Value-added tax (VAT)
In general, the VAT regulations are in line with the provisions of the sixth European Union (EU) VAT directive.
The standard VAT rate is 18%. This rate applies to overall turnover and imports of goods and services. In addition to the standard VAT of 18%, preferential rates of 5% and 10% are applied for turnover of certain goods and services.
The preferential tax rate of 5% applies to supply of food for human consumption; food for livestock; drinking water from public supply systems; computers and software; agricultural material and equipment; wood pellets, pellet stoves, and pellet boilers; baby products; school supplies (e.g. school backpacks, notebooks, pencils); pharmaceutics and medical equipment; publications, such as books, pamphlets, newspapers, and other printed material, except for publications mainly used for advertising purposes; electricity for households; transport of passengers; accommodation services, bed and breakfast services, as well as half-board and full-board services provided by hotel keepers in the country; craft-related services, such as repair of bicycles, shoes, and clothes, hairdressing services, etc.
The preferential tax rate of 5% on the import and supply of electricity intended for households is applicable until 31 December 2022. Starting from 01 January 2023, the preferential rate of 10% will be applied.
The preferential tax rate of 10% applies to restaurant services and catering services, with the exception of alcoholic beverages.
All taxpayers whose total annual turnover exceeds MKD 2 million or whose total supplies, as projected at the beginning of the business activity, will exceed this amount are liable to register for VAT purposes.
Residents that do not meet the criteria above may voluntarily register for VAT purposes at the beginning of each calendar year.
The standard VAT period is one calendar month. However, if the total turnover in the previous calendar year did not exceed MKD 25 million, the tax period is the calendar quarter. The VAT period for voluntary VAT registered taxpayers is the calendar quarter.
The taxpayer is obligated to submit a VAT return for each tax period within 25 days following the end of the relevant tax period. VAT is payable within 30 days following the end of the relevant tax period.
Customs duties generally apply to most products imported into North Macedonia. The customs rates under the most favoured nation treatment for agricultural products are up to 31%, whereas the customs rates for industrial products are below 23%.
North Macedonia has signed trade agreements with Turkey, Ukraine, and European Free Trade Association (EFTA) member states. The country is a member state to the Central European Free Trade Agreement (CEFTA) and has signed a Stabilisation and Association Agreement with the European Community.
The import of industrial products with preferential origin and certain raw precious metals is exempt from customs duties.
According to the Stabilisation and Association Agreement 2001 signed between Macedonia and the European Union, products with Macedonian origin can generally be exported into EU countries free of customs duties.
Excise duties are levied with respect to a limited number of goods produced or imported in North Macedonia. Alcohol and alcoholic beverages, tobacco products, and fuels and electricity are subject to an excise duty at a flat or percentage rate. The excise period is one calendar month, and excise duty is payable within 15 days as of the end of the calendar month. The excise duty for alcohol beverages and tobacco goods is levied by way of purchasing excise stamps.
Alcohol and alcoholic beverages are taxable per litre/percentage of alcohol. Some categories of alcoholic beverages (e.g. wine) are not subject to excise duty. Maximum excise duty payable is up to MKD 340 per litre on pure alcohol.
The excise duty for tobacco products is combined and is calculated both per unit/kilo and as a percentage from the retail price. As of July 2020 up to July 2023, the rate of the specific and minimum excise duty on cigars/smoking tobacco will increase by MKD 0.20 per peace every year.
The excise duty for fuels and electricity is paid in cases where those are used as a fuel or heating fuel. The excise base for fuels is the amount of fuels expressed in kilo net mass, normal cubic meters, litre, or giga joules gross calorific value, except for electricity where the excise base is the amount expressed in megawatt hours.
Property tax is paid annually on the ownership of real estate, including land (agricultural, construction, forest, and pastures) and buildings (residential buildings or flats, business buildings and business premises, administrative buildings and administrative premises, buildings and flats for rest and recreation, and other construction facilities, as well as installations constructed on the buildings or below and permanently attached to the buildings).
The person liable for property tax is the legal entity or the individual owner of the property. If the owner is not known or cannot be reached, the person liable for property tax is the user of the property. A property taxpayer may also be the taxpayer who usufructs the property; and, if the property is owned by several persons, each of them is a property taxpayer proportionately for the portion owned. A property taxpayer is also the person who uses real estate owned by the state and the municipality.
The property tax base is the market value of the real estate. The market value of the real estate is determined in accordance with the methodology prescribed by the government.
