• Supply of goods and services in the country (B2C supply) by foreign legal entities without registered seat or branch in North Macedonia with the obligation to register for VAT purposes through a VAT representative
Effective use and enjoyment. To avoid instances of non-taxation or double taxation, jurisdictions can apply “use and enjoyment” rules that allow a service that is “used and enjoyed” in the jurisdiction to be taxed or prevent a service that is “used and enjoyed” outside the jurisdiction from being taxed. If a service is taxed in the jurisdiction under the “use and enjoyment” provisions, a non-established supplier of the service may be required to register for VAT in every jurisdiction where it has customers that are not taxable persons. In North Macedonia, no services are subject to the “use and enjoyment” provisions.
Transfer of a going concern. Transfer of going concern rules do not apply in North Macedonia. As such, VAT applies to all sales of a business or part of a business capable of separate operation including assets.
From a Macedonian VAT perspective, transfer of a going concern (TOGC) exists in transactions where the essential features of a taxable person’s business or part of it are being transferred to the acquirer, who will further use them for its business activities. In cases where only part of the taxable person’s business is sold, such transfer is also considered a TOGC provided that the transferred part constitutes an economically independent part of the business and is being capable of operating separately. Based on the VAT guidelines, TOGC is considered as supply of goods, subject to 18% VAT. The base for calculation of the VAT shall be the price agreed for purchase of the business or its independent part. The law and the related bylaws do not further regulate what is considered as essential features of a business. The merits should be done on a case-bycase basis, depending on the factual situation at the time when the transfer takes place. The mere transfer of assets is not considered as a TOGC. The existing entity shall be obliged to issue an invoice and charge 18% VAT on the agreed price. The new company, as acquirer shall be entitled to deduct the input tax charged on the transfer provided it is registered for VAT purposes.
Transactions between related parties. In North Macedonia, there are no specific rules that indicate the value for VAT purposes for transactions between related parties.
C. Who is liable
A taxable person is a person that permanently or temporarily performs an independent business activity, regardless of the purposes of and the results from such business activity.
Taxable persons must register for VAT when their total supplies in a year exceed MKD2 million. Also, they must register if, at the beginning of a business activity, they project the making of total annual supplies exceeding MKD2 million. Taxable persons may voluntarily register for VAT at the beginning of each calendar year or at the beginning of their business activity.
Exemption from registration. The VAT law in North Macedonia does not contain any provision for exemption from registration.
Voluntary registration and small businesses. Taxable persons may voluntarily register for VAT at the beginning of each calendar year or at the beginning of their business activity, regardless of if they have reached the VAT registration threshold.
Group registration. North Macedonia VAT law allows VAT group registration. Several VAT-registered entities may decide to be registered as a single VAT-registered taxable person if they have a proprietary, organizational or managerial relationship.
In addition, if the tax authorities detect violation of tax principles or the possibility for violation of such principles as a result of proprietary, organizational or managerial relationship among
the taxable person meets the VAT registration obligation. The average time for the tax authorities to complete the registration is seven working days following the day the registration form is submitted.
Deregistration. Taxable persons stay VAT registered for at least three years following the year of VAT registration. If in the third year, the taxable person does not reach the VAT registration threshold of MKD2 million (regardless of whether the threshold has been reached in the first and second year), it is entitled to request to be deregistered at the beginning of the following year. The tax authorities may deregister the taxable person before the three-year period lapses in any of the following circumstances:
• In the year preceding the deregistration, with the VAT returns, the taxable person did not report taxable supplies and input tax
• In the two years preceding the deregistration, the taxable person did not calculate output tax
• The taxable person cannot be found on the registered address
• The taxable person failed to submit VAT returns in two VAT periods for monthly and quarterly VAT payers
• The taxable person committed tax fraud
• In cases where the criteria for VAT group registration is met
The related party may decide to terminate the group registration by applying for deregistration. The tax office shall accept or reject the application within 90 days from its filing.
Changes to VAT registration details. When there is a change in the VAT registration details, the taxable person is obliged to submit an application in paper form (form RDO). The application may be submitted by the taxable person or person authorized by the taxable person. There is no prescribed deadline for submission of the form RDO upon change in the registration details. However, failure for timely reporting of the new details may cause delay in receiving notifications from the tax authorities.
