EY North Macedonia
The draft Solidarity Tax Law for 2023 as well as the amendments of the Value Added Tax (“VAT”) and Corporate Income Tax (“CIT”) Law have been adopted by the National Assembly on 19th of September 2023 and were published in the Official Gazette of North Macedonia on 25th of September 2023.
The introduced Solidarity Tax and the amendments of VAT and CIT are outlined below.
Solidarity Tax
► Solidarity Tax is due by the taxpayers that are liable for Corporate Income Tax (“CIT”), including companies incorporated in the TIDZ, with generated revenue greater than MKD 615 million (approx. EUR 10 million) for FY 2022. The generated revenue does not include income from sale of property in bankruptcy proceedings.
► The 30% Solidarity Tax should be applied on the tax base determined as a difference between the: (i) tax base after deductions for FY2022 from the annual CIT return (“AOP 49”) or the average base after deductions from FY2021 and FY2022; (ii) average tax base after deductions from previous periods (FY2018, FY 2019 and FY2021) or average tax base after deductions from previous periods (FY2017, FY2018 and FY2019) respectively, increased by 20% i.e., 30% in case of changes in the taxpayer’s legal status.
► Taxpayers are obliged to submit the tax return for Solidarity Tax no later than 4 October and settle the extraordinary tax until 25 October 2023.
Solidarity Tax Exemptions
Taxpayers are not liable for Solidarity Tax in case:
► The generated income for 2022 is lower than MKD 615 million (approx. EUR 10 million).
► The business activity is commenced as of 2022 (excluding commencement of the business activity related to changes in the taxpayer’s legal status).
► The determined tax base after deductions (in the annual CIT return – “AOP 49”) for 2018, 2019 and 2021 or 2017, 2018 and 2019 amounts to zero.
► The business activity is terminated without subsequent changes in the taxpayer’s legal status and the taxpayer has submitted the CIT return for 2022.
VAT
Applicable as of adoption:
► Specification of the obligation for taxation of:
- shortages of goods that did not occur as a result of extraordinary events (theft, fire and other natural disasters);
- the costs for waste, scrap, debris and wreckage of goods exceeding the normative amount prescribed for the relevant business sector, provided that the same did not occur as a result of extraordinary events or vis major.
► Specifying the VAT treatment of value vouchers.
- A value voucher is considered an instrument that should be accepted as compensation or part of compensation for supply of goods or services, if the latter is known, or the potential supplier and the conditions for use of the value voucher are listed on the value voucher itself or in related documentation.
- The value vouchers can be single or multi-purpose and in electronic and in physical (hard copy) form.
- Value voucher does not refer to an instrument that provides the owner with the right of discount for the purchase of goods and services as well as transportation tickets, entry tickets and stamp cards.
- The sale of single vouchers shall be considered as supply of goods / services.
- In case of multi-purpose vouchers, the supply of goods / services shall be considered the moment in which the voucher is redeemed / used.
► Introduction of special tax bases
The amendments prescribe special VAT base for supplies realized through auction, for import of used passenger motor vehicles and for transfer of movable and immovable property in a procedure of forced collection.
► Clarification of the responsibilities in the VAT Group
All persons in the VAT Group are jointly liable for the unpaid VAT of each individual person in the VAT Group for the period in which they are members of the VAT Group.
Applicable as of 01 September 2023
► Change and introduction of goods for which the preferential tax rates of 5% and 10% will be applied
- Preferential VAT rate of 5% is introduced/amended for supply and import of basic products for human consumption; feminine hygiene products; publications (i.e., electronic textbooks, brochures and other printed materials, newspapers and other periodicals, etc.); and
- Preferential VAT rate of 10% is introduced for supply and import of other products for human consumption different from the basic products for human consumption; and
Applicable as of 01 January 2024
► Obligation for VAT registration for foreign legal persons
Foreign legal entities without registered seat or branch in North Macedonia, which perform supply of goods and services in the country (subject to VAT) would be obliged to register for VAT purposes (prior to commencement of the activity) through a VAT representative. The foreign legal entity has the obligation to register for VAT before commencing of its bussiness activity and can appoint only one VAT representative.
► The definition of supply of service was broadened
- Telecommunication services – services related to transmitting or receiving signals, words, images and sounds or information of any kind through communication, radio, optical or other electromagnetic systems, including the associated transmission or assignment of the right to use the capacity for such transmission, transmission or reception, including providing access to global information networks; and
- Electronically supplied services of: development of web pages, web hosting, maintenance of programs and equipment at a distance; software and its update, images, text and information and making available databases; music, movies and games, including games of chance, as well as political, cultural, artistic, sports, science and entertainment broadcasts and events and distance learning.
► Clarification and introduction of new general rule on the place of supply of services
- Persons performing activities or supplies that are not VAT-able supplies of goods and services, shall be considered as taxpayers for each supply of services performed towards them.
- The place of supply of services performed towards taxpayers shall be considered the place where the taxpayer has its registered seat (in case of a branch, the registered seat of the same). In case such place does not exist, as place of supply of services shall be considered the place of residence of the recipient of the services; and
- The place of supply of services performed towards non-taxpayers shall be considered the place where the service provider has its registered seat (in case of a branch, the registered seat of the same). In case such place does not exist, as place of supply of service shall be deemed the place of residence of the service provider.
Certain exceptions of the general rule are prescribed regarding provision of specific services, such as immovables, transport of passengers, transport of goods, cultural, artistic, scientific services, auxiliary transport services, catering etc. In such cases the place of supply of services shall be considered the place where the service is performed.
► The place of supply of services performed towards persons who are not taxpayers shall be considered the place where the recipient of the service has its registered seat or place of residence, in case of:
a) Transfer of copyrights, patents, royalties, trademarks and other similar rights;
b) Advertising/marketing services;
c) Consulting services;
d) Banking and financial services and insurance and reinsurance services, except for the rent of safes;
e) Lease of personnel;
f) Rental of movable property, except for all types of means of transport;
g) Intermediary services for access to natural gas systems or other similar systems, access to the systems for electrical energy in case of congestion of the corresponding allocation unit during the allocation of the cross-border transmission capacities of the interconnecting pipelines;
h) Telecommunication services;
i) Broadcasting services; and
j) Services supplied electronically
In order to avoid double taxation, non-taxation or violation of conditions of competition, the Minister of Finance is authorized to determine the place of supply of specific services to ensure that such specific services are taxed in the place where they are actually used.
The by-laws related with the proposed amendments to the VAT Law shall be adopted within five months from the date of their entry into force.
CIT
Applicable as of adoption
► Introduction of a general rule against an Abuse of arrangement(s) which main purpose is the use of tax benefits prescribed by the CIT law and/or the DTT
► The whole amount of life insurance premiums paid by employer for employees will be treated as tax non-deductible expense.
Applicable as of 01.01.2024
► The right to decrease the CIT liability for the amount of donations made in sports activities is abolished
► The obligation for mandatory submission of the Transfer Pricing documentation is abolished, further to which the taxpayers will have the obligation for submission only upon request from the tax authorities. Furthermore, the taxpayer will be obliged to submit a list of transactions with related parties. (Applicable for FY2023).
EY North Macedonia remains at your disposal should you require further assistance and guidance related to the application of the amendments to the VAT and CIT, as well as the Solidarity Tax Law.
