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Double Tax Treaties in Macedonia

Updated on Sunday 28th February 2021

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double-tax-treaties.jpgMacedonia has signed several double taxation agreements with countries worldwide and continues to develop the business and economic relations with other states too. A recent double tax agreement was signed with Belgium and entered into force this year in January. Avoiding the double taxation of profits in Macedonia is the main aspect of such an arrangement and ensures that businesses are properly placed on the market. Our company formation representatives in Macedonia can offer foreigners the needed support at the time of company incorporation in Macedonia and can also provide tax advice on request.

The countries which signed double tax treaties with Macedonia

 
The Republic of Macedonia signed 33 double taxation agreements with the following countries: Albania, Egypt, Austria, Belarus, Bulgaria, Belgium, Netherlands, Croatia, Czech Republic, Denmark, Italy, Iran, Latvia, Germany, France, Serbia and Montenegro, Hungary, Moldova, China, Poland, Romania, Russian Federation, Slovenia, China, Switzerland, United Kingdom, Sweden, Turkey, Ukraine, Qatar, Finland, Spain, Lithuania.
 
Likewise, Macedonia entered into several Free Trade Agreements with countries like Liechtenstein, Switzerland, Iceland, Norway, Serbia, Montenegro, Kosovo, Albania, Bosnia and Herzegovina. The Macedonian authorities are currently developing the investment protection treaties which involve a wide range of countries for which the business matters are mandatory. In certain cases, these are the same countries for which a double taxation treaty has been signed. Such agreements intend to protect the foreign investors and their assets on the Macedonian market.
 

The main provisions of tax treaties signed by Macedonia

 
The double taxation agreements in Macedonia regulate the taxation of incomes, dividends, interests, capital, and royalties for foreign companies with establishments in this country, and mention the conditions through which these provisions are applied. The following information is important to foreign investors in Macedonia:
 
  • the withholding taxes are lower for a signatory country, and in particular circumstances, it is not imposed on interests, royalties, and dividends.
  • the withholding tax is set at 10% or lower, depending if the company has non-resident shareholders from a state which signed a tax treaty with Macedonia;
  • in some cases, the withholding tax may involve a 15% rate;
  • if such provisions are not mentioned in a treaty, a Tax Exchange Information Agreement can be signed.
 

Who can benefit from the double tax treaties signed with Macedonia

 
All investors with origins from the above-mentioned countries who would like to set up a company in Macedonia, regardless of the type of business, can take advantage from the provisions of the double taxation agreements signed by Macedonia. The main condition is to have company establishments in this country as a foreign investor.
 

What is a permanent establishment?

 
Any office, branch, workshop, factory or building considered a fixed place for business in Macedonia is called a permanent establishment. In other words, your business office or any related property through which the activities are carried can be considered permanent establishments. We remind that the Articles of Association comprise information about the business address of your firm in Macedonia.
 

Do natural persons benefit from DDTs?

 
Yes, individuals living and working in Macedonia are exempt from a double taxation on their registered revenues. Our team of company formation consultants in Macedonia can provide you with complete information about this matter.

 

The OECD model tax convention

 
The double taxation agreements signed by Macedonia follow the OECD model tax convention. OECD or the Organization for Economic Cooperation and Development oversees the economic and business activities of countries worldwide. To take full advantages of the double tax conventions and their endowments, the foreign taxpayers need to offer a binding proof that the taxes are already paid in the home country. In this sense, a valid certificate of a taxpayer is normally issued by the foreign tax authorities and then registered with the financial authorities in Macedonia.
 

Short facts about the taxation system of Macedonia

 
Macedonia is quite beneficial from a taxation point of view and appealing to international entrepreneurs who intend to do business in this country. The VAT and the corporate income tax are the most important taxes in Macedonia and here are a few details about the taxes that need to be paid in this country:
 
  1. 10% represents the corporate income tax in Macedonia and it is one of the lowest in Europe. This is quite an advantage for local and foreign investors who want to start their operations in Macedonia. Companies with establishments in Macedonia must pay the corporate income tax.
  2. 18% is the standard VAT rate in Macedonia and it is imposed on most products and services available for sale purposes. A lower VAT of 5% rate applies to water supply, medical equipment, agricultural materials, accommodation services, publications, and more.
  3. A flat 10% rate represents the withholding tax in Macedonia for royalties, dividends, and interests. The double taxation agreements signed by Macedonia mention the withholding tax and the protection of paying this tax twice.
  4. The real estate tax in Macedonia is imposed on properties and ranges between 01% and 0.2%. the municipal fees, the transfer tax, and the communal taxes should also be considered. 
 
The taxation system in Macedonia is quite advantageous from a business point of view and it is appreciated by local and foreign entrepreneurs who what to start their operations and benefit from stability from this point of view. Those interested in more details about the tax structure in Macedonia can get in touch with our company formation specialists in Macedonia who can also offer assistance for tax registration in this country.
 

The withholding tax mentioned by the DDTs signed by Macedonia

 
As mentioned earlier, the withholding tax in Macedonia is set at a 10% rate and it is mentioned by the double taxation treaties signed by this country with other states. The withholding tax is imposed on royalties, interests and dividends, incomes derived from entertainment activities, financial services, management and consulting services, telecommunication, lease of immovable properties. The interest on bank deposits situated in Macedonia, from governmental bonds or transactions in state securities involving international markets are not subject to withholding tax. Please feel free to talk to our specialists and find out more about this important tax in Macedonia.
 

Exceptions of withholding tax with other countries

 
If the standard withholding tax is set at a 10% rate, there are also exceptions or a lower rate mentioned by the DTT signed with Macedonia. For instance, the double tax treaty signed with Azerbaijan mentions that the withholding tax is an 8% rate imposed on royalties, dividends, and interests. In the case of Estonia, such tax is set at a 5% rate or even exempted under certain conditions. As for France, the Netherlands, and in some cases Luxembourg, there is no withholding tax. More about the tax exemptions stipulated by the double taxation agreements signed by Macedonia with countries worldwide can be discussed with one of our company formation agents in Macedonia. Our team can also help you register a company in Macedonia.
 

Making investments in Macedonia

 
Macedonia is quite advantageous from an investment point of view because the country offers many business opportunities to both domestic and international investors who want to thrive in this part of Europe. The strategic geographic location, the booming economy, the fast company incorporation process, support and benefits for reinvested profits, and a great taxation system are solid pluses in the business environment in Macedonia, and representative in the investment sector that aims the foreign entrepreneurs. The experienced workforce of Macedonia is another benefit to international entrepreneurs who relocate their operations and businesses in this country. We would also like to add some interesting facts and figures about the economy and business direction of Macedonia:
 
  • Nearly USD 6.4 billion represented the total FDI stock for Macedonia in 2019.
  • In terms of ease of doing business, Macedonia ranks 17th out of 190 economies in the world, as mentioned by the 2020 Doing Business report.
  • Austria, UK, the Netherlands, Greece, and Slovenia are the main investors in Macedonia.
  • Most of the FDIs in Macedonia are directed to the productive manufacturing sector.
 
If you want to establish your business presence on the Macedonian market and if you want to know more about the taxation structure before registering a company in Macedonia, we suggest you contact our company incorporation agents in Macedonia.
 

 

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