D. Rates
The term “taxable supplies” refers to supplies of goods and services and imports that are subject to VAT, including the zero-rate.
The VAT rates are:
• Standard rate: 18%
• Reduced rate: 5%, 10%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services, unless a specific measure provides for a reduced rate, the zero-rate or an exemption.
Based on the adopted amendments of the VAT law, there has been change and introduction of goods for which the preferential tax rates of 5% and 10% will be applied, as mentioned in the examples below. The amendments for the above VAT rates are applicable as of 1 of September 2023.
Some supplies are classified as “exempt-with-credit” (i.e., zero-rated [0%]), which means that no VAT is due, but the supplier may recover related input tax.
Examples of supplies of goods and services taxable at 0% (i.e., exempt-with-credit)
• International air transport of passengers
• Supply of precious metals for the central bank
• Supply, repair and maintenance, chartering and leasing of aircraft
The time limit for a taxable person to reclaim input tax in North Macedonia is 30 days. The deadline for reclaiming the input tax from a previous period is 30 days, from the submission of the tax return (monthly or quarterly tax return). If the taxable person does not claim the difference of the input tax stated in the tax return, such difference is to be offset in the following tax periods.
Input tax includes VAT charged on goods and services supplied in North Macedonia, VAT paid on imports of goods and VAT self-assessed under the reverse-charge mechanism with respect to goods or services supplied by non-established entities.
VAT is recoverable for supplies provided to taxable persons by other taxable persons if a valid invoice or a customs declaration containing a separate statement of the tax collected on the import is issued and if such document is recorded in the accounting books of the taxable person.
Nondeductible input tax. Input tax may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered for some items of business expenditure.
The following lists provide some examples of expenses for which input tax is not deductible and examples of expenses for which input tax is deductible if made for business purposes.
Examples of items for which input tax is not deductible
• Representation expenses
• Audio and video devices
• Hotels
• Restaurant meals
• Advertising
• Consultancy services
Examples of items for which input tax is deductible
• Telecommunication services
• Equipment
Partial exemption. Input tax directly related to taxable supplies is fully recoverable, while input tax directly related to exempt supplies is not recoverable. If the domestically supplied or imported goods or services are used by the taxable person to make both supplies with the right to deduct input tax and exempt supplies without the right to deduct input tax, such person may deduct only the portion of the input tax corresponding on a pro rata basis to the supplies giving rise to an input tax deduction.
Approval from the tax authorities is not required to use the partial exemption standard method in North Macedonia. Special methods are not allowed in North Macedonia.
Capital goods. There are no special input tax recovery rules for capital goods. As such, normal input tax recovery rules (as outlined above) apply.
Refunds. If the amount of input tax recoverable in a tax period exceeds the amount of output tax in that period, the taxable person earns an input tax credit. In general, the input tax credit is carried forward to offset output tax in the following tax period. However, a taxable person may claim a refund of the input tax credit in the VAT return for the relevant tax period. The refund of the difference between the input and output tax is made within 30 days after the date of the submission of the tax return.
Pre-registration costs. Input tax incurred on pre-registration costs in North Macedonia is not recoverable.
Bad debts. Output tax accounted for on supplies that do not get paid by the recipient (i.e., bad debts) cannot be recovered in North Macedonia.
Noneconomic activities. Input tax incurred in relation to noneconomic activities is not recoverable in North Macedonia.
G. Recovery of VAT by non-established businesses
Input tax incurred by non-established businesses that are not registered for VAT in North Macedonia is not recoverable.
However, on the condition of reciprocity, North Macedonia refunds VAT incurred by businesses that do not have a headquarters or a branch office in the country and that satisfy the following additional conditions:
• It does not make any supplies in the country
• It does not owe any outstanding VAT
There is no official list of countries with which North Macedonia has reciprocity. In general, it is decided on a case-by-case basis.
The deadline for refund claims is 30 June of the year following the calendar year in which the tax becomes chargeable. The application for refund must be submitted to the North Macedonia tax authorities and must be accompanied by the appropriate documentation.
A refund application must be processed within six months after the date of submission of the application and supporting documents.
