VAT, GST and Sales Tax in Macedonia

Summary

Name of the tax Value-added tax (VAT)
Local name Danok na dodadena vrednost
Date introduced 1-Apr-00
Trading bloc membership EU, EFTA, CEFTA
Administered by Ministry of Finance (http://www.finance.gov.mk)
VAT rates
Standard 18%
Reduced 5%
Other Zero-rated and exempt
VAT number format MK 1 2 3 4 5 6 7 8 9 10 11 12 13
VAT return periods
Monthly Turnover in excess of MKD25 million in preceding calendar year
Quarterly Turnover of MKD25 million or less in preceding calendar year
Thresholds
Registration MKD1 million
Recovery of VAT by non-established businesses Yes (subject to reciprocity)

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods and services made in Macedonia by a taxpayer within the scope of its business activity
  • The importation of goods into Macedonia (other than exempt importations)
  • Reverse-charge supplies by foreign legal entities to Macedonian legal entities

Who is liable

A taxpayer is a person that permanently or temporarily performs an independent business activity, regardless of the purposes of and the results from such business activity.

Taxpayers must register for VAT when their total supplies in a year exceed MKD1 million. Also, they must register if, at the beginning of a business activity, they project the making of total annual supplies exceeding MKD1 million. Taxpayers may volun­tarily register for VAT at the beginning of each calendar year or at the beginning of their business activity.

Group registration. Macedonian VAT law allows VAT group reg­istration. Several VAT-registered entities may decide to be regis­tered as a single VAT-registered taxpayer if they have a proprietary, organizational or managerial relationship. In addition, if the tax authorities detect violation of tax principles or the possibility for violation of such principles as a result of proprietary, organiza­tional or managerial relationship among particular entities regis­tered as separate VAT taxpayers, they can issue a decision ordering the entities to register as a single taxpayer.

Foreign legal entities (non-established businesses). Foreign traders may not have a VAT registration number. If a supply is made by a taxpayer that does not have headquarters or a branch office in Macedonia, the VAT reverse-charge mechanism applies.

Tax representatives. Not applicable.

Registration procedures. Taxpayers apply for VAT registration by filing a hard copy DDV-01 form with the tax authorities. No electronic VAT registration is possible. The relevant form can be submitted by the legal representative or by an authorized person of the taxpayer. The deadline for submission of the VAT registra­tion form is 15 days from the day the taxpayer meets the VAT registration obligation. The average time for the tax authorities to complete registration is seven working days following the day the registration form is submitted.

Late-registration penalties. For late registration, a legal entity is fined EUR1,200, and the responsible person at the legal entity is fined 30% of the penalty imposed on the legal entity.

For failure to register, the fine is EUR2,500 for the legal entity and 30% of the penalty imposed on the legal entity for the legal representative.

Reverse charge. In Macedonia, the reverse charge applies to the following supplies:

  • Supply of goods and services by foreign legal entities to Macedonian taxpayers
  • Supply of construction services by a domestic constructor to an investor
  • Supply of construction services by a domestic sub-constructor to principal constructor
  • Supply of waste and scrap

Under the reverse-charge mechanism, the recipient of the goods or services bears the responsibility for the calculation of VAT, the submission of a VAT tax return, the payment of tax and the pay­ment of interest in the event of a late payment.

Digital economy. The VAT law does not stipulate specific rules relating to the taxation of the digital economy.

Deregistration. Taxpayers stay VAT registered for at least five years following the year of VAT registration. If in the fifth year, the taxpayer does not reach the VAT registration threshold of MKD1 million, he is entitled to request to be deregistered at the beginning of the following year.

The tax authorities may deregister the taxpayer before the five-year period lapses in any of the following circumstances:

  • During one calendar year the taxpayer submits tax returns with no supplies and input VAT.
  • During two calendar years the taxpayer submits tax returns with no supplies, zero VAT supplies or input VAT from investments made or import of goods.
  • The taxpayer fails to submit tax returns for two consecutive tax periods.
  • The tax authorities cannot find the taxpayer at the business address reported by the taxpayer.
  • The taxpayer is registered in a VAT group.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices and imports that are subject to VAT (either at the standard rate of 18% or the reduced rate of 5%). In Macedonia, the VAT rates are the standard rate of 18% and the reduced rate of 5%. The standard rate of VAT applies to all supplies of goods or services and imports, unless a specific measure allows a reduced rate or an exemption.

