North Macedonia: Revised amendments to corporate income tax, VAT, and windfall profits tax

The government has re-submitted to parliament the draft amendments to the corporate income tax law and the value added tax (VAT) law, as well as the draft law on the temporary solidarity (windfall profits) tax. The drafts were initially submitted last year.

A summary of the main changes is provided below.

• 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 when 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 proposed a repeal of the exemption from taxation of companies with total income not exceeding MKD 3 million; however, this provision is not included in the new draft. Accordingly, the exemption from taxation of companies with income less than MKD 3 million would continue to apply.
• Effective dates: Some of the amendments that were supposed to be effective in 2023 would now be moved to 2024.

• Preferential rate:
  • The 5% preferential rate would 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 the updated draft.
  • The 5% rate for residential apartments would apply until Macedonia’s accession in the EU.
  • Products for human consumption that are not subject to the 5% VAT rate would be subject to the 10% rate.
• Electronic invoices: The previous draft introduced the same provisions that were foreseen with a temporary effect as a COVID-related measure, according to which invoices in PDF or other electronic formats containing all the necessary elements in accordance with the VAT law would 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. The VAT law nevertheless includes that the Minister of Finance is to introduce a rulebook that would regulate matters in more details.
• VAT refund for foreign diplomatic or consular missions: It is proposed 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 would need to be submitted within six months after the end of the calendar year in which the supply was made (currently the deadline is five years).
• Effective dates: The provisions regarding electronic services, tax representatives, and place of supply of services are proposed 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.
   

Read a July 2023 report prepared by the KPMG member firm in North Macedonia