Indirect tax - North Macedonia

Value Added Tax (VAT) is the main type of indirect taxation in the North Macedonia.

It is a tax on consumption which is applied during the production and distribution process to most goods and services. It is also applied to goods, and certain services, entering the country. Although VAT is ultimately borne by the consumer by being included in the price paid, the responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests with the business making the supply ie the sale.

Taxpayer shall be a person that, permanently or occasionally, independently, performs an economic activity, regardless of the purposes and the results of such an activity. Economic activity shall be deemed any activity of the producers, the traders and the persons providing services aiming at generating income, including the activities in the field of mining, agriculture and forestry, as well as giving tangible and nontangible goods for the purpose of being used.

A business registered for the tax will charge VAT (output tax) on its sales, and incur VAT (input tax) on its purchases (including any VAT paid at importation). The difference between the output tax and the deductible input tax in each accounting period will be the amount of VAT payable by the business to the tax authority. Where the input tax exceeds the output tax, a refund can be claimed.

The tax base for the value added tax shall be the total amount of the compensation received or to be received for the supply, without the value added tax included. Money, goods, services and other benefits according to the market price paid or to be paid by the recipient of the good, or the user of the service or another person.

There are four rates of VAT that are applied to goods and services in the North Macedonia; the standard rate (18%), the reduced rate (10% and 5%), and the zero rate (0%).

Most goods imported into the North Macedonia from other country are subject to VAT. The tax will have to be paid by the importer at the time of importation. Where the importation is for business purposes and the importer is registered for VAT, it may be possible to reclaim the tax (subject to certain rules).

All taxpayers, whose total turnover has exceeded the amount of 2.000.000 denars in the past calendar year or whose total turnover is anticipated to exceed the amount at the beginning of the performance of the business activity or to exceed the amount during the year, shall be obliged to register for value added tax.

Fine in the amount of 300 to 1,000 euros in denar counter value to a taxpayer legal entity (micro trader), from 600 to 2,000 euros in denar value from 1,800 to 6,000 euros in denar counter value. legal entity (medium trader) and from 3,000 to 10,000 euros in denar counter value to a taxpayer of a legal entity (large trader) will be sentenced for a misdemeanor, if the application for registration of value added tax after the expiration of the announced deadline.

Subsequently, fine in the amount of 50 to 250 euros in MKD counter value of a responsible person in a legal entity (micro), from 100 to 500 euros in MKD counter value of a responsible person in a legal entity (small), from 150 to 500 euros in MKD counter value, for a responsible person in a legal entity (middle) and in the amount of 200 to 500 euros in MKD counter-value shall be imposed on the responsible person in a legal entity (large) for the misdemeanour referred to in above paragraph.

Not applicable.

As of 2023 the parliament adopted amendment in the Law on Value Added Tax and introduced an obligation for a foreign person to register for VAT if such person neither has headquarters, nor a subsidiary in the country, and sells goods and services in the country that are subject to taxation under the VAT Law.

Foreign persons who will register for VAT purposes in the country are obliged to appoint a VAT agent, that will have an obligation on their behalf and for their account to:

• calculate the tax,
• submit a tax return, 
• pay the tax, 
• pay penalty interest in case of late payment of the tax, and
• keep accounting records.

The VAT agent also jointly guarantees the VAT owed by the foreign person in the country.

In addition, services provided electronically are defined as a new type of service for VAT purposes.

The definition of these services includes:

• creation of websites, hosting of websites, maintenance of programs and equipment remotely, 
• software and its updates,
• images, text and information, and databases access,
• music, movies and games, including games of chance, as well as, political, cultural, artistic, sporting, scientific, and entertainment broadcasts and events, and 
• distance learning.

The place of supply of these services will be the place of headquarters or residence of the recipient of the service, regardless of whether the service is provided to a taxpayer (business) or to a consumer.

Not applicable.

The period for which VAT is calculated and paid is a tax period. Depending on the turnover, the tax period can be:

calendar month - if the total turnover in the past calendar year exceeded the amount of 25 million denars
calendar quarter - if the total turnover in the past calendar year did not exceed the amount of 25 million denars

VAT returns normally cover an accounting period of three months or one month, ending on the last day of a calendar month. The taxpayer shall be obliged, for each tax period, to submit a tax return in a period of 25 days after the expiry of the tax period where it shall calculate the taxes on its own.