Examples of supplies of goods and services taxable at 5%

  • Potable water from public water-supply entities
  • Food products
  • Computers
  • Pharmaceuticals and medical devices
  • Raw oil for production of food for human consumption
  • First sale of new residential buildings (within the first five years)
  • Services provided by commercial tourist facilities (hotels, motels and similar facilities)

The term “exempt supplies” refers to supplies of goods and ser­vices that are not subject to tax and that do not give rise to a right of input tax deduction (see Section F). Some supplies are classi­fied as “exempt with credit,” which means that no VAT is due, but the supplier may recover related input tax.

Examples of exempt supplies of
goods and services (without credit)

  • Rental of residential buildings and apartments that are used for housing
  • Banking and financial services
  • Insurance and reinsurance
  • Games of chance
  • Educational services

Examples of exempt supplies of
goods and services with credit (0% rate)

  • International air transport of passengers
  • Supply of precious metals for the central bank
  • Supply, repair and maintenance, chartering and leasing of air­craft

Option to tax for exempt supplies. Not applicable.

Time of supply

The moment when VAT becomes due is called the “time of supply” or the “tax point.” The tax point is the earlier of the following two dates:

  • The date on which goods are dispatched (transferred) and ser­vices are completely delivered
  • The date on which the payment is received if the payment is made with respect to future supplies of goods or rendering of services

In the case of periodical or continuous supplies for which subse­quent payments are prescribed, the tax point is the date on which the invoice is issued for the relevant period or, if earlier, the date on which the payment for the relevant period is received.

Reverse-charge services. Reverse-charge VAT applies to amounts charged for goods or services supplied by foreign legal entities to Macedonian legal entities. Under the reverse-charge mechanism, the recipient of the goods or services bears the responsibility for the calculation of VAT, the submission of a VAT return, the pay­ment of tax and the payment of interest in the event of a late payment.

Imported goods. Imported goods are subject to VAT unless they are exempt from VAT under law. The import VAT is calculated by the customs authorities based on the customs value of goods, increased with the customs duty, excise duty and commission, transportation and insurance fee. The import VAT is paid to the customs office simultaneously with the payment of the customs and excise duties.

Recovery of VAT by taxable persons

A taxpayer may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. A taxpayer gener­ally recovers input tax by deducting it from output VAT. The differ­ence between the output and input VAT is refunded to the taxpayer based on a written claim stated in the taxpayer’s tax return.

Input tax includes VAT charged on goods and services supplied in Macedonia, VAT paid on imports of goods, and VAT self-assessed under the reverse-charge mechanism with respect to goods or services supplied by non-established entities.

VAT is recoverable for supplies provided to taxpayers by other tax­payers if a valid invoice or a customs declaration containing a sepa­rate statement of the tax collected on the import is issued and if such document is recorded in the accounting books of the taxpayer.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered for some items of business expenditure.

 

The following lists provide some examples of expenses for which input tax is not deductible and examples of expenses for which input tax is deductible if made for business purposes.

Examples of items for which input tax is not deductible

  • Representation expenses
  • Audio and video devices
  • Hotels
  • Restaurant meals

Examples of items for which input tax is deductible

  • Advertising
  • Consultancy services
  • Telecommunication services
  • Equipment

Partial exemption. Input tax directly related to taxable supplies is fully recoverable, while input tax directly related to exempt sup­plies is not recoverable. If the domestically supplied or imported goods or services are used by the taxpayer to make both supplies with the right to deduct input VAT and exempt supplies without the right to deduct input VAT, such person may deduct only the portion of the input VAT corresponding on a pro rata basis to the supplies giving rise to an input VAT deduction.

