The Republic of North Macedonia offers advantageous tax opportunities, featuring one of the world’s lowest corporate income tax rates. The country possesses multiple Investment Zones where corporations enjoy various tax benefits. In this article, we will provide a comprehensive overview of the main characteristics of the corporate income tax regime in North Macedonia.
Corporate Tax Residency
A company is considered a tax resident in North Macedonia if it is established or has its headquarters in the country. Foreign companies with headquarters abroad are non-residents for tax purposes, but their branches in North Macedonia must pay taxes on any profits made within the country if they are classified as a Permanent Establishment (PE). A Permanent Establishment (PE) is usually a fixed location where a company’s business is conducted, either directly or through a dependent agent.
Application of Corporate Income Tax and Tax Rates
Corporate income tax holds significant importance in Macedonia’s tax system. It stands at a rate of 10%, which is among the lowest in Europe. This tax is applied to resident companies on their worldwide income. For foreign companies operating in Macedonia, corporate income tax is applied only on income generated within the country.
The tax base for the corporate income tax is determined by the profit realized for the current fiscal year adjusted for non-deductible expenses incurred during that period. Taxpayers must cover losses from previous years before distributing profits.
Non-profit organizations, including NGOs, religious and humanitarian groups, trade unions, and political parties, are taxed on income from their business activities. If their annual earnings exceed 1 million MKD, they pay a corporate income tax of 1% on their total yearly business revenue, after subtracting the 1 million MKD tax exemption.
Reductions, Retentions, and Exemptions from Corporate Tax
In North Macedonia, businesses enrolled in the simplified tax regime are obligated to remain within it if their total annual earnings over three consecutive years fall within the designated bracket. This regime offers relief from corporate income tax for companies earning up to MKD 3 million annually. Such businesses are subject to a 1% corporate income tax on their total income from all sources, as reported in their income statement and financial records for the respective calendar year. It is worth noting that this exemption excludes companies involved in banking, financial, insurance, or gambling activities.
Tax exemptions are provided to certain groups of taxpayers, including:
- Protective companies that employ disabled individuals, as outlined in the Law on Employment of Disabled Persons;
- Economic entities within institutions enforcing sanctions and juvenile correctional facilities, governed by the Law on enforcement of sanctions;
- Technological Industrial and Development Zones, which enjoy tax exemptions for a period of 10 years, subject to conditions and procedures specified in the Law on Technological Industrial and Development Zones.
If you are considering investing in North Macedonia, consulting with experts is important. Our firm specializes in international taxation, and our team is ready to assist you with any relevant matters. If necessary, we can connect you with the relevant professional to support you for any information needed on corporate income taxes. Please feel free to contact us and schedule an introductory meeting.
