Press release

8 May 2020 Skopje, MK

COVID-19: Economic measures, Part IV

Press contacts

Naiden Kostadinov, FCCA, CPA

EY Bulgaria, N. Macedonia, Albania and Kosovo Tax Service Line Leader

Accounting, payroll and tax services expert. Father of two teenage sons. Loves swimming.

Svetlana Radenkovic

EY N. Macedonia, Global Compliance & Reporting Services, Senior Manager

Senior Manager at Tax Service Line. Mother of two children. Loves to travel.

Maja Veljanova

Senior Consultant, Business Tax Advisory (BTA)

The Macedonian Government has introduced changes to the new economic measures for financial support for payment of salaries, effective as of 1 May 2020, changes in the economic measures for subsidy of social security contributions effective as of 5 May 2020 and changes in the Labour Law effective as of 1 May 2020. Further to that, please find below an updated overview of the economic measures including the recent changes.
 

Financial support for payment of salaries

Further to the new ordinance, the companies may apply for financial support for payment of salaries to their employees for April and May for an amount of up to MKD 14.500 (approx. EUR 230) per employee per month provided that the following conditions are met:

  • The taxpayer's revenue for April or May is reduced for at least 30% in comparison with the average monthly revenue in the previous year excluding any one-off revenues that are not generated as a result of the regular business activity of the employer;
  • The company should not distribute any dividends and provide any bonuses or other awards recorded under the code 102 in the MPIN reporting file, to its employees and members of the management and supervisory boards between 28 April 2020 and the date of payment of the salary for May 2020;
  • At most 10% of the employees of the company may have a net monthly salary that exceeds the amount of MKD 120.000 (approx. EUR 1.900) in the month financial support is granted.
  • The number of employees for the period financial support is granted until July 2020 should not be reduced in comparison with April 2020, except for the following cases:

    - retirement and death of an employee;
    - cancellation of the employment contract by the employee;
    - cancellation of the employment contract without notice by the employer due to violation of the work and discipline or work responsibilities;
    - amicable takeover of a worker;
    - termination of the validity of the employment contract on the basis of a court decision; and
    - termination of the validity of the employment contract due to established permanent disability for work.
  • In accordance with above condition, the number of employees should not be reduced until July 2020 in comparison with the number of employees in April for more than:
    - 15% for the employers that have up to 50 employees in the month the financial support is granted;
    - 10% for the employers that have 51-250 employees in the month the financial support is granted; and
    - 5% for the employers that have more than 250 employees in the month the financial support is granted.

    The employer is not eligible to apply for the financial support for the employees

  • That have received a monthly net salary exceeding the amount of MKD 39.900 (approx. EUR 650) for the last three months;
  • When the employer is subsidized for social security contributions during the state of emergency. This condition does not apply for the companies that perform business activity in tourism, hospitality and transport sector which may apply for both economic measures (subsidies for social security contributions and financial support for salaries) provided that they meet the following criteria:

    - Have been in a profit position in the last two years (2018 and 2019);
    - Are not on the list of debtors in accordance with the last published List of debtors nu. 3/2020 for overdue and unpaid debts issued by the Public Revenue Office;
    - With status as of 29 February 2020, should not have unsettled loan liabilities more than 90 days overdue.
  • For the employers who are exempt from payment of personal income tax and social contributions based on the Law of Employment and insurance against non-employment; and
  • For part time employees that are already fully employed with another employer.

    The financial support for payment of salaries should not be paid back and will be considered as a grant for employers that have up to 250 employees under the following criteria:
  • Have been in a profit position in the last two years;
  • Are not on the list of debtors in accordance with the last published List of debtors for overdue and unpaid debts issued by the Public Revenue Office on the day of filing of the request;
  • With status as of 29 February 2020, should not have unsettled loan liabilities more than 90 days overdue;
  • Will prove that the financial support in the amount equal to or greater than received amount of financial support have been used for:

    - investments in employees, such as training of employees or management of the company in areas of marketing and branding, financial management, production improvement, research and development, etc.;
    - operational improvements of the company, such as procurement related to upgrade of production process, marketing and branding, change of business model, digital transformation, new market expansion, development of a new product, etc.;
    - productive capital, such as procurement of equipment and other assets for improvement of the efficiency and productivity of operations, computers and other appropriate equipment, etc.

