Macedonia Personal Income Tax

Territoriality. Individuals resident in the Republic of Macedonia (RM) are subject to income tax on their worldwide income. Nonresident individuals are subject to income tax on their income earned in the RM.

Definition of resident. An individual is a resident of the RM if he or she has a permanent or temporary residence in the RM. An individual is considered to be resident in the RM if he or she is present in the RM either continuously or with interruptions for 183 or more days in any 12-month period.

Income subject to tax. Under the Macedonian Personal Income Tax Law, the following types of income are subject to tax:

  • Personal earnings
  • Self-employment income
  • Income from property and property rights
  • Income from copyrights and industrial property rights
  • Investment income
  • Capital gains
  • Gains from games of chance and other prize games
  • Other revenues

The various types of income are discussed below.

Personal earnings. The following items are included in personal earnings:

  • Salaries and allowances (to the extent that the amounts exceed the legal threshold amounts for allowances) arising from employ­ment, performance-based remuneration (for example, bonuses) and fringe benefits
  • Pensions
  • Income realized by members of management and supervisory boards of enterprises
  • Income realized by officials, members of parliament, advisers and similar high-level persons
  • Income realized by professional sportsmen
  • Sick-leave allowances
  • Annual leave allowances
  • Allowances for judges and jury members, forensic experts and receivers not employed by the respective institutions or enter­prises
  • Compensation and remuneration paid to the members of the Macedonian Academy of Sciences and Arts
  • Salaries earned and paid abroad based on employment con­tracts with Macedonian employers
  • Income derived from rendering services under contracts with entities and individuals on a temporary or occasional basis

Self-employment income. Self-employment income includes in come from the following types of activities:

  • Business activities
  • Professional and other intellectual services
  • Agricultural activities
  • Other activities with the objective of realizing revenues

Self-employed persons must maintain accounting books, except individuals whose total income from agricultural activities does not exceed MKD1,300,000 annually. The tax base for employ­ment income is net income, which is the difference between revenues and expenditures.

Income from property and property rights. Income from property and property rights includes income earned through the lease or sublease of land, residential or business premises, garages, leisure and recreational premises, equipment, transportation vehicles and other types of property.

Income from copyrights and industrial property rights. Income from copyrights and industrial property rights is considered to be payments received for the use of, or the right to use, such items.

Investment income. Under the Macedonian personal income tax law, investment income includes the following items:

  • Dividends and other income realized through participations in the profits of legal entities and non-corporate entities
  • Interest on loans granted to legal entities and individuals
  • Interest on bonds or other securities

The gross amounts of the above items are taxable.

Capital gains. Capital gains consist of income realized through sales of shares of capital and real estate. The tax base equals the difference between the higher selling price and lower purchase price.

For the period of 1 January 2013 through 31 December 2018, capital gains derived from the sale of securities are not subject to personal income tax.

Gains from games of chance and other prize games. An amount of gain exceeding MKD5,000 from conventional games of chance is subject to personal income tax. The gain from gambling on sports games is fully subject to tax.

Other income. Any income that is not specifically mentioned in the Personal Income Tax Law as being exempt from tax is other income, of which 65% is taxable. Other income includes income realized by acquiring securities and equity shares without consid­eration if the income is not taxed under the law on property taxes. For such income, the basis for the calculation of the tax is 100% of the market value on the day of the acquisition.

Taxation of employer-provided stock options. No specific mea­sures in the Macedonian tax law cover the taxation of stock options. Stock options granted are generally regarded as part of employment remuneration.

Deductions

Deductible expenses. Deductible expenses for personal income tax purposes include the following:

  • Contributions by an individual for pension, disability and health insurance and for employment
  • Contributions by the individual for voluntary pension and dis­ability insurance
  • Fees and other public duties paid

Nonresident individuals may not claim the above deductions.

Personal deductions and allowances. Resident individuals may claim a deductible personal exemption in the annual income tax calculation. For 2016, the annual personal exemption equals MKD88,284. Nonresident individuals may not claim such exemption.

Rates. Personal income tax is imposed at a rate of 10%.

Tax credit. Individuals donating financial resources to a legal entity under the Law on Donations and Sponsorship of Welfare Activities may claim a credit against personal income tax in their annual tax return. The credit may not exceed an amount equal to the first 20% of the annual tax debt, up to a maximum of MKD24,000.

Relief for losses. Capital losses from sales of shares can be carried forward for three years. Loss carrybacks are not allowed.

Other taxes

Property tax. Property tax is imposed on the owners of real estate, non-agricultural land, residential buildings or flats, busi­ness areas, administrative buildings, buildings or flats for rest and recreation, garages and other constructions. Property tax rates range between 0.1% and 0.2%, depending on the type and location of the property.

Real estate transfer tax. Transfers of real estate are subject to real estate transfer tax at a rate of 2% to 4% of the market value of the real estate.

Inheritance and gift taxes. Inheritance and gift taxes are imposed on the transfer of certain property by inheritance or gift. Inher­itances and gifts are subject to tax if the market value of the inheritance or gift is higher than the amount of the average annual salary in the RM in the preceding year, according to the data from the State Statistics Bureau. The following types of property are subject to tax:

  • Immovable property
  • Money and claims of money
  • Securities and other movable property

The inheritance and gift tax rates vary depending on the order of succession of the recipient. The tax rate is 0% for taxpayers in the first line of succession. For taxpayers in the second line of suc­cession, the tax rate is between 2% and 3%. For other taxpayers, the rate is between 4% and 5%. The municipal authorities fix the actual rate of tax.

Social security

Contributions. Employers are required to withhold the contribu­tions listed in the table below from gross salary. No employer contributions are required. The following are the rates for the contributions.

