North Macedonia

There are no tax consolidation provisions in North Macedonia.

Transfer pricing

New transfer pricing (TP) legislation

The CIT Law and the TP Rulebook have introduced new provisions in respect of transfer prices applied between related parties from 1 January 2019 onwards. The above legislation prescribed detailed rules on TP, both in terms of substantial and TP reporting aspects. 

TP reporting requirements

The amended tax legislation outlines new TP reporting requirements for taxpayers, as follows:

• TP report requirement does not apply to (i) taxpayers that have realised total annual revenue of up to MKD 300 million and (ii) transactions between related parties that are Macedonian residents.
• Short TP Report requirement: Taxpayers that have total annual revenue above MKD 300 million and have transactions with non-resident related parties in an annual amount up to MKD 10 million.
• Full TP Report requirement: All other taxpayers that do not fall under the two categories above.

The above-mentioned TP reports should be prepared in Macedonian language and should be submitted to the tax authorities within 15 days of their request.

Detailed definition of related parties

According to the new TP legislation, two persons would be considered as related in the following situations:

• One of them has acquired, directly or through another entity, at least 20% of the shares in the share capital of the other person or when it holds at least 20% of all voting rights in its assembly.
• Any third party, directly or through another entity, has acquired at least 20% of the shares in the share capital in each of the related parties, or when it holds at least 20% of all voting rights in its assembly or in any of related parties’ assembly.
• One or more executive or non-executive directors or members of the Management or Supervisory Board of one person are executive or non-executive directors or members of the Management or Supervisory Board in the other person.
• A loan granted or guaranteed by one person constitutes more than 20% of the book value of the total assets of the other person.
• One person, directly or through another entity, receives at least 20% of the profits of the other person, based on an agreement for business cooperation between the two persons.
• One person is a PE of another person.
• One person performs business and financial transactions with another person who is resident of a country in which the CIT rate is 25% lower than the CIT rate applicable in the Republic of North Macedonia.

For the purpose of the above paragraphs, the shares or voting rights of a natural person shall be considered together with those of the spouse, the relatives in a vertical line, the siblings, the guardians, and the adoptive parents.

Full TP Report

In general, the Full TP Report should include a:

• Master File
• Local File, and
• Statutory-prescribed attachments (e.g. consolidated financial statements of the group, financial statements of the local taxpayer, copy of inter-company agreements, copy of any Advance Pricing Agreements [APAs], etc.).

The elements of the Master File and the Local File are generally aligned with the elements prescribed in the Organisation for Economic Co-operation and Development (OECD) TP Guidelines.

Short TP Report

The Short TP Report should contain data for each category of transactions (i.e. a group of transactions of the same type) as follows:

• Description of the transactions.
• Value of the transactions.
• A related entity with which the transactions have been performed.

TP methods, comparables, and market range of comparables’ data

The new legislation prescribes five TP methods (instead of the previous two) that can be used for determination of the transfer price upon transactions with related parties.

The prescribed methods are:

• Comparable Uncontrolled Price Method.
• Resale Price Method.
• Cost Plus Method.
• Transactional Net Margin Method.
• Profit Split Method.

The taxpayer should choose the most appropriate method in accordance with the arm’s-length principle and should choose a method for each type or category of transactions. If necessary, in specific cases, a combination of several methods may be used.

Thin capitalisation

A proportional part of the interest related to a loan received from a non-resident shareholder, who directly holds at least 20% of the capital in the company, that exceeds three times its share in the equity in the company will be taxable during a tax period. Thin capitalisation rules also apply to loans from banks if they are granted in relation to a deposit of the shareholder in that particular bank. Note that thin capitalisation rules do not apply for newly established companies within the first three years of operation.

Controlled foreign companies (CFCs)

There are no CFC rules in North Macedonia.