Generally, the following types of income realised in the country and abroad are subject to Macedonian taxation: income from work (employment and service agreement based income); income from self-employment (business, intellectual, registered agricultural business activity, and other types of independent activities); royalties; income from sale of own agricultural products; income from intellectual property (IP) rights; income from lease and sub-lease of movables and immovable property; income from capital; capital gains; gains from games of chance; income from insurance; and other income not mentioned above.
PIT is payable on income irrespective of whether received in money, securities, in kind, or any other type of compensation.
Income from work
Income from work is subject to taxation and is comprised of all income realised by the taxpayer based on employment, including income from contractual services. This income includes wages and salaries and other allowances realised based on employment; pensions; income of members of management and supervision bodies; salaries of officials, MPs, and advisors; salaries of professional athletes; allowances for jurors, forensic experts, and trustees; allowances of the members of the Macedonian Academy of Sciences and Arts; salary earned abroad based on employment in the country; allowances for interns according to the Internship Law; and every individual income realised based on temporary service contracts with legal entities and physical persons.
Income from self-employment
Income from self-employment consists of income realised by individuals from business activities, registered agricultural business activity, or from rendering professional and other intellectual services, such as doctors, lawyers, public notaries, tax consultants, engineers, architects, accountants, etc. If several physical persons realise income from joint activity, each shall be subject to PIT on the share of the income attributable to a person in accordance to the agreement for joint activity.
Income from copyrights and related rights
Income from copyrights is the compensation realised by the individual from artwork and related rights regulated under the Law on Copyrights and Related rights (e.g. paintings, artistic work in music, film, etc.). The tax base is decreased by the amount of recognised expenses that range between 20% and 50%.
Income from sale of own agricultural products
Income from sale of one's own agricultural products consists of sale of own agricultural products to payers that keep accounting records and to natural persons if the sale took place outside organised green markets.
The tax base is 20% of the gross income realised.
The taxpayer whose total income in the year exceeds the amount of MKD 1 million shall be required to register for business activity in accordance with the legislation by 15 January of the following year, at the latest.
If the taxpayer during the calendar year generates income from sale of one's own agricultural products not exceeding MKD 1 million, such taxpayer shall have the right to recover the tax paid thereof, provided the taxpayer has not realised any other income that is taxable under the PIT Law.
Income from intellectual property (IP) rights
Income from IP rights is the compensation realised by the individual based on rights regulated with the Intellectual Property Rights Law. The tax base is 90% of the gross income.
Income from lease and sub-lease of movables and immovable property
Income from lease and sub-lease of movables and immovable property is comprised of income earned by physical persons from lease and sub-lease of movables and immovable property, equipment, transportation vehicles, and other property. In case of a non-furnished property lease, the taxpayer is recognised a 10% deduction on the tax base for maintenance and management expenses. As for the lease of equipped residential and business premises, a 15% deduction on the tax base is recognised to the individual.
Income from capital
Income from capital refers to those realised from the following:
- Dividends and other income realised through participation in the profit with legal and physical persons.
- Interest on loans given to legal and physical persons.
- Interest on time savings and other deposits.
- Interest on bonds and other securities.
- Other income from securities and financial instruments.
Dividends are subject to a flat 10% tax rate on the gross amount paid. The tax is payable by the payer of the dividend by way of withholding.
Interest is subject to a flat 10% tax rate. The tax base is the amount of the calculated interest. Interest on bonds issued by the state and local government units (LGUs), public loans, and call deposits is not subject to taxation.
The taxation of interest on time savings is postponed until 1 January 2023.
Capital gains refer to the income realised by the taxpayer as a positive difference from the sales of real estate, securities, share of capital, shares issued from investment funds, and other movables and immovable property.
Capital gain is the difference between the sales price and the purchase price.
The tax base is 90% of the realised capital gain from sale of securities, share of capital, share of investment funds, and immovable property in which the taxpayer has lived at least one year prior to the sale.
The taxation of capital gains from sale of securities and shares issued by an investment fund is postponed until 31 December 2022.
Tax is not payable on capital gains realised from sale of securities that were issued within initial public offer.
Capital gains from the sale of immovable property are exempt in cases where the immovable property:
- is sold following three years as of date of purchase, in case the taxpayer has lived in it for at least a year prior to the sale
- is sold after five years as of date of purchase
- is inherited/obtained as gift, if such inheritance/gift is exempt from taxation under the Property Taxes Law
- is acquired within a procedure for denationalisations, or
- sold between spouses, or from spouses to third parties, and such sale is in relation to a divorce procedure.
Gains from games of chance
The tax on gains from games of chance and other prize games is not paid on the realised gain if it does not exceed MKD 5,000; otherwise, tax is paid on the total amount of the gains, at a flat 15% rate.
On the other hand, any gain realised in betting houses is taxable at a flat 15% rate, where the tax base is the difference between the betting deposit and the paid out gain.
Income from insurance
Insurance income includes:
- the life insurance premium paid out by a legal entity or a self-employed individual
- the premium for non-life insurance paid out by a legal entity or a self-employed individual, excluding the premiums paid out for collective insurance of employees for work-related injuries, and
- the paid out insured amount, except for the compensation for damages.
Insurance income is subject to a flat 10% rate until the end of 2022.
Other income under the PIT Law is deemed to include all other taxable income realised by physical persons that is not mentioned above. This category especially includes the income generated by e-commerce through specialised Internet pages, Internet marketing services, amount of unused financial aid, amount of unused donations, trade shortages not caused by extraordinary events (theft, fire, or other natural disasters), which are not at the expense of the responsible person's salary, as well as income generated from the sale of usable solid waste.
The tax base for the income generated from sale of usable solid waste is the gross income realised decreased by 50%. Until the end of 2022, other incomes are taxable at the 10% flat tax rate, applied on the gross income received.
Tax exempt income, such as certain employment related expenses, awards, scholarships, damages, alimony, certain types of interest, etc., is exhaustively listed in the PIT Law.