Corporate tax in Macedonia

Summary

Corporate Income Tax Rate (%) 10
Capital Gains Tax Rate (%) 10
Branch Tax Rate (%) 10
Withholding Tax (%)
Dividends 10
Interest 10
Royalties from Patents and Know-how 10
Fees for Management, Consulting, Financial,
Research and Development Services
10
Rent and Payments under Leases of Immovable
Property
10
Insurance Premiums 10
Payments for Telecommunication Services 10
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 0
Carryforward 3

Taxes on corporate income and gains

Corporate income tax. Macedonian companies are subject to cor­porate tax on their worldwide income. Macedonian companies are companies incorporated in Macedonia. Foreign companies are taxed in Macedonia on their profits generated from activities conducted through a permanent establishment in the country and on income from Macedonian sources.

Rate of corporate income tax. The corporate income tax rate is 10%.

Tax incentives. Tax incentives available in Macedonia are describ­ed below.

Tax relief for reinvested profits. As of January 2015, companies may claim tax relief for the amount of profits reinvested in business-related tangible and intangible assets. No relief is avail­able for profits reinvested in cars, furniture, carpets, audiovisual devices and other decorative objects used to equip administrative premises. The tangible and intangible assets acquired under the tax relief may not be sold or otherwise disposed of within the five-year period beginning with the year in which the investment is made. If this condition is not satisfied, the company must pay the tax saved.

Technological Industrial Development Zones. Companies are exempt from income tax for the first 10 years of their activities in a Technological Industrial Development Zone, subject to the con­ditions and procedures established in the Law on Technological Industrial Development Zones.

Capital gains and losses. Capital gains are included in taxable income and are subject to tax at the regular corporate income tax rate of 10%.

Administration. The tax year is the calendar year.

Companies must make advance monthly payments of corporate income tax by the 15th day of each month. The tax base for the monthly payments equals 1/12 of the tax determined for the pre­ceding year ad justed by the percentage of the cumulative growth of retail prices in the country in the preceding year.

Companies must file annual tax returns by 15 March of the year following the tax year. Filing of monthly tax returns is not re­quired. If the tax determined in an annual tax return is more than the amount of advance tax paid, the company must pay the differ­ence within 30 days after the filing due date. Any overpaid amount must be refunded within 30 days following the request of the taxpayer.

Dividends. Dividends paid to foreign companies are subject to withholding tax at a rate of 10% on the net amount of the distrib­uted dividends (that is, after deduction of the 10% corporate tax), unless tax treaty relief applies. Remittances of profits by branch­es to their home countries are not subject to withholding tax.

Dividends distributed to resident companies are exempt from corporate tax.

Foreign tax relief. Resident companies may claim a tax credit for foreign income tax paid, but the amount of the credit may not exceed the 10% profit tax imposed in Macedonia on the foreign-source income.

Determination of trading income

General. Companies pay income tax on the profit realized in the year, increased by the amount of the nondeductible expenses.

Inventories. Inventories are valued at cost, but the value for tax purposes may not exceed the sales value on the date when taxable income is determined.

Provisions. Provisions booked for current liabilities are deduct­ible for tax purposes. Write-offs of receivables for which no final court decision on their non-collectibility has been issued are not deductible for tax purposes. Written-off receivables taxed in prior years as nondeductible expenses are deducted from the tax base in the year in which the receivables are collected.

Tax depreciation. Tax depreciation follows the accounting depre­ciation of tangible and intangible assets. The excess amount of the accounting depreciation not recognized for tax purposes taxed in prior years is deductible from the nondeductible expens­es in the following years in which such differences become deductible for tax purposes.

Relief for losses. As of 1 January 2015, losses may be carried forward for three years. Losses may not be carried back.