Contribution Rate (%)
Pension insurance 18
Health insurance 7.3
Unemployment insurance 1.2
Additional health insurance 0.5

The minimum base for social security contributions equals 50% of the average national salary (50% of MKD32,268 [approxi­mately EUR525]). The maximum base for social security contri­butions equals 12 times the average national salary (MKD387,216 [approximately EUR6,296]).

Self-employed individuals must pay the contributions at the above rates. Their minimum base is the same while the maximum base equals eight times the average national salary (MKD258,144 [approximately EUR4,197]).

Totalization agreements. To provide relief from double social security contributions and to assure benefit coverage, Macedonia has entered into totalization agreements, which usually apply for a maximum of two years, with the following jurisdictions.

Australia                          Croatia                        Poland

Austria                            Czech Republic           Romania

Belgium                           Denmark*                   Serbia

Bosnia and                      Germany                     Slovak Republic

Herzegovina                    Luxembourg               Slovenia

Bulgaria                           Montenegro                Switzerland

Canada                            Netherlands                Turkey

* This agreement has not yet entered into force.

Tax filing and payment procedures

Individuals must submit an annual tax return (PDD-GDP form) reporting taxable income by 15 March of the tax year following the tax year in which the income was realized. Self-employed individuals must submit by the same date an annual tax return specifically designed for income realized from self-employment activities.

An individual is not required to file an annual tax return if, dur­ing the year, he or she realizes only salary or pension income.

By 31 January of the year following the tax year, companies and other entities must file an annual report containing the following information for the tax year:

  • Gross salary paid
  • Tax and contributions withheld from employees’ salaries
  • Net income for the individuals
  • Amount of gross income, net income and taxes withheld with respect to income paid to individuals who are not employees

Companies and other institutions are required to issue reports to individuals that contain specified information, including the amount of tax withheld and the net income to the recipient by 25 January of the year following the tax year.

Tax at a rate of 10% is withheld from the following types of income:

  • Personal earnings
  • Income from copyrights and industrial property rights
  • Investment income
  • Income from property and property rights if the income payer maintains business records
  • Gains from games of chance and other prize games
  • Other income for which the income tax is not determined by a decision from the Public Revenue Office

Advance payment of income tax is required for the following types of income:

  • Self-employment income: monthly payments that are due by the 15th day of the month for income earned in the preceding month.
  • Income from property and property rights: monthly payments that are due by the 15th day of the month for income earned in the preceding month.
  • Capital gains and other income realized periodically: reported on a special form to the tax authorities within 15 days after deriv­ing the income. The tax on the gains is determined through the issuance of a decision by the tax authorities, and the tax is payable within 30 days from the date of the issuance of such decision.

Individuals must pay the difference between the annual tax amount and the advance payments within 30 days after receiving the decision on tax liability based on the submitted annual tax return (PDD-GDP form).

Double tax relief and tax treaties

The RM has entered into double tax treaties with the following jurisdictions.

Albania                            India                             Romania

Austria                            Iran                              Russian

Azerbaijan                       Ireland                          Federation

Belarus                            Italy                              Serbia

Belgium (a)                     Kazakhstan                   Slovak

Bosnia and                      Kosovo                        Republic

Herzegovina                    Kuwait                         Slovenia

Bulgaria                           Latvia                           Spain

China                               Lithuania                      Sweden

Croatia                             Luxembourg                Switzerland

Czech Republic               Moldova                      Taiwan

Denmark                         Montenegro                 Turkey

Estonia                            Morocco                      Ukraine

Finland                            Netherlands                  United Arab

France                             Norway                        Emirates (b)

Germany                         Poland                          United Kingdom

Hungary                          Qatar

  • This treaty has not yet been ratified and entered into force. Until the ratification and the application of this treaty, the agreement entered between Belgium and the former Yugoslavia still applies.
  • The Macedonian parliament ratified the treaty on 1 April 2016, but the treaty has not yet entered into force.

Temporary visas

Under Macedonian law, foreign nationals may request a tempo­rary visa for touristic, business, personal and other purposes. The duration of the temporary visa is usually up to one year.

Work visas and permits

The reciprocity principle in international relations is considered in evaluating applications for work and residence permits. Apart from reciprocity criteria, only domestic economic problems may cause difficulties in the obtaining of work and residence permits. Macedonian law provides for the following types of working visas:

  • Self-employment visas, which are issued for a period of one year or three years or as permanent visas. Permanent visas may be issued to members of families in the RM, foreign citizens from humanitarian programs or foreign individuals granted asylum.
  • Employment visas, which are issued for up to one year.
  • Work permits, which have a duration that depends on the nature of the work.

Residence visas and permits

The Macedonian law provides for the following three types of residence visas and permits:

  • Residence permits, which are issued for up to three months.
  • Temporary visas, which are issued to foreign citizens who intend to stay longer than three months. They are usually issued for a duration of up to one year, depending on the reason for the visit (for example, employment, self-employment, study, scientific research or visiting family members). Temporary visas are renewable.
  • Permanent visas, which are issued to foreign nationals who have been residing in the RM with a temporary visa for 5 years or more and, during this period, the individual has not left the country for a continuous period of 6 months or for a discon­tinuous period of 10 months.

Family and personal considerations

Family members. After a foreign national obtains a residence permit or visa, the spouse and children may apply for their own residence permits.

Family members of foreign nationals holding residence permits or visas receive priority in the RM for the obtaining of work permits.

Marital property regime. The ordinary marital property regime in the RM is participation in jointly acquired properties.

Driver’s permits. Foreign or international driver’s licenses may be used in the RM.