North MacedoniaTax Obligations Detailed

In North Macedonia, employers face several tax obligations related to payroll, corporate income, and value-added taxes.

Payroll Taxes and Social Security Contributions

As of 2025, employers in North Macedonia do not directly pay payroll taxes. However, they are responsible for withholding and remitting several social security contributions and personal income tax from their employees' salaries. The current social security contribution rates, calculated on gross salary, are as follows:

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

The basis for calculating social security contributions is the employee's gross salary, including bonuses. There's a minimum base of 50% of the average national salary, and the contributions are capped at 16 times the national average salary. As of 2024, the national average gross monthly salary is MKD 57,609. Personal income tax is withheld at a progressive rate. The first MKD 90,000 of monthly income is taxed at 10%, and any income exceeding this amount is taxed at 18%.

Corporate Income Tax

The standard corporate income tax rate is 10%, applied to worldwide income for resident entities and Macedonian-sourced income for non-resident entities. Resident entities are those established or headquartered in North Macedonia. A simplified tax regime is available to small and micro legal entities. If annual income is between MKD 3 million and MKD 6 million, the tax rate is 1% of total revenue. If annual income is below MKD 3 million, no corporate tax is due. Capital gains are generally included in taxable income. Dividend income received from other resident entities is deductible if it was already taxed at the source. Losses can be carried forward for three years but not carried back, and group tax consolidation is not permitted. The tax period is the calendar year, with returns due by the end of February (or March 15th for electronic filing). Advance monthly payments are required within 15 days of the end of each month. Reinvested profit tax exemptions have been abolished. However, exemptions may be available for investments in green transition and digital transformation.

Value Added Tax (VAT)

The standard VAT rate in North Macedonia is yet to be provided. Businesses must register for VAT if their annual turnover exceeds MKD 2 million. VAT returns are filed monthly or quarterly, with deadlines on the 25th of the following month or quarter, respectively. VAT payments are due five days after the filing deadline. A VAT exemption is currently in place for donations made to government entities. Businesses can deregister from VAT if their turnover falls below the threshold after three years of registration.

Other Taxes

• Capital Gains Tax: Levied at rates from 0% to 15% depending on the holding period of the asset.
• Inheritance and Gift Tax: Applies to inheritances and gifts, with rates varying from 2% to 5% based on the relationship between the parties involved. First-order inheritors are exempt.
• Property Tax: Levied at rates determined by each municipality.

It's important to note that this information is based on available data as of today, February 5, 2025, and may be subject to change due to legislative updates or further clarification from authorities. Consulting with a local tax advisor is highly recommended for the most accurate and up-to-date information.

In North Macedonia, employers deduct several taxes and contributions from employee salaries, including personal income tax, social security contributions, and contributions for mandatory health insurance and unemployment funds.

Personal Income Tax (PIT)

• Tax Rate: A flat rate of 10% is applied to employment income.
• Tax Deduction at Source: Employers are responsible for withholding PIT directly from employee salaries and remitting it to the tax authorities by the 10th of the following month.
• Annual Tax Return: For employees under the Final Deduction System, an annual tax return is typically not required unless specific exceptions apply. If a return is necessary, it's generally due within 30 days of the assessment date.

Social Security Contributions

• Total Contribution Rate: The total social security contribution is typically around 28% of the employee's gross salary, split between employer and employee portions. Employee contribution is around 18%.
• Components: Contributions cover pension, health insurance, unemployment insurance, and other social security benefits.
• Employer Responsibility: Employers are responsible for calculating, withholding, and remitting employee contributions, along with their own share, to the relevant authorities.

Other Mandatory Deductions

• Health Insurance: A mandatory health insurance contribution is deducted from employee salaries.
• Unemployment Fund: A contribution to the unemployment fund is also deducted.
• Court-Ordered Deductions: Wage garnishments for reasons such as child support or debt repayment are deducted post-tax.

Tax Credits and Incentives

• Tax-Free Allowance: A monthly tax-free allowance (non-taxable amount) is applied to employee income. The allowance for 2025 is MKD 9,038 per month or MKD 108,456 annually. Please note that this information is based on data from 2023 and may be subject to change.
• Technological Industrial Development Zones: Salaries of employees working for companies in these zones may be exempt from personal income tax.

Additional Information

• Record Keeping: Employers are required to maintain employee tax records for five years.
• Global Minimum Tax: North Macedonia implemented a 15% global minimum tax effective January 1, 2024, affecting large multinational and domestic groups with consolidated revenues exceeding EUR 750 million. The first reporting is due 18 months after the end of the 2024 tax year, with subsequent reports due within 15 months. Payments are due within 30 days of the filing deadline. Penalties for non-compliance can include joint and several liability for group members in North Macedonia. The top-up tax calculation includes adjustments and exclusions, such as the de minimis exclusion for smaller entities and a substance-based income exclusion based on payroll costs and tangible assets.

Please note that this information is current as of February 5, 2025, and may be subject to change. Consulting with a tax advisor is recommended for specific situations.

In North Macedonia, the Value Added Tax (VAT), known locally as Danok na dodadena vrednost (DDV/ДДВ), is a consumption tax levied on most goods and services.

