North Macedonia, a country located in Southeast Europe, has become an increasingly attractive destination for businesses due to its strategic location, economic reforms, and growing market. The nation’s commitment to economic development is reflected in its tax policies, including the Corporate Income Tax (CIT) structure.
Corporate Income Tax Rate
North Macedonia boasts one of the lowest Corporate Income Tax rates in Europe, which stands at a flat rate of 10%. This competitive rate is designed to stimulate investment and economic growth. The 10% rate applies to the taxable income of resident companies operating within the country.
**Taxable Entities and Residence**
Companies considered residents of North Macedonia are those that are incorporated in the country or have their place of effective management located there. Resident companies are subject to CIT on their worldwide income, while non-residents are taxed only on income derived from sources within North Macedonia.
Taxable Income and Deductions
The taxable income for CIT purposes is the financial profit of the company, adjusted for tax purposes. However, there are various allowances and deductions available:
1. **Depreciation**: Companies can deduct depreciation expenses based on the straight-line or declining-balance methods, applied to the acquisition cost of tangible fixed assets.
2. **Interest**: Interest expenses incurred for the purpose of the business are generally deductible, although they are subject to thin capitalization rules, limiting interest deductions if the company’s debt-to-equity ratio exceeds certain thresholds.
3. **Losses**: Any operational losses can be carried forward and deducted from taxable income for up to three consecutive years.
Withholding Tax
Withholding tax is applied to certain types of income earned by non-residents from sources in North Macedonia. The general withholding tax rate for dividends, interest, royalties, and service fees is 10%. Tax treaties between North Macedonia and other countries may provide for reduced rates.
Tax Incentives and Reliefs
To encourage investment, North Macedonia offers various tax incentives, including:
1. **Technological Industrial Development Zones (TIDZs)**: Companies operating within these zones may benefit from tax holidays, exemption from customs duties, and other financial incentives.
2. **Investment Incentives**: There are multiple incentives for companies investing in renewable energy, agriculture, and other priority sectors, including reduced tax rates and grants.
3. **Employment Incentives**: North Macedonia offers tax relief for companies that create new jobs, particularly in underdeveloped regions.
Tax Compliance and Administration
The Public Revenue Office (PRO) is responsible for tax administration in North Macedonia. Companies must file annual tax returns and pay any CIT due within three months following the end of the fiscal year. Additionally, companies may be required to make advance CIT payments throughout the year.
North Macedonia’s low CIT rate and various tax incentives make it an appealing location for both domestic and foreign investors. Coupled with its strategic position near key European markets and ongoing economic reforms, the country presents numerous opportunities for business growth and development.
Understanding Corporate Income Tax in North Macedonia
For further information on corporate income tax in North Macedonia, you can explore the following domains:
Ministry of Finance of North Macedonia