Procurement for the purposes of the company's regular business activities will not be considered as an investment.

Provided that the companies meet the above criteria and perform the investment until the end of 2020, may submit a request for conversion of the financial support to a grant not later than the deadline for submission of the statutory financial statements and the corporate income tax return for 2020 which is 15 March 2021.

The companies that have recorded profit for 2020 should pay back the financial aid in 2021 up to a threshold calculated as 50% of the profit for 2020 increased for tax non-deductible expenses. Any subsidy exceeding this threshold will not be subject to repayment to the state. The payback should be performed in three installments in April, May and June 2021 with no interest applied.

Subsidy for social security contributions

Companies may apply for subsidy for the amount of 50% of the social security contributions payable for April, May and June 2020 but not more than 50% of the social security contributions calculated on the average monthly gross salary, by the State Statistical Office of North Macedonia published in January, under the following conditions:

  • The taxpayer's revenue for April, May or June is reduced for at least 30% in comparison with the average monthly revenue in the previous year excluding any one-off revenues that are not generated as a result of the regular business activity of the employer;
  • The number of employees for the period subsidy for social security contribution is granted until August 2020 should not be reduced in comparison with April 2020, except in the following cases:

    - retirement and death of an employee;
    - cancellation of the employment contract by the employee;
    - cancellation of the employment contract without notice by the employer due to violation of the work and discipline or work responsibilities;
    - amicable takeover of a worker,
    - termination of the validity of the employment contract on the basis of a court decision; and
    - termination of the validity of the employment contract due to established permanent disability for work.

  • The number of employees should not be reduced until August 2020 in comparison with the number of employees in April for more than:
    - 15% for the employers that have up to 50 employees in the month the financial support is granted;
    - 10% for the employers that have 51-250 employees in the month the financial support is granted; and
    - 5% for the employers that have more than 250 employees in the month the financial support is granted.
  • The company should not distribute any dividends and provide any bonuses or other awards recorded under the code 102 in the MPIN reporting file, to its employees and members of the management and supervisory boards between 5 May 2020 and the date of payment of the salary for June 2020;

This measure will not apply for any company that is granted with financial support for salary payment for April and May 2020, except for companies that perform business activity in tourism, hospitality and transport sector which may apply for both economic measures (subsidies for social security contributions and financial support for salaries) provided that they meet the following criteria:

  • Have been in a profit position in the last two years (2018 and 2019);
  • Are not on the list of debtors in accordance with the last published List of debtors nu. 3/2020 for overdue and unpaid debts issued by the Public Revenue Office;
  • With status as of 29 February 2020, should not have unsettled loan liabilities more than 90 days overdue.

This measure will also not apply for companies that are subsidized for social security contributions as a result of increasing of the salary based on the Law for subsidizing of social security contributions.

The companies that have recorded profit for 2020 should pay back the financial aid in 2021 up to a threshold calculated as 50% of the profit for 2020 increased for non-deductible expenses. Any subsidy exceeding this threshold will not be subject to repayment to the state. The payback should be performed in three installments in April, May and June 2021 with no interest applied.

Settlement for reinstating the employment relationship

Further to the new ordinance in respect to the Labour Law effective as of 1 May 2020, the companies that have dismissed employees in the period from 11 March until 30 April 2020 may conclude a settlement for reinstating the employment relationship. The employer shall cover all labour obligations that arise from employment relation during the period as of the dismissal until the conclusion of the settlement. The employer that envisages to use this measure should register the respective employee in the Employment agency and Social Securities Department no later than 7 May 2020.