Refunds. If the amount of input tax recoverable in a tax period exceeds the amount of output tax in that period, the taxable per­son earns an input tax credit. In general, the input tax credit is carried forward to offset output tax in the following tax period. However, a taxable person may claim a refund of the input tax credit in the VAT return for the relevant tax period. The refund of the difference between the input and output tax is made within 30 days after the date of the submission of the tax return.

Preregistration costs. Not applicable.

Recovery of VAT by non-established businesses

On the condition of reciprocity Macedonia refunds VAT incurred by businesses that do not have a headquarters or a branch office in the country and that satisfy the following additional conditions:

  • They do not make any supplies in the country.
  • They do not owe any outstanding VAT.

Refund application. The deadline for refund claims is 30 June of the year following the calendar year in which the tax becomes chargeable. The application for refund must be submitted to the Macedonian tax authorities and must be accompanied by the appropriate documentation.

A refund application must be processed within six months after the date of submission of the application and supporting documents.

The claim period varies between one month and several consecu­tive months in one calendar year. The minimum claim for these periods is MKD30,000. In the claims for the last month of the calendar year, input taxes from previous claim periods may also be taken into account. The minimum claim for this period is MKD15,000.

Claims are paid in domestic currency (MKD) into a bank account opened by the applicant in Macedonia.

Invoicing

VAT invoices and credit notes. A Macedonian taxpayer must issue invoices for all of its taxable supplies. A document qualifies as a valid invoice if it complies with the requirements set out in the Macedonian VAT Act. The invoice must be issued within five working days after the date of the supply.

If an invoice is issued both for taxable supplies and nontaxable supplies, each supply must be stated separately. If a nontaxable supply is made, it must be stated on the invoice that “The Value Added Tax is not calculated.”

A taxpayer delivering taxable goods to recipients of goods or services who are not taxpayers (end consumers) must record the supply through a cash register and issue a receipt, regardless of whether the recipient of such goods or services requests a receipt.

A credit note may be used to reduce VAT charged and claimed back on a supply. A credit note must be cross-referenced to the original invoice. However, no official rules have been issued with respect to credit notes.

Foreign-currency invoices. In general, VAT invoices must be issued in domestic currency (denars [MKD]). If a VAT invoice is issued in a foreign currency, all values required for VAT purposes must be converted into denars for tax purposes, using the rate published by the National Bank of Macedonia on the date of the invoice.

Proof of exports. The taxpayer must hold an export customs clear­ance issued by the customs authorities as proof that the goods are exported from the country. If the export customs procedure does not require an export clearance to be issued, the taxpayer must hold a document issued by the customs authorities that displays the name and address of the taxpayer and the foreign recipient of the goods, trade name of the goods and the quantity of the goods exported, place and date of export.

VAT returns and payment

VAT returns. The tax period is the calendar month if the total turnover in the preceding calendar year exceeded MKD25 million. Taxpayers that had a total turnover in the pre­ceding year of less than MKD25 million must file VAT returns and pay VAT quarterly. Newly registered taxpayers projecting an annual turnover of more than MKD1 million must register for VAT and make quarterly VAT return filings. Taxpayers must cal­culate the VAT for the relevant tax period for all supplies made that are subject to VAT. Taxpayers must submit a tax return within 25 days after the end of the relevant tax period.

Special schemes. Not applicable.

Electronic filing and archiving. All taxpayers must submit tax returns electronically. After the VAT registration and before the deadline for filing the first tax return, the taxpayers must register for electronic filing. Electronic archiving of the submitted tax returns and any related supporting documentation is permissible.

Annual returns. No requirement exists for filing of annual returns.

Penalties

A legal entity is fined the MKD equivalent of EUR1,200 for late VAT registration and of EUR1,500 for a late VAT return filing and for a late issuance of an invoice.

Failure to register or file a VAT return is subject to a fine of EUR2,500. The same penalties apply if the legal entity fails to pay the VAT into the authorities’ bank account into which regis­tered VAT payers must pay their VAT or if the legal entity makes inaccurate VAT accounting entries. Separate fines apply to the legal representative of the company. Criminal sanctions apply if the offenses are intentional.

Taxpayers that make a late VAT payment are liable to pay interest on the tax due at a rate of 0.03% for each day of delay.