North Macedonia offers attractive tax benefits, low personal and corporate tax rates to investors. In addition, it has established special investment zones with additional financial incentives. This article provides an overview of the tax benefits in North Macedonia and analyzes how they can enhance investment potential in the country.
Why Invest in North Macedonia?
North Macedonia offers one of the most appealing tax regimes in Europe with low rates and simple regulations supporting the growth of the companies. It has expanded its trade policy by signing numerous agreements that give local industries unrestricted access to European and global markets, enhancing its reputation as a competitive export leader. These agreements, including three multilateral and two bilateral, offer duty free access to a market of more than 650 million consumers.
Low Tax Rates
North Macedonia’s tax rates are competitive, with personal and corporate taxes levied both at a fixed rate of 10%. The value-added tax (VAT) varies with a general 18% and a reduced rate of 5% or 10% for certain products and services, such as food, beverages, software, craft-related, catering services, etc.
Estate taxes range from 0.1% to 0.2%, while real estate transfer taxes are between 2% to 4%. Additionally, inheritance and gift taxes are minimal, ranging in between 0% to 5%.
Application of Tax Deductions
North Macedonian legislation provides different fiscal incentives in the form of deductions for different types of taxpayers. Individuals in North Macedonia are entitled to full tax deductions for compulsory payments to health, pension, unemployment and associated insurance. Additionally, the Personal Income Tax Law provides an annual tax exemption for employees, which is set at MKD 114,480.
On the other hand, businesses can deduct documented expenses related to their operations, such as employee benefits (like transport, training, and accommodation) and insurance contributions. Net operating losses can be carried forward for up to three years, and losses specifically from 2020 and 2021 can be extended up to five years.
You can learn more on the incentives in North Macedonia by clicking here.
National Incentives
Free Zones Incentives
Land in free zones is available for long-term lease at concessional rates. Additionally, investors are exempt from utility taxes and land building permit fees, and they receive free connections to essential utilities. The government also supports capital investments by refunding 10% of costs spent on new machinery, equipment, buildings, or land.
Employees working for employers in Technological Industrial Development Zones are exempt from tax on their salaries for a period of ten years from the month when the employer begins paying wages.
Corporate Tax Incentives
North Macedonia’s tax benefits include a foreign tax credit and a reinvestment credit. Taxpayers can claim credits for taxes paid on overseas income if there is a Double Tax Treaty in place. In addition, the Corporate Income Tax Law offers a reduction in the tax base for profits generated in business reinvestment which applies to both tangible and intangible assets, except those used for administrative purposes. As a condition to benefit from this reduction, the assets must be held for at least, five years, otherwise the associated corporate income tax becomes payable.
North Macedonia’s tax system mainly taxes income from profits and gains, and includes numerous reliefs and exemptions. To avoid fines and penalties, companies might benefit from tax specialists to help them manage the complex tax implications. Our firm specializes in international taxation, and our team is ready to assist with any related matters. If needed, we can connect you with top professionals to support your business activities in Bulgaria. Please feel free to contact us.
