaching 3.000.000 MKD.

Trade companies, which during the year reach a total profit of 3.000.001 to 6.000.000 MKD, are enabled to choose the regime/model of taxation, having the opportunity to pay tax for the total income to the amount of 1%, rather than pay a profit tax of 10% as predicted in the permanent legal decision.

Trade companies will not be able to change the chosen taxation model in the next three years including the year when the total income tax is submitted, if in the following three years they reach a total income of 3.000.001 to 6.000.000 MKD per year.

Avoiding double taxation

Unless differently regulated by the International Double Taxation Avoidance Agreements domestic legal entities, domestic physical entity – registered for the activity; and foreign legal entity and non-resident physical entity with permanent business unit in the Republic of Macedonia, when settling the income for the foreign legal entity are obliged to retain and submit the tax on an adequate suspense account simultaneously with the inc ome settlement.

The law predicts unilateral measurements for the resident tax payer of RM, who has submitted a tax for the achieved income abroad, that reduces the calculated tax in the country for the tax amount of the value added tax paid abroad, up to the amount following the application of the interest rate in accordance with the Law on VAT. The Republic of Macedonia has concluded an International Double Taxation Avoidance Agreement with around thirty countries.

PERSONAL INCOME TAX
Tax payers of personal income tax

The personal tax is paid by tax payersphysical entities, on the total income reached by miscellaneous sources, i.e. all the incomes realized in the country and abroad during one calendar year. The resident tax payer is a physical entity who on the territory of the Republic of Macedonia has a permanent residence - continuously or with interruption resides for 183 days or more within a period of 12 months.

Tax basis for the calculation of personal income tax

The tax basis is the positive difference of the gross income received as a sum of separate types of incomes realized by the tax payer in the year that the tax is determined and the deductions allowed by the Law on Personal Taxation, as follows:

  • Contributions for pension and disability insurance, health insurance and employment;
  • Contributions for voluntary pension and disability insurance covered by the tax payer;
  • Personal relief, which for 2016 is 7.357 MKD per month or 88.284 MKD per year, and
  • Other recognized expenses that the tax payerhas made while gaining the income.

The basis for calculation of the personal tax for incomes with interest is the amount of the calculated interest, by the rate of 10%. Interests for public loans, interests for the bonds issued by the Republic of Macedonia and the units of local self-government and interests on saving deposits,current accounts and demand deposits, are not subjects of taxation.

Capital gains are the incomes realized by the tax payer as a positive difference between the selling and buying price of the securities, capital sharing and real estate. The tax basis is 70% of the realized capital gain, which is a do wn payment taxed by a rate of 10%. Capital losses in the sale of securities can be deduced with realized capital gains, and if after the offset there is a difference, it can be transmitted to the gains achieved in the following three years. A capital gain is not submitted for funds realized by selling real estate that the tax payer has sold three years after the day he has g ained it in possession.

Dividends, down payments are taxed by witholding tax with a rate of 10% of gross dividends, i.e. the incomes from the shared profit of the tax payer.

Gains from games of chance represent an income realized by gains of games of chance and other prize games. No taxation is submitted for a realized profit, if the same does not exceed the amount of 10.000 MKD, otherwise a tax is calculated for the total profit amount, with a 10% rate and the tax credits represent a final sett led tax obligation.

For all the incomes realized by physical entities, not covered by the Law on Personal Taxation, the tax basis is determined by a 35% deduction of fixed expenses of the gross income, and the calculated and paid tax, after deduction, is considered to be the final sett led tax liability.

Except for incomes with down payment paid tax considered to be final settled tax liabilities, all the remaining types of profits are a part of the annual income of the tax payer, who by the end of the year is cumulatively taxed according to the annual tax rate, whereupon the amounts of paid advances and used r elieves are deductible rates.

Tax rate of personal income tax

Personal income tax is paid by a 10% rate.

EXCISE

Excises are paid for the following products: mineral oils; alcohol and alcoholic beverages; tobacco goods and automobiles. To import/export goods with excise liabilities, an excise permit needs to be issued on behalf of the Public Revenue Office in accordance with the Ministry of Finance. The excises are regulated by the Law on Excises. There are certain cases when there alleviations to the excise liability.