A number of proposed changes to the tax legislation, which we brought to your attention in the previous issue of KPMG’s Tax News, have now been adopted by the Parliament and published in the Official Gazette. Please see below what is changing.

New Law on Tax on Personal Income

The new Law on Tax on Personal Income was adopted by the Macedonian Parliament and promulgated in the Official Gazette No.241 dated 26 December 2018. It entered into force on the day of its promulgation and is applicable as of 1 January 2019.

The major changes were described in our tax alert from 13 December 2018 when the Ministry of Finance published the draft law.

In addition, the law introduces new types of non-taxable proceeds:

• Funds from donations which have been disbursed through special telephone numbers, and
• Travel costs for the participants in educational activities and events realized abroad.

The calculation of the personal income tax for 2018 will be made in accordance with the provisions of the Law on Personal Income Tax applicable until 31 December 2018.

Amendments to the Law on Mandatory Social Security Contributions

The draft amendments to the Law on Mandatory Social Security Contributions addressed in our tax alert from 20 December 2018 were adopted by the Macedonian Parliament and promulgated in the Official Gazette No. 247 dated 31 December 2018.

The amendments entered into force on the day they were published, and will start to apply as of 1 January 2019 in regards to the increased contributions (with the payment of salary for January 2019).

The provisions that define individuals registered for performance of an independent activity for retail trade at booths and markets as persons obliged to pay pension and disability insurance as well as health insurance will be applicable as of 1 July 2019.

Amendments to the Corporate Income Tax Law

The draft amendments to the Corporate Income Tax Law (CIT Law) addressed in the tax alert dated 20 December 2018 were adopted by the Parliament and promulgated in the Official Gazette No. 248 dated 31 December 2018. The amendments are applicable as of 1 January 2019.

The amendments adopted by the Parliament differ slightly from the draft amendments discussed in KPMG’s tax alert, and these generally refer to:

• Taxation of non-profits: Non-profits will be subject to 1% tax on their income from business activities, if such income is higher than MKD 1 million (the draft law proposed a threshold of EUR 2.500)
• CIT treatment of loan receivables which have not been repaid by the end of the year in which they were provided: Loans granted to legal entities residents of the Republic of Macedonia will not be treated as add-backs to the tax base (the draft law did not envisage this exception from the rule which was introduced in 2014)
• Transfer pricing (TP): Under the amendments, transfer pricing provisions will mostly concern taxpayers who have realized income of more than MKD 60.000.000 (approximately EUR 975.000) during the respective year. At the moment, based on the current wording of the amendments, it is not clear if the threshold will apply only in regards to the requirements for preparation of TP documentation, or in regards to the transfer pricing rules in general
• Requirement that dividends and other distributions from profits be made in a chronological order: This requirement proposed in the draft law is removed from the amendments adopted by the Parliament.

Amendments to the Law on Public Revenue Office

The amendments to the Law on Public Revenue Office that were discussed in our tax alert from 20 December 2018 were adopted by the Macedonian Parliament and promulgated in the Official Gazette No. 7 dated 14 January 2019. The amendments entered into force on the day of their promulgation in Official Gazette and are applicable as of 1 January 2019. As noted, the amendments grant the Public Revenue Office (PRO) with access to certain data from banks and other organizations.

A more detailed presentation of the recent legislative changes in the area of tax will be made at this year’s Business Seminar for KPMG’s clients.

Other developments: Rulebook on the Annual Personal Income Tax Return

The Ministry of Finance published the Rulebook for the format and the content of the prefilled Annual Tax Return for assessment of the Personal Income Tax for 2018 (the “Rulebook”). It was published in the Official Gazette No. 241 dated 27 December 2018.

The Rulebook also prescribes the manner in which the tax authorities will deliver the Annual Tax Return to the taxpayers and the manner in which the taxpayers will confirm the Annual Tax Return.

A more detailed presentation of the recent legislative changes in the area of tax will be made at this year’s Business Seminar for KPMG’s clients.