VAT Rates

• Standard Rate: 18% (applies to most goods and services).
• Reduced Rates: 5% and 10%. As of September 1, 2023:
  • 5%: Applies to essential goods and services like certain food items, baby products, school supplies, books (including digital textbooks), feminine hygiene products, potable water, pharmaceuticals, medical devices, and specific energy products. The 5% rate also applies to the first sale of new residential buildings completed within five years of construction (until December 31, 2025).
  • 10%: Applies to restaurant services (on-site consumption of food and beverages, excluding alcoholic beverages) and certain luxury food items.
• Zero Rate (0%): Applies to specific goods and services, details of which can be confirmed with the Public Revenue Office.

VAT Registration

• Mandatory Registration: Businesses with an annual turnover exceeding MKD 2,000,000 are required to register for VAT.
• Voluntary Registration: Businesses below the mandatory threshold can register voluntarily.
• Foreign Digital Service Providers: Non-resident providers of digital services must register for VAT with no threshold, appointing a local fiscal representative.

VAT Filing and Payment

• Tax Periods: Monthly for businesses with turnover exceeding MKD 25 million in the previous calendar year; quarterly for those below. Voluntary registrants also file quarterly.
• Filing Deadline: VAT returns must be submitted within 25 days following the end of the tax period.
• Payment Deadline: VAT is payable within 25 days following the end of the tax period, meaning payment is due on the same day as the return filing.
• Additional Reporting: Large taxpayers may be required to submit lists of invoices with their VAT returns.

VAT Exemptions

Some goods and services are exempt from VAT, either with or without the right to deduct input VAT. Examples of exempt categories (with the right to credit/deduction for input tax where applicable) may include:

• International transport of goods and passengers
• Certain financial services
• Supply of certain precious metals to the central bank
• Certain educational and healthcare services
• Donations of goods and services to the government (until the end of 2021 as per available information)

Fiscal Representatives

Foreign businesses providing digital services to consumers in North Macedonia without a physical presence in the country must appoint a fiscal representative. The fiscal representative is a local VAT-registered entity responsible for VAT compliance on behalf of the foreign business, including registration, filing, and payment. They should have no outstanding tax debts and should have been VAT registered for at least 12 months before appointment.

VAT Refunds

VAT refunds are available for foreign diplomatic or consular missions, subject to certain conditions. For instance, the refund is not allowed if the individual invoice amount does not exceed MKD 9,000. The refund request must be submitted within six months after the end of the calendar year in which the supply was made.

This information is based on available data up to February 5, 2025, and may be subject to change. It is essential to consult official sources or tax professionals for the most up-to-date and detailed information regarding VAT regulations in North Macedonia.

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

Tax Incentives in North Macedonia

Technological-Industrial Development Zones (TIDZs)

• Corporate Income Tax: 0% for the first 10 years of operation.
• Personal Income Tax: 0% for the first 10 years of operation.
• Value Added Tax (VAT): Exemption on goods, raw materials, equipment, and machinery.
• Customs Duties: Exemption on goods, raw materials, equipment, and machinery.
• Building Costs Incentive: Grants of up to €500,000, depending on investment value and employee count.
• Land Lease: Long-term leases up to 99 years at concessional rates.
• Infrastructure: Free connection to utilities (natural gas, water, electricity) and access to the main road network.
• Simplified Procedures: Expedited business registration.
• Additional Benefits for Specific Sectors: Further advantages for businesses in production, IT, research, and environmentally friendly technologies, including exemption from providing guarantees for customs arrears.

Free Economic Zones

• Corporate Income Tax: 0% for the first 10 years.
• Personal Income Tax: 0% for the first 10 years.
• VAT: Exemption on import and trade of goods within the zones. Exemption on customs duties for equipment, machinery, and spare parts.
• Land Lease: Long-term leases up to 99 years at concessional prices.
• Utility Taxes and Fees: Exemption from local municipality utility taxes and building permit fees.
• Infrastructure: Free connection to utilities (natural gas, water, and sewage).

General Tax Environment

• Corporate Income Tax (CIT): Standard rate of 10%. Tax exemption for reinvested profit is being phased out. Potential future exemptions for investments in green transition and digital transformation are under consideration. A global minimum tax of 15% applies to large multinational and domestic groups with annual consolidated revenues of €750 million or more. Relief mechanisms like the de minimis exclusion and substance-based income exclusion are available.
• Personal Income Tax (PIT): Standard rate of 10% for most income types. 15% on gambling income. Statutory social contributions are paid on gross salary, with the maximum threshold abolished.
• Value Added Tax (VAT): Standard rate is 18%, with exemptions for specific goods and services.
• Withholding Tax: Dividends, interest, and royalties paid to non-residents are subject to a 10% withholding tax, which may be reduced under tax treaties.

Additional Considerations

North Macedonia actively encourages foreign direct investment and provides national treatment to foreign investors. Investment in all sectors is generally permitted, with some exceptions subject to government approval (e.g., weaponry, narcotics). The country has a network of double taxation treaties that may offer further tax benefits. For the most current and detailed information on tax incentives, consulting with a tax advisor or referring to official government resources is highly recommended.