Taxes represent the mandatory financial charge of taxpayers, composed by citizens and companies of a certain country. Through the revenues achieved from the taxes, public and common needs in that country are being satisfied.
Like in a lot of countries, taxes are also the primary source for funding the government spending in North Macedonia. Over 80% from the total Macedonian state budget is based on collecting taxes from taxpayers.
Macedonian economy introduced a fiscal policy in the 1990s, controlled by the Public Revenue Office of the Republic of North Macedonia (UJP). The first reform of the Macedonian tax system was created in 1994.
Basic elements of the tax system
Every tax system is composed by four basic elements. Those are:
- Subject of taxation – revenues, consumption, and property
- Taxpayer – citizens and companies in the country
- Tax base – amount from the subject of taxation on which the tax is being calculated (e.g. profit tax by companies, personal income tax by citizens)
- Tax rate – determined percentage that should be paid in the form of tax (e.g. if a company has profit of 100.000 euros, and tax rate is 10%, the tax that should be payed by the company is 10.000 euros).
Tax rates can be proportional and progressive.
- Proportional taxes – the same tax rate is being applied for every income or profit, without considering their amount
- Progressive taxes – several tax rates are being included (e.g. higher amount of income or profit is being taxed with a higher tax rate)
There are three main types of taxes when it comes to the subject of taxation:
- Income taxes (direct taxes – profit tax and personal income tax)
- Consumption taxes (indirect taxes – value added tax (VAT), excises and customs)
- Property taxes
Income taxes are direct taxes payed when a material benefit is being received. Main examples are personal income tax for citizens, as well as profit tax for companies.
Personal income tax is calculated as a yearly sum of all incomes that a citizen can earn through different sources (main job, self-employment, copyrights, capital gains, insurance, and other incomes).
Also, this type of tax include the incomes that an employee can gain as a percentage of a company profit. After paying the profit tax, the final profit is being taxed by a 11,11% personal tax rate.
In North Macedonia, the personal income tax has a proportional tax rate of 10%. Taxpayers for this kind of tax also include the following forms of business: sole proprietors, people who work with services (e.g. lawyers), people from the agriculture and crafts industries, etc.
The tax base for the personal income tax is the gross income earned in one calendar year, reduced by the contribution for social insurance, tax reduces, as well as standardized costs declared by law.
Profit tax, on the other hand, is responsibility of every company that has revenue of more than 3 million MKD in a one financial year. The types of companies which pay this tax include LLCs (Limited Liability Companies) like DOOEL and DOO.
A legal person, resident of North Macedonia, is the one who is a subject to a profit tax in the country. Also, this tax is obligating every foreign citizen that gains a profit from an activity which is being executed on the territory of North Macedonia.
Subject of taxation is the profit of the company – the difference between the revenues and expenses in one financial year, which is declared officially by an authorized accountant.
The profit which is being divided in a form of a dividend, is not being taxed multiple times. The Macedonian method anticipates taxation in the end of the chain, i.e. to the last taxpayer which is doing the allocation of the profit to the shareholders and owners of the capital.
The non-profit organizations are not obliged to this type of tax, except if the revenues from doing an economic activity exceeds 1 million MKD. In that case, the organization will be taxed 1% from the realized revenue.
The tax rate for the profit tax is 10% in North Macedonia.
Consumption taxes are indirect taxes payed by the ending consumer. Main examples are: value added tax (VAT), excises and customs.
Value added tax (VAT) is being charged in all phases of the production and trade, as well in the service sector. Purchase of goods and services from the country’s residents is being taxed with VAT.
Taxpayers of VAT are also all companies which are executing economic activities on the territory of North Macedonia, and have more than 2 million MKD revenue in one calendar year. Companies with lower revenue can voluntarily register as VAT taxpayers. If they don’t register, they are being taxed as final buyers.
Tax rate for VAT is generally 18%. However, there is also a preferential tax rate of 5%, which covers the following segments – food products, water from public systems, publications, material for agriculture producing, medicines, and other.
Macedonian government has declared some tax reliefs for domestic companies in order to stimulate their export in foreign countries. In some cases and industries, they are excluded from paying VAT.
Regular citizens of the country are paying the VAT while doing any commercial transaction, while the companies where the transaction is being done have the obligation to submit the tax to the country.
Companies have the obligation to pay VAT to the government every 3 months, if the yearly revenue is lower than 25 million MKD. If the yearly revenue exceeds 25 million MKD, VAT is being payed on a monthly level.
It represents a yearly tax which is being payed for owning a property. It applies for both citizens and companies. The tax base is being calculated as the market value of the property, estimated by a local municipality commission with an already established Methodology.
The tax rate is proportional and can vary between 0,10 and 0,20%.
Other than the property taxes, there also exist tax for ownership change of a real estate (tax rate from 2% to 4%), as well as tax for real estate gained as inheritance or gift (tax rate between 2% and 5%).