Groups of companies. Group registration is not permitted in Macedonia.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate
Value-added tax; imposed on goods sold and
services rendered in the RM, on sales of real
property in the RM and on imports; certain
items are exempt, such as banking, insurance
and other financial activities
Standard rate 18.00%
Reduced rate (for food products for human use, drinking water from public water supply systems, books, brochures and newspapers, certain materials and fixed assets for agriculture, drugs and medicine products for human use, computers, printers and accessories, software, equipment that is used for the production of
solar electricity and passenger transport)
5.00%
Exports 0.00%
Excise tax on sales in the RM and on imports
of various items; tax is imposed at ad valorem
rates, which are applied to the sales or import
price, or at specific rates, which are expressed
in Macedonian denars per unit of goods; for
petrol, Diesel D-1 and gas, the rates are
subject to change every two weeks
Petrol MKD21.692 to
MKD24.396 per liter
Diesel D-1 (petrol for use
in motor cars)
MKD12.121 per liter
Heating oil MKD3.136 per liter
Fuel oil MKD0.10 per kilogram
Alcoholic beverages MKD340 per liter
of pure alcohol
Beer MKD4 per percentage
of alcohol in a liter
Cigars and cigarillos MKD21.37 per piece
Cigarettes MKD1.30 per piece plus
9% of the retail price
Other tobacco products MKD1,350 per kilogram
Taxes contained in Property Tax Law
Property tax; annual tax on owners of
immovable property, including non-rural
land, residential buildings or apartments,
industrial, business and administrative
buildings, and garages and other structures;
tax base is the market value of the real
estate or movable property; tax return
must be filed by 31 January (only if changes
have occurred since the previous period)
0.1% to 0.2%
Tax on sales and other transfers of real
estate and rights to real estate; tax base
is the market value of the real estate or
right at the time of the sale; for exchanges,
the tax base is the difference between the
market values of the items being exchanged;
tax payable by transferor; tax return must
be filed within 15 days after the transfer
of the property
2% to 4%
Inheritance and endowment tax, on the
inheritance or endowment of immovable
or movable property; tax applies regardless
of whether inheritance or endowment is
granted in a will or is acquired under the
inheritance law or under an endowment
agreement; tax base is the market value of
the inheritance and endowment, reduced by
debts and expenses; tax is paid by resident and
nonresident recipients, including companies;
tax return must be filed within 15 days after
the transfer of the property
Individuals in first line of heritage 0.00%
Individuals in second line of heritage 2% to 3%
All others 4% to 5%

Miscellaneous matters

Foreign-exchange controls. The currency in Macedonia is the denar (MKD). All transactions in Macedonia must be made in denars.

The National Bank of the Republic of Macedonia, which is the central bank, is exempt from income tax.

Residents and nonresidents may maintain foreign-currency ac­counts at commercial banks.

Registration with the central bank is required for the following transactions:

  • Obtaining or granting loans
  • Paying or receiving cash
  • Opening bank accounts abroad

Transfer pricing. Macedonia has transfer-pricing rules. Under these rules, the tax authorities may adjust the taxable income of taxpay­ers derived from transactions with related companies if they deem prices paid (or charged) to related companies for various types of items to be excessive. In such circumstances, the difference be­tween prices stated in financial statements and arm’s-length prices is subject to tax.

Debt-to-equity ratios. Under thin-capitalization rules, interest on loans received from shareholders owning at least 25% of the capital of the borrower or on loans guaranteed by such sharehold­ers is subject to tax to the extent that such interest corresponds to the excess of the loan balance over three times the shareholders’ share in the equity of the borrower.

The thin-capitalization restrictions apply only to loans provided by direct shareholders that are nonresidents. In addition, the 25% participation threshold is alternatively measured by reference to voting rights. Loans provided from financial institutions are ex­cluded from the thin-capitalization restrictions. Newly establish­ed entities are excluded in their first three years of operations.

