The Government of North Macedonia has proposed a series of comprehensive tax reforms aimed at establishing a fair, efficient, transparent, and modern tax system. Published in the Official Gazette No. 199 dated September 25, 2023, these reforms focus on aligning the country’s tax policies with European Union standards and best practices.
These updates also highlight the expertise of Marijana Andrikj, an external tax advisor and a pivotal contributor to this initiative. Her deep understanding of tax systems and her role in drafting strategies underscore her commitment to enhancing economic policies in North Macedonia. Marijana’s insights, particularly on the Profit Tax Act and Solidarity Tax Act, have been instrumental in shaping reforms that align with EU directives.
Below, we summarize the main highlights of the Profit Tax Act, Value Added Tax Act, and Solidarity Tax Act, as outlined in the reforms.
Profit Tax Act
The revised Profit Tax Act introduces significant changes, particularly regarding non-deductible expenses. Certain expense categories—such as life insurance premiums paid by employers on behalf of employees and donations to sports clubs—will now be treated as entirely non-deductible.
For reinvested profits, businesses must substantiate their use of tax exemptions for investments in both tangible and intangible assets, such as real estate, equipment, software, and patents. Failure to provide the necessary documentation will result in penalties of up to five times the tax initially exempted. Additionally, transfer pricing rules have been more clearly defined, with new requirements for attaching transaction reports between related parties to Annual Financial Statements.
These provisions take effect immediately upon publication, except for certain changes that will be implemented starting January 1, 2024.
Value Added Tax (VAT) Act
One of the key updates to the VAT Act is the complete revision of Article 14, which now better defines the place of supply of services. This change, effective January 1, 2024, brings North Macedonia’s VAT law in line with EU directives, particularly for online-delivered services.
Other notable amendments include:
- Expanded definitions of goods and services in Articles 2 and 6.
- VAT treatment of value vouchers as accepted payment instruments.
- Introduction of a Tax Representative role within the VAT system.
- Changes to the list of goods eligible for the reduced 5% tax rate.
- Solidarity liability for tax debts among related entities.
These adjustments aim to modernize the VAT system and improve tax collection efficiency.