Property tax rates are proportional and range from 0.10% to 0.20%. The rates may be determined on the basis of the type of the property. As an exception, property tax rates on agricultural land not used for agricultural production, residential or commercial real estate that is not used or not leased for more than six months during a calendar year may be increased outside the above range (i.e. from three to five times in relation to the basic rates).
The amount of the rates is decided by the Municipal Councils.
The transfer of the right to ownership of real estate for or without compensation, as well as other means of acquiring real estate for or without compensation, between legal entities or natural persons is subject to transfer tax.
The person liable for transfer tax is the seller of the real estate. As an exception, a taxpayer may also be the buyer of the real estate if agreed in the sale and purchase agreement. When replacing real estate, the taxpayer is the party that replaces the real estate of greater value.
When selling real estate in bankruptcy and law-enforcement procedure, as well as when realising agreements on mortgage, the taxpayer may be the buyer of the real estate.
In the case of transfer of ownership of an ideal share in real estate, taxpayers are each of the owners separately.
The tax base is the market value of the real estate at the moment the tax liability arises.
When replacing real estate, the tax base is the difference between the market values of the real estate being replaced.
When selling real estate in bankruptcy and law-enforcement procedure, the tax base is the attained selling price.
The market value is determined by a special municipal commission in accordance with the methodology prescribed by the government.
Tax rates are proportional and range from 2% to 4%. The tax rates are determined by the municipal councils by way of decision.
There are certain exemptions from transfer taxes available for specifically determined cases (i.e. transfer of shares, sale of securities, the first sale of residential premises for the first five years from the end of their construction, etc.).
Stamp taxes are not payable in North Macedonia.
Social security contributions and payroll taxes
Employers are obligated to calculate and withhold from employees’ gross salary and pay into the accounts of respective funds the compulsory social security contributions and personal income tax (PIT). The current level of the compulsory social security contributions is as follows:
- Pension and disability insurance: 18.8%.
- Health insurance: 7.5%.
- Employment insurance: 1.2%.
- Additional health insurance: 0.5%.
The legislation prescribes the minimum and the maximum base for calculation of the social security contributions.
The Public Revenue Office (PRO) is the authorised body to control the calculation and the payment of the compulsory social security contributions and PIT on salaries. All employers send their calculations to the PRO that controls them and, if correct, issues a declaration of acceptance that is used by the banks to perform the payment of the social security contribution, PIT, and net salaries.
Garbage collection fee
A garbage collection fee is payable for immovable property, depending on the type of property and on the surface area used. It is calculated on the basis of a tariff and is collected together with the bills for water usage.
Companies and individuals are liable for paying communal taxes for usage of certain rights and services (mainly for usage of the urban space in the municipalities, posting commercials, etc.).
Motor vehicle tax
From 1 January 2020, a new tax on motor vehicles is introduced, which basically taxes passenger cars and other motor vehicles designed primarily for transport of persons, including motorcycles and pickup vehicles, as well as vans for combined transport of persons and goods.
The subject of taxation is new and used motor vehicles that are imported and/or put into free circulation in the country for the first time. This law does not cover freight motor vehicles and exclusively electrically driven vehicles.
The tax base for motor vehicle tax calculation is the amount of average carbon dioxide (CO2) expressed in grams per kilometre, depending on the type of propulsion fuel and the sales value of the vehicle or import value of the vehicle if the vehicle is imported.
Motor Vehicle Tax = Value + Specific Component
Value = The value of the motor vehicle multiplied by the percentage of the value of the vehicle for the appropriate value category.
Specific component = The amount of average CO2 emissions multiplied by the value of 1 gram of CO2 for a given category, depending on the fuel type of the vehicle.
There are specific rules for:
- hybrid vehicles, in which case the amount of tax on motor vehicles is reduced by 50%
- pickup vehicles, in which case the tax is calculated on the basis of the amount of engine power expressed in kW and the value of one kW, depending on the level of exhaust emissions
- motorcycles, tricycles and quadricycles, in which case the tax is calculated on the basis of engine volume data expressed in cm3, motor vehicle tax amount per cm3 expressed in Macedonian denars for the relevant category and emission level, and
- old-timers (vehicles older than 35 years), in which case the tax is calculated and paid in lump sum of MKD 5,000.
The competent authority for determining, collecting, and controlling the implementation of the Law on Motor Vehicles is the Customs Administration of the Republic of North Macedonia.