Navigating the complexities of payroll and employment taxes is a critical aspect of operating in any country, and North Macedonia is no exception. Employers engaging staff in North Macedonia must adhere to specific regulations regarding social security contributions, income tax withholding, and various reporting obligations. Understanding these requirements is essential for compliance and smooth business operations.
The North Macedonian tax system includes contributions for social security, encompassing pension, health, and unemployment insurance, alongside personal income tax levied on employee earnings. Employers play a key role in collecting and remitting these taxes and contributions on behalf of their employees, ensuring that both employer and employee obligations are met according to the law.
Employer Social Security and Payroll Tax Obligations
Employers in North Macedonia are responsible for calculating and remitting social security contributions for their employees based on gross salary. These contributions cover several funds, including pension and disability insurance, health insurance, and unemployment insurance. The basis for calculation is typically the employee's gross salary, subject to minimum and maximum contribution bases set by law.
The standard rates for employer social security contributions are as follows (rates are subject to change and should be confirmed for the specific period):
| Contribution Type | Rate (%) |
|---|---|
| Pension and Disability | 18.8% |
| Health Insurance | 7.3% |
| Unemployment Insurance | 1.2% |
| Total Employer Contribution | 27.3% |
Note: These rates are applied to the gross salary within the defined minimum and maximum contribution bases.
Employers are also responsible for withholding the employee's portion of social security contributions from their gross salary before paying the net salary. The employee contribution rates are typically included within the total contribution rates mentioned above, meaning the employer remits the full amount (employer + employee portion) to the relevant funds.
Income Tax Withholding Requirements
Employers are required to withhold Personal Income Tax (PIT) from their employees' gross salaries on a monthly basis. The PIT system in North Macedonia operates with a progressive tax rate structure. The tax base for PIT is the employee's gross income less mandatory social security contributions and any applicable personal allowances.
The standard PIT rates are:
| Annual Taxable Income (MKD) | Tax Rate (%) |
|---|---|
| Up to 1,080,000 | 10% |
| Above 1,080,000 | 18% |
Note: The annual taxable income threshold and rates are subject to change based on legislative updates.
Employers calculate the monthly PIT withholding based on the employee's monthly taxable income, applying the relevant tax rate. This withheld amount is then remitted to the tax authorities along with the social security contributions.
Employee Tax Deductions and Allowances
Employees in North Macedonia are entitled to certain personal allowances and deductions that reduce their taxable income for PIT purposes. The most common is the basic personal allowance, which is a fixed monthly amount that is deducted from the gross income (after social security contributions) before calculating the PIT.
Other potential deductions or allowances may exist for specific circumstances, such as dependents or certain types of expenses, though the basic personal allowance is the primary mechanism for reducing the PIT base for most employees. The amount of the basic personal allowance is set annually by law.
Tax Compliance and Reporting Deadlines
Employers in North Macedonia have specific reporting obligations to the Public Revenue Office (PRO). The primary reporting requirement is the monthly submission of a consolidated declaration (Form DD) detailing gross salaries, social security contributions (employer and employee portions), PIT withholding, and net salaries for all employees. This declaration is typically due by the 10th or 15th of the month following the payroll period.
In addition to monthly reporting, employers must also provide employees with annual income statements and submit annual reports to the PRO summarizing the total income paid, taxes withheld, and contributions made for each employee during the calendar year. Adhering to these deadlines is crucial to avoid penalties and interest.
Special Tax Considerations for Foreign Workers and Companies
Foreign individuals working in North Macedonia may be subject to North Macedonian income tax depending on their residency status and the duration of their stay. Non-residents are generally taxed only on income sourced within North Macedonia, while residents are taxed on their worldwide income. Employers hiring foreign workers must determine the correct tax treatment based on these rules and any applicable double taxation treaties between North Macedonia and the employee's country of residence.
Foreign companies employing staff in North Macedonia, even without a registered legal entity, may trigger a permanent establishment (PE) and associated tax obligations. Utilizing an Employer of Record service can help foreign companies manage these complexities, ensuring compliance with local labor and tax laws without needing to establish a local entity. The EOR acts as the legal employer, handling payroll, taxes, social contributions, and compliance for the local workforce.
