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After 10 years of 10% flat personal income tax rate in FYR Macedonia, the Ministry of Finance has recently abolished the approach and introduced the Law on progressive personal taxation which has become effective as of 1 January 2019. Aiming at a creation of a more fair tax system, the new provisions result in the following main changes important for companies doing business in the country.

Introduction of 2 tax brackets and rates

A personal income tax rate of 18% will be applied to the portion of the tax base exceeding MKD 90,000 per month (MKD 1,080,000 a year). The amount up to MKD 90,000 per month will continue to be taxed with 10%. Effectively, the tax reform introduces an additional tax bracket taxed with extra 8% for the part of the income exceeding MKD 90,000 per month.

It is expected that for most of the citizens the tax rate will remain 10 percent due to the relatively high threshold for additional personal tax. The Ministry has stated that such threshold was selected because it only affects the highest-earning 1% of the total population.

However, our practice shows that the high-earning employees across a wide range of sectors have loudly voiced their concerns and requested that employers harmonize net earnings to the old system, therefore effectively raising the payroll expenditures of companies who have decided to keep net earnings the same. Our advisors are observing a definite trend of companies – facing revolt from difficult to replace employees – increasing the gross salaries of skilled employees with high earnings in order to maintain their net earnings the same.

Change in taxation of income from property rights, rent and capital

Income from industrial property rights, rent (lease) and sublease as well as income from capital, capital gains, gains from games of chance, insurance and other income will be taxed at a single rate of 15% as opposed to the current tax rate of 10%. The new rate has become applicable as of 1 January 2019 and impacts companies who pay such rights/lease/sublease amounts to individuals, as per the relevant Law, the payment of personal income tax for such income realized by individuals is the obligation of the paying company.

Introduction of taxation of interest

Following multiple delays in introducing taxation on bank interest, interest from deposits exceeding MKD 15,000 a year will be taxed at 15%. However, this provision will only apply as from 1 January 2020 and there are multiple unanswered questions as to how this new tax will be technically implemented. A 15% tax will also be levied on income from securities starting from 2020.

Change in tax base deduction for rental income

Previously, a deduction of 30% of the gross rental income tax base (for furnished units) and a deduction of 25% (for unfurnished units) applies. The percentages of 30% and 25% have been lowered to 15% and 10% respectively starting from 2019.

The new Law on Personal Income Tax has become effective as from 1 January 2019, with the exception of the provisions with a delayed date of entry into force.

We advise businesses active in FYR Macedonia to seek professional advisory in regards to ensuring compliance with the changes. The amendments will affect all active businesses with employees as they will impact payroll processing and may require HR-related advisory to make sure employment documents such as work contracts are up to date. Companies leasing office space from individuals will also be affected and should carefully review existing lease agreements to evaluate the additional tax burden the amendments may create.


Sonja Kaljoshevska, sonja.kaljoshevska@eurofast.eu
Elena Kostovska, elena.kostovska@eurofast.eu
Eurofast Global Skopje
Direct tel: + 389 2 400225


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