3 minute read 24 Nov 2020
Tax reform newsletter

Tax reform newsletter

Authors
Milen Raikov

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

Tax Markets Leader

Viktor Mitev

EY Bulgaria, N. Macedonia, Albania and Kosovo Associate Partner, International Tax and Transaction Services (ITTS)

International tax enthusiast. Chartered Certified Accountant. Father. Snowboarding amateur. Innovation aficionado.

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)

3 minute read 24 Nov 2020

Details on the new Law for financial support and the amendments of the VAT Law are outlined below.

In line with the announced fourth set of economic measures and support of the economy affected by the COVID-19 pandemic, on 6 November 2020, the Parliament adopted the Law on Financial Support for Payment of Salaries for the Months of October, November and December of Employers Affected by the COVID-19 Crisis and the amendments on the Law on Value Added Tax (VAT Law).

Law on Financial Support for Payment of Salaries for the Months of October, November and December 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 payment of salaries to their employees for October, November and December. Pursuant to the Law provisions, depending on the decrease of the company’s revenue, employers are entitled to subsidies ranging from MKD 14,500 (EUR 236) to MKD 21,776 (EUR 354) net, per employee, per month, provided that the following conditions are met:

  • The taxpayer's average monthly revenue from April until October, November or December 2020 is reduced by at least 30% in comparison with the average monthly revenue in the months from April to October, November or December 2019. For companies established in the last quarter of 2019, the monthly revenue shall be measured against the average monthly revenue realized from the month of their establishment to the month in which the financial support is granted. Any one-off revenues that are not generated as a result of the regular business activity of the employer are excluded from the calculation.
  • The number of employees for the month when the financial support is requested should not be reduced compared to the number of employees in August 2020.
  • 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 in which the financial support was granted.
  • 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 when the financial support was granted until the date of salary payment in December 2020.
  • The taxpayer does not have accumulated profits from the period from 2017- 2019 in 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 June, July, August or September or, for each month of employment, if the latter 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; and
  • Part-time employees who are already fully employed at another employer.


The companies 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. The payback should be performed in three installments in October, November and December 2021 with no interest applied.

The companies that have recorded a tax loss for 2020 should not pay back the financial aid.

The number of employees for the period when financial support is granted and two months afterwards, should not be reduced in comparison with the month when 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 and a permanent work disability. In accordance with the condition above, 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.

The request for financial support should be submitted no later than the 10th in the month following the month for which the support should be provided.

We are at your disposal to provide you assessment of your eligibility for applying for financial support with a view to payment of salaries, as well as for submission of applications.

Amendments of the VAT Law, applicable from 9 November 2020

  • Electronic invoices

A document provided in an electronic form, containing all the mandatory information, will be considered as an electronic invoice. The supplier will be obliged to notify the recipient of services/ goods that the invoices will be issued electronically. The recipient is entitled to refuse a receipt of electronic invoices within a period of 10 days after the supplier’s notification, as otherwise it will be considered that electronic invoicing is accepted.

With the amendments above, taxpayers are not obliged to sign the invoices with electronic signature issued by an authority authorized for issuance of electronic signatures.

The amendment above will be applicable until 31 December 2021.

  • Exemption from VAT on public donations

Supply of goods and services intended for donations towards state institutions for the purpose of dealing with COVID-19 are exempt from output VAT. In addition to the Agreement for donations, donors are obliged to obtain confirmation issued by a state institution – a recipient of the donation.

Supplies made toward state institutions paid with public donations intended for purchase of goods/services for dealing with COVID-19 will be exempt from VAT. The supplier should hold a statement from the recipient that the supply payment is part of the provided donation.

The exemptions elaborated further above will be applicable until 31 December 2021.

Amendments of the VAT Law, applicable from 1 January 2021

Based on the adopted amendments of the VAT Law, the below presented amendments will become applicable from 1 January 2021. Considering that the main purpose of the amendments is recovering from the COVID-19 crisis, there is no certainty that they will be retained after the pandemic.

  • Extension of VAT payment deadline

The deadline for VAT payment is extended to five days as of the deadline for submission of the VAT return.

  • Introducing a preferential VAT rate for restaurant services

Serving food and beverages for on-site consumption, except alcoholic beverages, will be taxed at a preferential VAT rate of 10%.

  • Extension of a list of services subject to a 5% preferential VAT rate

Craft services performed by craftsmen who are registered in the craft register in accordance with the Law on Crafts, shall be subject to 5% VAT.

Specifically, the following services are subject to a preferential VAT rate:

(a) Repair of:

  • Bicycles
  • Shoes and leather products
  • Household clothing and bedding, including patching and tailoring, and

(b) Hairdressing services.

  • Reporting obligations

Taxpayers receiving services from domestic service providers, subject to reverse charge, shall be obliged to prepare and submit a report on the received services with the VAT return. Until now, only the service provider was under the obligation to prepare and submit the report.

  • Refund of input VAT

Taxpayers will be entitled to use the excess amount between the input VAT and the VAT payable for settling third-party tax obligations. Such a request should be made with the VAT return and shall be allowed provided that the taxpayer does not have unsettled tax obligations.

Summary

Should you have any questions please do not hesitate to contact us.

About this article

Authors
Milen Raikov

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

Tax Markets Leader

Viktor Mitev

EY Bulgaria, N. Macedonia, Albania and Kosovo Associate Partner, International Tax and Transaction Services (ITTS)

International tax enthusiast. Chartered Certified Accountant. Father. Snowboarding amateur. Innovation aficionado.

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)