A tax haven
The tax system in Macedonia has undergone a radical overhaul in the last 10 years. Now considered a tax haven in Europe, Macedonia has implemented a flat tax rate that has seen progressive cuts. Combined with low VAT and a number of policies to encourage reinvestment, business development opportunities in Macedonia are increasing rapidly.
Reforms of the economy have been at the forefront of the Macedonian Government’s policies, with the introduction of a flat tax system in 2007. In addition, the country has introduced a number of significant changes to the tax system such as significant reductions to corporate and personal income tax, special tax reductions and exemptions which specifically target businesses looking to invest in Macedonia and attractive fiscal benefits for Technological Industrial Development Zones.
The Macedonian tax system includes three types of taxes: income taxes (Profit tax and Personal Income Tax), consumption taxes (Value Added Tax, Excises and Customs) and property taxes. The state administration body responsible for collection of public revenues is the Public Revenue Office. All information regarding the tax system can be found on the following link: http://www.ujp.gov.mk/en
Personal income tax
Macedonian resident individuals are subject to personal income tax (PIT) on their worldwide income, whereas non-resident taxpayers are subject to tax only on income derived from Macedonian sources.
Individuals are considered to be residents for tax purposes in Macedonia if they (i) have a permanent dwelling in Macedonia or (ii) reside in Macedonia for more than 183 days in a 12-month period. The personal income tax rate is 10%.
The types of income exempt from personal income tax include amongst others:
· Compensation for periods of unemployment
· Per diem allowances for business trips within the approved limits
· Salaries paid by employers carrying out business activities in technological industrial developing zones for a period of ten years from the commencement of the activities in such a zone
· Certain types of compensation provided under the Labor Relationships Law
· Children allowances
· Interest on demand deposits, term deposits and current accounts, as well as interest under securities issued by the Republic of Macedonia
· Certain types of compensation under insurance contracts.
Social security and health insurance
Mandatory contributions for pension and disability insurance, health insurance, unemployment insurance and additional health insurance in case of accidents at work and work-related injuries are due. Social contributions are fully borne by the employees while the employer is obliged to deduct and remit the contributions on behalf of the employees. Employers are required to make social security contributions on behalf of its employees at a rate of 7.3% for health insurance, 0.5% for additional health insurance contributions, 18% for the pension and disability fund, and 1.2% for unemployment. The mandatory contributions made on the account of the individual are fully deductible from the taxable income.
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 countries: Austria, Belgium, Bulgaria, Bosnia, Canada, Croatia, Czech Republic, Denmark, Germany, Luxembourg, Montenegro, Netherlands, Poland, Romania, Serbia, Slovenia, Switzerland, Turkey.
Macedonian property tax is paid on all non-agrarian land, business and residential buildings and areas, garages and other buildings. It can also be applied to moveable property, such as cars over 1.8 litres of engine volume, buses, articulated vehicles, tractors, and vessels or planes. 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.
Double taxation agreements
Macedonia has also entered numerous agreements with countries worldwide to avoid double taxation. These double taxation agreements stipulate that payable personal income tax in Macedonia is reduced by the amount of personal income tax paid abroad.
Macedonia has signed Double Taxation Avoidance Agreements with 37 countries: Netherlands, France, Italy, Sweden, Denmark, Finland, Switzerland, Hungary, Croatia, Turkey, Yugoslavia (applicable for Serbia and Montenegro), Poland, People’s Republic of China, Taiwan, Russia, Ukraine, Slovenia, Bulgaria, Egypt, Albania, Iran, Romania, Belarus, Spain, Czech Republic, Slovakia, Moldova, United Kingdom of Great Britain and Northern Ireland, Ireland, Qatar, Austria, Latvia, Lithuania, Estonia, Belgium, Morocco and Germany. Six treaties have not entered into force yet (the treaties signed with Egypt, Iran, Latvia, Romania, Morocco and Belgium). As per Belgium, corporate tax payers can benefit from the adopted treaty concluded by Former Yugoslavia.
For more information, please check the following link: http://www.ujp.gov.mk/en/plakjanje/category/137