Effective 1 January 2021, the North Macedonian VAT regime has been amended to include a new tax rate of 10%, in addition to the previously prescribed standard rate of 18% and reduced rate of 5%. This is the first time a new rate has been introduced since the VAT Law has been in effect.
The newly added article 30a stipulates the application of a 10% rate to a number of categories of supply related to the serving of food and beverages. These include:
- Supply of food and beverages (except alcoholic) for immediate consumption at the place of supply
- Catering services (except alcoholic beverages)
As such, this novelty will effectively reduce the current tax rate for the restaurant and catering services in order to assist the hospitality sector and improve liquidity.
It is expected that the Government will publish further details on the categories affected. By way of background, the sale of food items in North Macedonia (including home delivery of food) is subject to the reduced rate of 5% but the supply of prepared food and non-alcoholic beverages which are being consumed at the location where the supply is made (eg. restaurants) as well as catering services were so far subject to the standard rate of 18% as they are considered a service supply. The new rate introduces a sort of middle- ground but it remains to be seen whether it will be void of the confusion typically present in this sector’s taxation.
Alcoholic beverages will continue to be taxed with 18% regardless of the manner of their delivery/supply.
We advise affected sector companies to closely follow the developments in this area in order to ensure compliance and to benefit from the amendments.
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