Macedonia

In North Macedonia, employers face several key tax obligations, including payroll taxes, corporate income tax, and value-added tax (VAT).

Payroll Taxes

Employers are responsible for withholding and remitting the following from their employees' gross salaries:

• Personal Income Tax (PIT): A flat rate of 10% is applied to the employee's taxable income after deducting social security contributions.

• Social Security Contributions: These contributions are calculated based on the employee's gross salary, subject to a minimum base of 50% of the national average salary and a maximum cap of 16 times the national average salary. As of 2024, the average monthly salary is MKD 57,609. The contributions include:

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

Corporate Income Tax (CIT)

• A flat rate of 10% is applied to the company's profit, calculated as revenue minus expenses. Non-deductible expenses, such as those deemed non-essential for business activities, are added back to the profit for tax calculation. Some non-deductible expenses include:

  • Expenses unrelated to the ordinary course of business (100% non-deductible)
  • Excessive employee allowances or board member expenses (100% non-deductible)
  • Hidden profit distributions (100% non-deductible)
  • Representation expenses (90% non-deductible)
  • Donations exceeding 5% of annual turnover (100% non-deductible)
  • Sponsorships exceeding 3% of annual turnover (100% non-deductible)

Value Added Tax (VAT)

• The standard VAT rate is 18%. A reduced rate of 5% applies to specific goods and services. Companies with an annual turnover exceeding MKD 2,000,000 are required to register for VAT. Those below this threshold can register voluntarily. The VAT filing period is monthly or quarterly, determined by the previous year's turnover:
  • Monthly: Turnover exceeds MKD 25 million.
  • Quarterly: Turnover is MKD 25 million or less.

Tax Filing and Payment

• CIT: Tax returns are generally due by the end of February of the following year or by March 15 for electronic filing. Monthly advance payments are required, with the remaining balance due within 30 days of the filing deadline.
• VAT: VAT returns must be submitted within 25 days following the end of the tax period (monthly or quarterly), and payment is due within 30 days following the period's end.
• PIT: Individuals no longer submit annual tax returns; instead, the tax authority issues draft returns for review and approval around April.

Additional Information for Employers

• Minimum Wage: The minimum monthly wage is MKD 22,567 as of 2024. Note: The minimum hourly wage is MKD 126.09, which for a typical 40-hour work week would amount to MKD 20,174.4, however, official publications list the monthly amount as MKD 22,567.
• Working Hours: The standard workweek is 40 hours, with a maximum of 190 overtime hours allowed annually. Overtime pay varies depending on when the overtime is worked: standard rates for Monday-Saturday, 135% for nights, and 150% for Sundays and holidays.
• Contracts: Fixed-term contracts can last up to five years, and employees with these contracts have the same rights as those with indefinite contracts.
• Probation: Probationary periods are optional, usually lasting between one and six months.
• 13th-Month Salary: It is customary to pay a 13th-month salary as a bonus.
• Employee Benefits: Work-related employee benefits are generally tax-exempt.
• Global Minimum Tax (Top-Up Tax): Applies from January 1, 2024 (or 2025 for certain entities), with the first reporting due 18 months after the respective tax period.

This information is current as of February 5, 2025, and is subject to change due to potential legal amendments. It's crucial to stay updated with the latest regulations for accurate compliance.

Employee tax deductions in Macedonia for 2025 consist of social security contributions and personal income tax.

Social Security Contributions

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

These contributions are capped at a maximum base of 16 times the national average gross salary, which was MKD 57,609 per month in 2024. The 2025 figure will be released by the North Macedonian Public Revenue Office. They are also subject to a minimum base of 50% of the national average monthly salary.

Personal Income Tax (PIT)

• A flat rate of 10% is applied to the taxable income, which is calculated after deducting social security contributions and the non-taxable portion of the salary from the employee's gross salary. For 2024, the non-taxable annual income was MKD 114,480 which will be updated to 123,240 MKD for 2025.

Tax Administration and Deadlines

• Employers withhold and submit both social security contributions and PIT to the Public Revenue Office (PRO) monthly.
• The deadline for payment is typically the 15th of the following month.
• As of 2019, employees no longer submit annual tax returns directly. Instead, the PRO prepares draft tax returns, sends them to individuals for review and confirmation around April, and finalizes the tax calculation.

Other Deductions

Other potential deductions from an employee's salary may include union membership dues and voluntary contributions to private pension schemes or other savings plans.

Example

Consider an employee earning a gross monthly salary of MKD 60,000 in 2025.

1. Social Security Contributions: Assuming the national average gross salary does not change from 2024 amounts, the contribution base will be capped at 16 times MKD 57,609 = MKD 921,744 annually, or MKD 76,812 monthly. Since the employee's salary is less than the cap, the full amount is used. The total social security contribution is 28% of MKD 60,000 = MKD 16,800.

2. Taxable Income: The non-taxable portion of the salary must be divided monthly by dividing MKD 123,240 by 12 to reach 10,270 MKD. The taxable income is then calculated as MKD 60,000 (gross salary) - MKD 16,800 (social security) - MKD 10,270 (non-taxable income) = MKD 32,930.

3. Personal Income Tax: The PIT is 10% of the taxable income, which is 10% of MKD 32,930 = MKD 3,293.

4. Net Salary: The employee's net salary is MKD 60,000 (gross salary) - MKD 16,800 (social security) - MKD 3,293 (PIT) = MKD 39,907.