Treaty withholding tax rates

Dividends (%) Interest (%) Royalties (%)
Albania 10 10 10
Azerbaijan 8 0/8 (b) 8
Austria 0/15 (i) 0 0
Belarus 5/15 (a) 10 10
Belgium 10/15 (a) 15 10
Bosnia and Herzegovina 5/15 (aa) 10 10
Bulgaria 5/15 (a) 0/10 (b) 10
China 5 0/10 (c) 10
Croatia 5/15 (a) 0/10 (e) 10
Czech Republic 5/15 (a) 0 10
Denmark 0/5/15 (f) 0 10
Egypt (w) 10 10 10
Estonia 0/5 (a) 0/5 (k) 5
Finland 0/15 (g) 0/10 (h) 0
France 0/15 (d) 0 0
Germany 5/15 (q) 0/5 (z) 5
Hungary 5/15 (a) 0 0
India 10 0/10 (b) 10
Iran (w) 10 10 10
Ireland 0/5/10 (r) 0 0
Italy 5/15 (a) 0/10 (j) 0
Kazakhstan 5/15 (aa) 0/10 (e) 10
Kosovo 0/5 (aa) 10 10
Kuwait (w) 0 0 15
Latvia 5/10 (q) 0/5 (t) 5/10 (u)
Lithuania 0/10 (i) 0/10 (e) 10
Luxembourg 5/15 (a) 0 5
Moldova 5/10 (a) 5 10
Morocco 10 10 10
Netherlands 0/15 (i) 0 0
Norway 0/10/15 (x) 0/5 (y) 5
Poland 5/15 (a) 0/10 (k) 10
Qatar 0 0 5
Romania 5 0/10 (l) 10
Russian Federation 10 10 10
Serbia and Montenegro 5/15 (a) 10 10
Slovak Republic 5 10 10
Slovenia 5/15 (a) 10 10
Spain 5/15 (q) 0/5 (p) 5

 

     
  Dividends

%

Interest

%

Royalties

%

Sweden 0/15 (a) 0/10 (m) 0
Switzerland 5/15 (a) 0/10 (n) 0
Turkey 5/10 (a) 0/10 (o) 10
Ukraine 5/15 (a) 0/10 (e) 10
United Kingdom 0/5/15 (v) 0/10 (s) 0
Non-treaty countries 10 10 10

a) The lower rate applies if the recipient of the dividend is a company (other than a partnership) that holds at least 25% of the equity of the payer of the dividends.

b) The 0% rate applies if the beneficial owner of the interest is the government or the central bank.

c) The 0% rate applies if the beneficial owner of the interest is the government, a municipality, the central bank or an agency fully owned and controlled by the government or a municipality (debts indirectly financed by the govern­ment, a local authority or the central bank).

d) The 0% rate applies if the recipient of the dividend is a company that holds directly or indirectly at least 10% of the equity of the payer of the dividends.

e) The 0% rate applies if the beneficial owner of the interest is the government, municipalities, the central bank, other financial institutions fully owned by the government or municipalities, or other legal entities that are directly financed by the government, the central bank or municipalities.

f) The 0% rate applies if the beneficial owner of the dividends is a pension fund or other similar institution providing pension schemes in which individuals may participate to secure retirement benefits. The 5% rate applies if the re cipient of the dividend is a company (other than a partnership) that holds at least 25% of the equity of the payer of the dividends and if such holding is maintained for an uninterrupted period of at least one year and the dividends are declared within that period.

g) The 0% rate applies if the recipient of the dividend is a company (other than a partnership) that holds at least 10% of the voting power of the payer of the dividends.

h) The 0% rate applies if the beneficial owner of the interest is the State of Finland, Bank of Finland, Finnish Fund for Industrial Co-operation or if the interest is from loans supported by the government of Finland.

i) The 0% rate applies if the recipient of the dividend is a company (other than a partnership) that holds at least 10% of the equity of the payer of the dividends.

j) The 0% rate applies if the beneficial owner of the interest is the government, municipalities or their fully owned entities or if the interest payments arise from loans of other agencies or instrumentalities (including financial institu­tions) based on agreements between the governments.

k) The 0% rate applies if the beneficial owner of the interest is the government including municipalities, the central bank and financial institutions controlled by the government or if the interest is derived from loans guaranteed by the government.

