Employers in North Macedonia have the responsibility of withholding and contributing to their employees' social security funds. The current contribution rates are as follows:

Pension and Disability Insurance

Employers are required to contribute 18.8% of the employee's gross salary towards pension and disability insurance.

Health Insurance

7.5% of the employee's gross salary is to be contributed towards health insurance.

Additional Health Insurance

An additional 0.5% of the employee's gross salary is required for additional health insurance.

Employment Insurance

Employers are also required to contribute 1.2% of the employee's gross salary towards employment insurance.

Payroll Calculation and Reporting

Employer contributions are calculated based on each employee's gross salary. Employers are responsible for withholding the employee's portion of social security contributions and adding their own contributions before remitting the funds. Both employee and employer social security contributions are generally paid on a monthly basis to the relevant government authorities.

Contributions Limits

There is a maximum monthly salary base upon which social security contributions are calculated. Any portion of an employee's salary exceeding this base is not subject to social security contributions. This limit is adjusted periodically.

Other Important Considerations

Employers are required to provide severance pay to employees in the case of redundancy. The North Macedonian Labor Law outlines the responsibilities of employers and their obligations pertaining to social contributions, severance pay, and various employment-related matters.

Important Note

Labor and social security regulations are subject to change. Seeking professional advice ensures you fully understand and comply with current requirements as an employer in North Macedonia.

Employees in North Macedonia are subject to mandatory social security contributions, which are withheld directly from their gross salaries. The current rates are:

• Pension and Disability Insurance: 18.8% of gross salary
• Health Insurance: 7.5% of gross salary
• Employment Insurance: 1.2% of gross salary
• Additional Health Insurance: 0.5% of gross salary

Personal Income Tax (PIT)

Employees in North Macedonia also pay personal income tax (PIT) on their taxable income. North Macedonia has a flat PIT rate of 10%. Taxable income is calculated after social security contributions and a fixed tax-free allowance (currently MKD 8,000) are deducted from the gross salary.

Calculation and Payment

Employers are responsible for calculating both social security contributions and PIT, withholding them from the employee's salary, and remitting these deductions to the tax authorities. They also manage the submission of necessary tax reports on behalf of their employees.

Other Considerations

There might be certain tax deductions or credits available for employees in specific circumstances. It's important to note that labor regulations and tax codes are complex and may change.

North Macedonia operates a multi-tiered VAT system. The standard rate is 18%, applicable to most goods and services. Reduced rates of 10% and 5% apply to certain essential services and basic goods respectively. Some transactions, such as the export of goods and certain international services, are zero-rated.

The "place of supply" determines where VAT is charged on services. For Business-to-Business (B2B) transactions, this is generally where the customer is established or has its fixed place of business. For Business-to-Consumer (B2C) transactions, the place of supply is typically where the supplier is established. However, specific rules apply to certain services.

Businesses and individuals exceeding an annual turnover threshold of MKD 2 million are considered "taxable persons" and must register and charge VAT. Businesses below the threshold can still opt to register for VAT.

Under specific circumstances, the reverse charge mechanism may apply. This is typically in B2B transactions where the recipient of the service is established outside of North Macedonia, making the service recipient responsible for accounting for VAT rather than the supplier.

Businesses must issue proper VAT invoices with specific details, including supplier and customer information, date of invoice issuance, description of the service, taxable amount, VAT rate, and total VAT amount, and invoice number.

VAT returns are generally filed monthly, but the frequency may change depending on a business's turnover. VAT-registered businesses supplying goods or services to VAT-registered businesses in other EU countries might need to file EC Sales Lists (ECLs).

North Macedonia offers a variety of tax incentives to attract and encourage business investment. These incentives range from a competitive corporate tax rate to specific incentives for businesses operating in Technological Industrial Development Zones (TIDZs) and those investing in research and development.

Competitive Corporate Tax Rate

North Macedonia has a flat corporate tax rate of 10%, which is favorable compared to many other countries. Additionally, under certain conditions, dividends and capital gains from qualifying shareholdings are generally exempt from taxation.

Incentives in Technological Industrial Development Zones (TIDZs)

Companies operating in TIDZs can benefit from a 10-year corporate income tax exemption. Employees in these zones are also exempt from personal income tax for up to 10 years. Furthermore, businesses in TIDZs may be exempt from VAT and customs duties on the import of equipment and raw materials.

Investment Support Measures

The government may provide grants to encourage investment, especially in specific regions or target industries. Companies creating new jobs may be eligible for subsidies aimed at reducing labor costs.

Research and Development (R&D) Incentives

Tax credits may be available for eligible research and development expenses. In some cases, businesses can deduct R&D expenses at an increased rate, reducing taxable income.

Other Incentives

Companies that reinvest a portion of their profits into business development may be able to reduce their tax base. Additional incentives may be available for businesses investing in designated underdeveloped regions of North Macedonia.

Accessing Incentives

Most incentives require businesses to submit applications to relevant government authorities for approval. Consulting a tax advisor is highly recommended for successfully navigating the application process and ensuring you receive all eligible incentives.

Please note that tax incentives are subject to specific conditions and regulations and may change over time. Consult official government sources or a qualified tax professional for the most up-to-date information and to ensure your business maximizes available benefits.