In North Macedonia, employers have several tax responsibilities. They are required to withhold and pay social security contributions on behalf of their employees. These contributions include Pension and Disability Insurance at 18.8% of the gross salary, Health Insurance at 7.5% of the gross salary, and Employment Insurance at 1.2% of the gross salary. It's important to note that these social security contributions are capped at a maximum base of 16 times the national average salary.

Personal Income Tax (PIT)

Employers are also responsible for withholding a flat 10% as Personal Income Tax from employee salaries.

Payment Deadlines

Employers are obligated to calculate, withhold, and submit the social insurance contributions and PIT on a monthly basis. The deadline for payment is the 15th of the following month.

Other Potential Employer Taxes

Companies in North Macedonia are subject to a flat Corporate Income Tax (CIT) rate of 10% on their profits. Property owners are also subject to property tax based on the value of the property.

In North Macedonia, an employee's taxable income is subject to a flat tax rate of 10% after social security deductions. The taxable income is calculated by subtracting mandatory social security contributions and a personal allowance from the employee's gross salary. The annual personal tax exemption for 2024 is MKD 114,480.

Mandatory Social Security Contributions

Employees are obligated to contribute to several social security funds. These include:

• Pension and Disability Insurance: 18.8% of gross salary
• Health Insurance: 7.5% of gross salary
• Unemployment Insurance: 1.2 % of gross salary
• Additional Health Insurance: 0.5% of gross salary

Other Potential Deductions

There are other potential deductions that may apply to an employee's salary. These include union membership dues, if applicable, and voluntary contributions to pension schemes or other savings plans.

It's important to note that these deductions are made directly from the employee's gross salary by the employer. Deductions for social security contributions are calculated based on specific percentages of the gross salary, making their calculation straightforward.

In North Macedonia, the standard VAT rate is 18%, which applies to most services provided within the country.

Reduced VAT Rates

There are also reduced VAT rates in place. A 10% VAT rate applies to food and beverage delivery services and on-site catering services, excluding alcoholic beverages. A 5% VAT rate applies to accommodation services, bed and breakfast services, and half-board and full-board services provided by hotel keepers, as well as the transport of passengers.

VAT Exemptions

Certain services are exempt from VAT in North Macedonia. These include financial services such as banking and insurance, medical and healthcare services, educational services, and specific cultural and sporting activities.

VAT Filing Procedures

Businesses providing taxable services in North Macedonia must register for VAT if their annual turnover exceeds a specific threshold. The current registration threshold is MKD 1,000,000 annually. VAT returns are generally filed monthly, by the 15th of the following month. Some businesses may be eligible for quarterly filing. VAT payments are due with the VAT return filing.

It's important to note that VAT legislation in North Macedonia is aligned with EU directives, providing a degree of consistency compared to the broader European market.

North Macedonia provides a variety of tax incentives to stimulate economic activity and attract foreign investment.

Free Zones

Companies operating within designated Free Zones enjoy significant tax advantages. These include a 10-Year Corporate Income Tax (CIT) Holiday, where businesses are exempt from paying CIT for the first ten years of operation. Employees of Free Zone companies can also benefit from a 100% Personal Income Tax (PIT) exemption for up to ten years.

To qualify for Free Zone status, companies need to be involved in manufacturing, processing, and certain service activities like IT and logistics. Specific criteria regarding minimum investment or job creation might apply. Investors interested in establishing a presence in a Free Zone should contact the Macedonian Foreign Investment Agency for detailed application procedures.

Technological and Industrial Development Zones (TIDZs)

Businesses operating within TIDZs also benefit from a 10-Year CIT Holiday. Businesses involved in advanced manufacturing, research & development, and high-tech activities are typically eligible for TIDZ status. For details on the application process for TIDZs, contact the Ministry of Economy of North Macedonia.

Reinvested Profits

Businesses can reduce their taxable income by reinvesting a portion of their profits back into the company for development purposes. This includes investments in tangible assets like equipment and intangible assets like software. There are no specific limitations on the type of business eligible for this tax benefit. Companies simply need to demonstrate reinvestment of profits for development activities. Specific documentation outlining the reinvestment plan and associated expenses needs to be submitted with the company's tax return.