10 minute read 5 May 2021
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Tax alert - Financial support for salaries and CIT changes

Authors
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.

Milen Raikov

EY Bulgaria, N. Macedonia, Albania and Kosovo Partner, Tax Markets Leader, Attorney-at-law, CIPP/E

Tax Markets Leader

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)

10 minute read 5 May 2021

In line with the announced new set of economic measures and support of the economy affected by the COVID-19 pandemic, on 24 April, the Government has submitted to the Parliament changes on the Corporate Income Tax (CIT) Act. The changes are still not adopted. In addition, on 18 April 2021, the Law on Financial Support for Salaries’ Payment for the Months of February and March of Employers Affected by the COVID-19 Crisis was also adopted. Further details are outlined below.

Proposed amendments in the Corporate Income Tax Act

  • The tax-deductible amount for annual vacation allowance is increased from 40% to 80% of the amount of the average monthly gross salary paid per employee in the Republic of North Macedonia.
  • The tax-deductible amount of cost for laboratory tests for COVID-19 is increased from MKD 3.000 (approx. EUR 49) to 50% of the average monthly salary per employee in the Republic of North Macedonia.
  • The Public Revenue Office (hereinafter: “PRO”) is obliged to adopt a decision for recognition of the depreciation costs on the residual value of the assets which are no longer used as tax deductible in a period of 30 days from the request’s submission. Up until these amendments, the law did not provide any deadline for the PRO; and
  • Tax losses can be carried forward without obligation for covering the losses pursuant to the Law on Trade Companies.

Financial Support for Salaries’ Payment for the Months of February and March of Employers Affected by the COVID-19 Crisis

As part of the economic measures adopted by the Government, local companies are entitled to apply for financial support for salaries’ payment to their employees for February and March. Pursuant to the Law provisions, depending on the decrease of the company’s revenue, employers are entitled to subsidies from MKD 14,500 (EUR 236) and up to MKD 21,776 (EUR 354) net, per employee, per month, provided that the following conditions are met:

  • The taxpayer's average monthly revenue (excluding one-off revenues) realized in November, December 2020 and January 2021 or December 2020, January and February 2021, respectively, is reduced by at least 30% in comparison with the revenue realized in the same period during the preceding year. For companies established after January 2020, the monthly revenue shall be measured against the average monthly revenue realized from the month of their establishment to the end of October or November 2020.
  • The taxpayer should not distribute any dividends and provide bonuses or other awards to its employees and management and supervisory board members from the moment of enforcing this Law until the financial support for March 2021 is paid to the employees.
  • The number of employees for the month when the financial support is requested should not be reduced compared to the number of employees in December 2020 unless the number is reduced due to an employee death or statutory reasons. The number of employees must not be reduced by more than:

 - 15% for employers that have up to 50 employees in the month the financial support is granted
 - 10% for employers that have 51–250 employees in the month the financial support is granted; and
 -  5% for employers that have more than 250 employees in the month the financial support is granted

  • Not more than 10% of the total number of company employees received a net monthly salary exceeding MKD 120.000 (approx. EUR 1.900) in the month for which the financial support is requested.
  • The taxpayer does not have profits accumulated in the period 2017–2019 in any amount exceeding MKD 600.000.000 (approx. EUR 9.756.000), unless it employs more than 2,000 individuals.

The financial support will not apply for:

  • Employees who received a monthly net salary exceeding MKD 39.900 (EUR 650) in any of the months of October, November, December 2020 or January 2021, for each month of employment, or if the employment is concluded for a period shorter than four months
  • Employees’ salaries exempt from payment of personal income tax and social contributions based on the Law of Employment and Insurance against Non-employment
  • Part-time employees who are already fully employed by another employer; and
  • Public institutions and employment agencies for individuals that are engaged to work in the public sector

Companies should pay back 50% of the subsidy received, based on a submitted request for calculation of the financial aid. The request should be submitted not later than the deadline for submission of the corporate income tax return for 2021 and the payment will be performed in two installments in February and March 2022. As an exception, provided that the subsidy is used for investments in tangibles and intangibles for the purpose of business activities’ expansion, the subsidy is non- refundable (i.e., converted to grant), subject to a special procedure.

The number of employees for the period when financial support is granted and two months afterwards should not be reduced compared to the month when the financial support was used, unless the employment is terminated voluntarily by the employee, in case of retirement, death, disciplinary misdemeanor of the employee, a court decision, an employee transfer or a permanent work disability.

The request for financial support should be submitted not later than the 12th, in the month following the month for which the support should be provided.

We are at your disposal to provide you with an assessment of your eligibility to apply for financial support regarding salaries’ payment, as well as for further evaluation if the company fulfills the conditions for converting the subsidy into a grant.

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About this article

Authors
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.

Milen Raikov

EY Bulgaria, N. Macedonia, Albania and Kosovo Partner, Tax Markets Leader, Attorney-at-law, CIPP/E

Tax Markets Leader

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)