l) The 0% rate applies if the beneficial owner of the interest is the government including municipalities, agencies or banks of the government or municipali­ties or if the interest is derived from loans warranted, insured or financed by the government.

m) The 0% rate applies if any of the following circumstances exist:

  • The beneficial owner of the interest is the state, a statutory body or the central bank.
  • The interest is paid on loans approved by the government of the country of the interest payer.
  • The interest is paid on loans granted by the SWEDCORP, Swedfund Inter­national AB, the Swedish Export Credits Guarantee Board or any other pub lic institution with the objective of promoting exports or development.
  • The interest is paid on bank loans.

n) The 0% rate applies if the beneficial owner obtained the interest with respect to sales on credit of industrial, commercial or scientific equipment or with respect to sales on credit of merchandise between enterprises or if the interest is paid on bank loans.

o) The 0% rate applies if the beneficial owner of the interest is the government, municipalities or the central bank.

p) The 0% rate applies if the beneficial owner obtained the interest with respect to sales on credit of industrial, commercial or scientific equipment or with respect to sales on credit of merchandise between enterprises or if the interest is paid on long-term bank loans (over five years).

q) The lower rate applies if the recipient of the dividend is a company (other than a partnership) that holds at least 10% of the equity of the payer of the dividends.

r) The 0% rate applies if the beneficial owner of the dividends owns at least 25% of the equity of the payer of the dividends for the entire 12-month period end­ing on the date of payment of the dividend or if the beneficial owner of the dividends is a pension scheme. The 5% rate applies if the beneficial owner of the dividends is a company that holds at least 10% of the voting power of the payer of the dividends.

s) The 0% rate applies to interest paid with respect to a loan granted or credit extended by an enterprise to another enterprise and to interest paid to political subdivisions, local authorities or public entities.

t) The 0% rate applies to interest paid with respect to a loan granted or credit extended for the sale of industrial, commercial or scientific equipment (un less the sale or loan is between related persons), and to interest paid to the government including local authorities, the central bank and financial institu­tions wholly owned by the government.

u) The higher rate applies to royalties paid for the use of, or the right to use, movies or tapes for radio and television broadcasting.

v) The 0% rate applies if the beneficial owner of the dividends owns at least 25% of the equity of the payer of the dividends for the entire 12-month period ending on the date of payment of the dividend or if the beneficial owner of the dividends is a pension scheme. The 5% rate applies if the recipient of the dividend is a company (other than a partnership) that holds at least 10% of the equity of the payer of the dividends.

w) This treaty is not yet in force.

x) The 0% rate applies if the beneficial owner of the dividends is the Central Bank of Norway, the government pension plan of Norway or Norfund or, in case of Macedonia, the Central Bank of Macedonia. The 10% rate applies if the recipient of the dividend is a company (other than a partnership) that holds at least 25% of the equity of the payer of the dividends.

y) The 0% rate applies to the following:

  • Interest paid to the government of a contracting state, a political subdivi­sion or local authority thereof, the central bank of a contracting state or an institution wholly owned by the government of a contracting state
  • Interest paid on a loan insured or guaranteed by a governmental institution for the purpose of promoting exports
  • Interest paid with respect to the sale on credit of industrial, commercial or scientific equipment

(z) The 0% rate applies to the following:

  • Interest paid with respect to the sale of commercial or scientific equipment on credit
  • Interest paid with respect to the sale of goods by an enterprise to another enterprise on credit
  • Interest paid on a loan guaranteed by the Federal Republic of Germany with respect to the export of foreign direct investment
  • Interest paid to the government of the Federal Republic of Germany, the Deutsche Bundesbank, the Kreditanstalt fur Wiederaufba, the Deutsche Investitions-und Entwicklungsesellschaft or the Macedonian government. (aa) The lower rate applies if the recipient of the dividend is a company that holds directly at least 25% of the equity of the payer of the dividends.