Developments in the Macedonian tax legislation

The Government of the Republic of North Macedonia has re-submitted to the Parliament the draft amendments to the Corporate Income Tax Law and the VAT Law, as well as the draft Law on Solidarity Tax. The drafts were initially submitted last year (beginning of the year with respect to the Solidarity Tax), and they have been subject to our tax alerts then. You can find them below.

Further to the information provided in our previous tax alerts, below you may find a summary of the main changes from the previous versions:

• Introduction of a specific anti-tax avoidance measure: beneficial tax related rights (such as right to reduce a tax base, tax exemptions, etc.) cannot be used in arrangements where the main intention (or one of the intentions) is to use such benefits, if such arrangements are not authentic (not based on authentic commercial reasons reflecting economic reality);
• Taxation regime of small and micro companies: the previous draft envisaged abolishment of the exemption from taxation of companies with total income not exceeding MKD 3 million, however, such provision is not included in the new draft. Accordingly, the exemption from taxation of companies with income less than MKD 3 million will continue to apply;
• Entering into force: Some of the amendments that were supposed to enter into force in 2023 are now moved to 2024.

• Preferential rate:
  • the 5% preferential rate will no longer apply for the supply of pellets, pellet stoves, and pellet kettles; 
  • the provisions in the previous draft amendments for prolonged application of the preferential rates for electricity for households (5% until 31 December 2023 and 10% until 31 December 2024), are not included in this draft; 
  • The 5% rate for residential apartments is to apply until Macedonia’s accession in the EU; 
  • Products for human consumption which are not subject to the 5% VAT rate, will be subject to the 10% rate.
• Electronic invoices: the previous draft introduced the same provisions which were foreseen with a temporary effect as a covid related measure, according to which invoices in pdf or other electronic format containing all the necessary elements in accordance with the VAT Law shall be considered as invoices in electronic form. However, these provisions are not included in the new draft, and there is only an alignment of the general provisions regarding electronic invoices to refer to the new Law on Electronic Documents, Electronic Identification and Confidential Services. Please note that the VAT Law nevertheless envisages that the Minister of finance is to introduce a rulebook which would regulate matters in more details in this respect;
• VAT refund for foreign diplomatic or consular missions: it is envisaged that the VAT refund on supplies made towards diplomatic or consular missions would not be allowed if the amount of the individual invoice does not exceed MKD 9,000 (currently the threshold is MKD 5,000). The VAT refund request should be submitted within six months after the end of the calendar year in which the supply was made (currently the deadline is five years).
• Entering into force: the provisions regarding electronic services, tax representatives, place of supply of services are envisaged to start to apply as of 1 January 2024. The amendments related with the preferential rates are to start to apply as of 1 September 2023.

Filing deadlines: the respective tax return is to be filed by 25 September 2023 and is due to be paid within 30 days.

Srdjan Randjelovic
Partner
Tel.: +389 2 313 52 20

Koce Jovanov
Senior Manager, Tax
Tel: +389 2 313 52 20

Katerina Mitevska
Manager, Tax
Tel: +389 2 313 52 20