MACEDONIA – Regulation tailored for Investors
By Filip Chichevaliev & Ilija Ilijovski
Posted: 20th October 2015 09:13
During the past 10 years, Macedonia has focused entirely towards the needs of the Investors. This focus has inspired major changes in its legislation in order to achieve a more “Investor friendly” status. Currently Macedonia has the best climate for Investment on the Balkan and probably in Europe.
This achievement began when an Article 59 was added in the Macedonian Constitution stipulating that “Foreign investors are guaranteed the right to the free transfer of invested capital and profits. The rights obtained on the basis of the capital invested may not be reduced by law or other regulations.”
Having such a significant Investor protection in the highest act in the State has enabled Macedonia to continue to improve its legislation by implementing the “one-stop shop” principle in the administration, major improvements of the Trade Registry system, electric cadaster system, introducing flat rate tax system, establishing industrial zones and technological and development zones, tourist zones, medical zones, etc. Here we will elaborate some of the most important benefits that arise from such legislative adjustment.
The “one stop shop” principle
The Central Register operates under the principle of “One Stop Shop system” which basically means that the investor is served in one place for most of the procedures required to register its business in Macedonia. According to the Law on the One Stop Shop system all types of companies can be registered as soon as four hours after submitting an application (in practice, it might take 1-2 business days). The Central Registry, an institution authorised to register companies within the Trade Register, provides a unique company ID number, tax number from the Public Revenue Office and a bank account at the same time of registration
Taxes and Excises
On the most important legislation changes was in the tax system in Macedonia. The introducing of the “flat rate” system has brought the following benefits for the Investors:
- Corporate income tax of 10%;
- Personal income tax of 11.11%;
- VAT: 18%
- Tax on retained earnings: 0%
Withholding tax on income paid to foreign legal entities Domestic legal entities, domestic individuals – registered for carrying out an activity – as well as a foreign legal entity or individual having a permanent establishment in Macedonia are obliged, when paying certain types of income to a foreign legal entity, to withhold tax and to pay the tax withheld to the revenue authorities simultaneously with the payment of the income.
Withholding tax is applied on the following incomes payable abroad: i) dividends; ii) interest; iii) royalties; iv) income from entertainment or sporting activities in Macedonia; v) income from management, consulting, financial services, services related to research and development; vi) income from insurance or reinsurance premiums; vii) income from telecommunication services between Macedonia and a foreign country; viii) income from lease of immovable property in Macedonia.
Tax shall not be withheld on the following revenues: i) transfer of the profit of the permanent establishment of a foreign legal entity in Macedonia, for which profit tax has been previously paid; ii) revenue from interest on debt instruments issued and/or guaranteed by the Macedonian Government, the National Bank of Macedonia and banks or other financial institutions acting as a representative of the Macedonian Government; iii) income from interest on deposits in a bank located in Macedonia; and iv) income from intermediation or consulting regarding government securities on the international financial market.
Technology Industrial Development Zones (TIDZ)
Investors in technology and industrial zones can benefit from tax holidays for up to 10 years for profit tax and personal income tax for the employees, VAT and customs duties exemptions and other incentives. Under the Law on Technological Industrial Development Zones, the zones are used to facilitate economic activities to be performed under special conditions, including tax and other incentives for zone users. The aim of the TIDZ is to support the development of high modern technologies through an application of the highest environmental standards. The establishment, development and monitoring of the zones is carried out by the Directorate for Technological Industrial Development Zones. The tax exemptions and incentives available in the TIDZ include:
- Corporate income tax exemption for a period of up to 10 years from the day of commencement of activities in the TIDZ. In order to fully utilise this tax exemption, the investor should start with the business activities no longer than two years after obtaining the official decision for work commencement in the TIDZ;
- Personal income tax exemption on salary payments for a period of up to 10 years as of the moment the investor commences its business activities in the TIDZ i.e. as of the month of first salary payment to the employees;
- VAT exemption on the sales of goods and services within the TIDZ, excluding the sales of goods and services considered as final consumption under the VAT law;
- VAT exemption on the import of goods into the TIDZ intended for export, excluding the goods intended for final consumption as per the provisions in the VAT Law;
- Exemption from taxes and other duties related to the utilisation of construction land, connections to water, sewerage, heating, gas and the power supply networks.
The TIDZ users are also entitled to customs duties exemptions and reliefs in accordance with the domestic customs legislation. The land in TIDZ may be leased to foreign investors for a period of up to 99 years.
What Chichevaliev and Ilijovski Law Firm can do for you?
Having in mind the aforementioned our main task at Chichevaliev and Ilijovski Law Firm is to ensure that your business receive and take advantage of every benefit that Macedonia has to offer. We possess the skill, talent and experience to ensure smooth operation of every investment endeavor that you will decide to take. The benefits that we can ensure for your company will contribute towards building high profit and safe business in Macedonia. In our Firm you will always find helpful and safe environment and a dedicated team ready to aid you in every endeavor. We champion an open approach towards our clients by providing personal attention towards any issue that may arise. We believe in creating bonds with our clients, bonds that are nurtured through care, responsibility and dedication.
Our company and our employees are committed to provide professional, responsive and intellectual treatment to our clients. Lawyers, associates and junior associates in this Law office will continue to strive for achieving excellent results in their work, good relationship with the clients and personalimprovements. Our team will continue to compete in the constantly changing market by creating and implementing innovative and effective methods in providing accessible and quality services to our clients and will continue to fulfill and exceed the expectations of its valued clients.
Filip Chichevalievis Attorney at Law and a Partner at the Law Firm Chichevaliev & Ilijovski. He is published author of legal articles in International and domestic Journals. He specializes in Foreign Investment and Corporate Law. In 2015 he has received award for Excellence in Foreign Investment Law from Corporate Livewire Legal Awards. He is a member of the Macedonian Law Bar Assembly.
Filip can be contacted on +389 2 324 56 95 or by email at firstname.lastname@example.org
Ilija Ilijovski is Attorney at Law and a Partner at the Law Firm Chichevaliev & Ilijovski. He specializes in Foreign Investment and Banking and Finance Law. In 2015 he has received award for Excellence in Banking and Finance Law from Corporate Livewire Legal Awards. He is involved as an expert in several expert teams for drafting legislation in the areas of child protection, innovations and health care. He is a member of the Macedonian Law Bar Assembly.
Ilija can be contacted on +38975303991 or by email at email@example.com