The form and content of the tax return shall be prescribed by the minister of finance.

If the taxpayer determines that it has reported inaccurate or incomplete supplies, taxes or input taxes in a particular tax return for the corresponding tax period, it shall be obliged to correct the tax return by submitting a new, corrected tax return for the referred tax period, within the deadline for submission of the annual account, at the latest. The correction shall not be performed by showing the differences in the amounts, but by showing the complete amounts.

A default surcharge penalty may be imposed by the tax authority if VAT returns are not submitted on time, or the related tax is not paid by the due date.

For the first late submission or payment, the tax authority will issue a notification to the taxpayer confirming that a penalty may be imposed in the future. If another submission or payment is late within the next 12 months, a fixed percentage penalty is imposed on that occasion. The percentage penalty is increased for subsequent defaults (up to a specified maximum), unless returns and the related payments are made on time for a 12 month period.

The penalties are presented in point 9 below.

Annual VAT decalration.

According Law on VAT, fine in the amount of 300 to 1,000 euros in MKD counter value to a taxpayer legal entity (micro), from 600 to 2,000 euros in MKD counter value to a taxpayer legal entity (small), from 1,800 to 6,000 euros in MKD counter value to a taxpayer, fine for legal entity (middle) and from 3,000 to 10,000 euros in MKD counter value to a taxpayer legal entity (large) shall be imposed on the tax payer – legal entity if:

• Does not submit VAT return to the tax authority;
• does not pay the VAT to the appropriately assigned account;
• does not submit a request for registration for the value added tax;
• does not keep or keeps the records incorrectly;
• does not submit records to the tax authorities;
• issues inaccurate invoice; or
• does not keep the invoices or the other documents within the time period prescribed with the Value Added Tax Law.

Subsequently, fine in the amount of 50 to 250 euros in MKD counter value of a responsible person in a legal entity (micro), from 100 to 500 euros in MKD counter value of a responsible person in a legal entity (small), from 150 to 500 euros in MKD counter value, for a responsible person in a legal entity (middle) and in the amount of 200 to 500 euros in MKD counter-value shall be imposed on the responsible person in a legal entity (large) for the misdemeanour referred to in above paragraph.

The responsible person in the legal entity that has not submitted a VAT report within the prescribed deadline, or has submitted a VAT report but with inaccurate data, or has submitted a VAT report but has not pay the tax due to gain greater benefit or value, will be sentenced to imprisonment of six months to five years and will be fined. If the amount of tax liability is significantly high, the offender will be sentenced to imprisonment of at least four years and will be fined. When the misdemeanour referred to the above paragraph is committed by the legal entity, it will be subject to fine. The financial benefit acquired by the committed misdemeanour referred to a previous.

Yes, it may be possible to reclaim the VAT incurred in certain circumstances. Reciprocity whit some country, is needed in order to start with the procedure. For that purpose the following documents are required:

• document that the company is a VAT payer - provided by a competent institution in the resident country translated by a certified court translator and notarized
• certificate of reciprocity, resident status - provided by the competent institution translated by a certified court translator
• original invoice for which a refund is requested (if the invoice is in EUR, provide invoice from the supplier expressed in MKD currency)
• payment order for payed invoice (743 bank form)
• customs declaration.

The invoice must contain the following data:

1. place, date of issuance, number;
2. name (title) and address of the taxpayer carrying out the supply and its tax number registered under for value added tax;
3. name (title) and address of the recipient of the goods or user of the service;
4. day of the completed supply;
5. quantity and description of the supply;
6. amount of the consideration for the completed supply, not including the value added tax;
7. tax rate applied;
8. amount of the calculated value added tax;
9. total amount of the consideration for the completed supply and the value added tax; and
10. name, surname and signature of the authorized person for signing invoices at the issuer of the invoice.

The invoice issued in an electronic form need not be stamped by the issuer of the invoice.

The minister of finance shall prescribe the form and the contents of the Report for calculation of the value added tax in a procedure for coercive collection and coercive enforcement, in the cases where the creditor is the acquirer of the good.

For large taxpayers it is mandatory to attach in addition to the VAT return, a list of invoices included in the VAT return. Regarding the medium and small VAT payers at random by the PRO to create an obligation to submit a list of invoices included in the VAT return for the appropriate tax period.