This information is valid as of today, February 5, 2025, and might change due to legal and regulatory updates. For the latest information, consult with the North Macedonian Public Revenue Office or a qualified tax advisor.

In North Macedonia, Value Added Tax (VAT) is a consumption tax levied on most goods and services.

VAT Rates

• Standard Rate: 18% (Applies to most goods and services)
• Reduced Rates: 5% (Applies to essential goods like basic foodstuffs, water, books, pharmaceuticals, medical devices, baby products, computers, and agricultural materials) and 10% (Applies to restaurant and catering services)
• Zero Rate: 0% (Applies to exports and international passenger travel)
• Exempt: Financial services, gambling, education, public postal services, residential property lease, and healthcare services.

VAT Registration

• Threshold: Businesses with an annual turnover exceeding MKD 1,000,000 are required to register for VAT. Startups projecting an annual turnover exceeding MKD 2,000,000 must also register.
• Voluntary Registration: Businesses below the threshold can register voluntarily.
• Non-Resident Digital Service Providers: No threshold; registration is required upon providing the first taxable supply. A local fiscal representative is mandatory.
• Procedure: Submit application Form DDV-01 to the Public Revenue Office (PRO) Regional Office.
• Time Frame: Approximately 10 days.

VAT Filing and Payment

• Tax Period: Monthly for businesses with turnover exceeding MKD 1,000,000 (MKD 2,000,000 as of 2020). Quarterly for those below. Voluntary registrants also file quarterly.
• Return Deadline: 25th of the month following the tax period.
• Payment Deadline: 30 days following the end of the tax period.

VAT Deregistration

• Allowed after three years of continuous VAT registration, provided the annual turnover falls below the mandatory registration threshold. Specific criteria must be fulfilled.

Tax Agent/ Fiscal Representative Requirement

Mandatory for non-resident providers of digital services. The representative must be a local VAT-registered entity for at least 12 months with no outstanding tax debt. Responsibilities include record-keeping, VAT return preparation, filing, and payment.

Example of Exempt Supplies

Financial and banking services, insurance, lottery, education, residential property lease. Specific exemptions apply to supplies of feminine hygiene products (5% VAT)

Planned Changes

• Potential reduction of the list of goods and services eligible for the 5% reduced VAT rate.
• Possible expansion of the list of non-refundable VAT items.
• Potential removal of VAT exemptions on certain goods and services.
• Expected clarifications on VAT treatment for scrap expenses and self-charged VAT.

Note: This information is current as of February 5, 2025, and is subject to change. Consult with a tax professional for personalized advice.

North Macedonia offers a range of tax incentives, especially for businesses operating within designated zones.

Corporate Income Tax Incentives

• Tax Holiday in Free Zones: Businesses in free zones benefit from a 10-year tax holiday on corporate profits. This means a 100% reduction of the standard 10% corporate income tax for up to 10 years.
• Personal Income Tax Reduction in Free Zones: Employees of businesses located in free zones receive a 100% reduction in personal income tax for up to 10 years. This effectively eliminates the standard 10% personal income tax burden.
• VAT Exemption in Free Zones: Import and trade of goods within free zones are exempt from Value Added Tax (VAT), which normally stands at 18%.
• Customs Duty Exemption in Free Zones: Equipment, machinery, and spare parts imported into free zones are exempt from customs duties.
• Local Utility Tax and Permit Fee Exemptions in Free Zones: Businesses in free zones are exempt from local utility taxes and fees for building permits, along with free connections to utilities.
• Investment Incentives: A 10% return on investment costs is offered for new machinery, equipment, buildings, and land. As of 2022, the government is planning to abolish the reinvestment of profit-related tax exemptions, but introduce new ones for investments in green and digital transformations. Further planned changes include limiting the tax exemption related to donations in sports, and additional conditions for using the tax exemption related to income from dividends paid by Macedonian tax resident companies and foreign companies.
• Global Minimum Tax: As of January 2025, a 15% global minimum tax applies to large multinational and domestic groups with consolidated revenues exceeding EUR 750 million, impacting groups with an effective tax rate below 15%. The law includes relief options like the de minimis exclusion for small entities and a substance-based income exclusion for activities within the jurisdiction.

Personal Income Tax

• Flat rate of 10% on income from various sources including employment, self-employment, royalties, rental income, capital gains, and other income as of January 2023. Previously, a progressive tax rate existed with 10% for income up to MKD 1,080,000 and 18% for amounts above that threshold. Capital income was taxed at a flat rate of 15%. A 15% tax rate remains on gambling income.
• As of 2022, the government was planning to introduce mandatory social security contributions for income from service contracts, remove the maximum threshold for social security contributions, apply social security contributions to the entire gross salary, define how benefits in kind provided to managers and employees are taxed, as well as modify capital gains tax from share sales and investment funds, and change interest tax from term deposits.

Value Added Tax (VAT)

• The standard VAT rate is 18%. Specific exemptions exist, such as for goods within free zones. The government plans to reduce VAT exemptions, as of December 2024.

Other Tax Considerations

• No wealth tax is levied in North Macedonia.

It is important to note that tax regulations are subject to change. This information is current as of February 5, 2025, and it is advisable to consult with a tax professional for the most up-to-date details.