The claim period varies between one month and several consecutive months in one calendar year. The minimum claim for these periods is MKD30,000. In the claims for the last month of the calendar year, input taxes from previous claim periods may also be considered. The minimum claim for this period is MKD15,000.
Claims are paid in domestic currency (MKD) into a bank account opened by the applicant in North Macedonia.
One of the mandatory conditions is the business must have an opened nonresident bank account prior to the submission of the application for the VAT refund. The applicant should meet the following conditions:
• Reciprocity
• Has not performed any trading activities in the country except for services related to import, export and transit
• Has performed business activity in the country for which the recipient of the goods or the purchaser of the services shall bear the tax in accordance with the law on VAT
• The amount of the tax refund claim must be at least equal to the minimum threshold of MKD30,000 (approx. EUR500)
H. Invoicing
VAT invoices. A Macedonian-taxable person must issue invoices for all of its taxable supplies. A document qualifies as a valid invoice if it complies with the requirements set out in the North Macedonia VAT Act. The invoice must be issued within five working days after the date of the supply.
If an invoice is issued both for taxable supplies and nontaxable supplies, each supply must be stated separately. If a nontaxable supply is made, it must be stated on the invoice that “the valueadded tax is not calculated”.
Tourist services provided by the tour operator are considered as a single service, taxed with 18% VAT. The place of supply of the service shall be deemed to be the place where the service provider has its establishment/residence.
The taxable base is determined as the difference between the amount paid by the tourist for the tourist trip and the expenses paid by the tour operator for the previously ordered tourist services by the tour operator. The tour operator can determine the tax base either for each service separately, for a group of tourists’ services or for all tourist services together within a certain tax period.
The tour operator is not eligible to deduct input VAT for the previously received supply by third parties.
Investment gold. According to the VAT law, the following is considered as investment gold (not for sale for numismatic purposes):
• Gold in the form of rods or plates with a weight accepted by the precious metal markets and with a fineness equal to or greater than 995 thousand parts, regardless of whether it is secured in the form of securities or not
• Gold coins, with a fineness equal to or greater than 900 thousand parts, minted after 1800, which in the country of origin are or were legal means of payment and are usually sold at a price not exceeding 80% of the value of gold contained in the coin, on the free market
Trade and import of investment gold, including investment gold represented by certificates for allocated (unsecured) or unallocated (unsecured) gold or traded through gold trading accounts, as well as loans in gold and gold swaps (swap), which acquires ownership of investment gold, and transactions relating to investment gold involving futures and forward contracts resulting in the transfer of ownership or a claim relating to investment gold, are VAT exempt. Intermediary services related to investment gold are also VAT exempt.
Input tax can be recovered for sale of investment gold that is VAT exempted and for manufacturing of investment gold or conversion of gold into investment gold, if certain conditions are met.
The taxable persons are required to keep evidence of the performed supply related to investment gold.
Annual returns. Annual returns are not required in North Macedonia.
Supplementary filings. No supplementary filings are required in North Macedonia.
Correcting errors in previous returns. In the case of incorrect VAT reporting, VAT taxable persons should prepare and submit corrected VAT returns via the online e-tax platform no later than the deadline prescribed for annual accounts submission, i.e., 27/28 February, for annual accounts being submitted in hard copy, or 15 March when annual accounts are being submitted online. As an exception, the taxable person is obliged to make a correction of an incorrect or incomplete tax return in the last tax return from the calendar year to which the error relates, if the reported tax in the relevant tax period is less than 1% of the declared tax.
Digital tax administration. Fiscal cash registries. Taxable persons performing sale of goods and services for which the payments are made in cash are obliged to install and use a fiscal cash registries’ system (the system) for purposes of issuing fiscal receipts. The system comprises the cash registry and software system. The software system is further comprised on a general packet radio service (GPRS) terminal and crypto module, which at the end is connected with the Public Revenue Office (PRO). The software system automatically generates and sends daily financial report to the PRO. Taxable persons that are not obliged to have cash registries do not have transactional reporting requirements in North Macedonia. In addition, local banks are obliged to provide the tax authorities with monthly reports on taxable persons’ bank accounts.