At the workshop held on 16.12.2019, the changes and amendments related to the Law on Corporate Income Tax were discussed, with special emphasis on the obligations standardized in order to be implemented timely and lawfully.

One of the news items introduced by the amendments entered into force on the 1 of January 2019 is the determination of the conditions under which citizen associations, foundations, unions, other forms of association and other legal entities established according to special regulations, prescribing them as non-profit organizations, become obliged to payment of total income tax. That is, it is stated that non-profit organizations become taxpayers for total income tax, if in their non-profit activity they earned income from performing business activity in excess of 1,000,000 MKD.

According to the amendments to the Law, several news items are introduced in the area of ​​non-deductible expenditures. It is determined that the tax deductible expense is the employee’s allowance for using his/her own vehicle for  employer’s needs, up to 30% of the amount paid but in an amount not exceeding  60,000 MKD annually. It is determined that the allowance for  food for  employees’ overnight work  above the amount set by the Labor Relations Law is tax non-deductible expense for the purposes of the Corporate Income Tax Law and will increase the tax base for 2019. According to the amendments to the Corporate Income Tax Law, the employer’s payment to the Voluntary Pension Fund for employees are deductible as an expense in the amount of up to two average monthly gross salaries paid in the previous year in the Republic of Macedonia per employee per year. The amount exceeding two average monthly gross salaries paid per employee per year is a ​​non-deductible gross expense.

For 2019 tax deductible expense in Tax balance is the amount of 71,250 MKD. Also, a non-deductible expense are the employer’s  payments for expenses on the basis of paid life insurance premiums over the amount of two average monthly gross salaries paid in the previous year in RM per employee per year. Also, a non-deductible expense for the purposes of the Corporate Income Tax Law are the shortages which are not caused by emergency events (theft, fire or other natural disasters), which are not at the expense of the responsible person’s salary.

A limit of 16 average gross salaries per employee per month is set so that expenses paid on the basis of business performance are not taxed that is to say are deductible as an expense for profit tax purposes. Non-deductible expenses for tax purposes are also the expenses for amortization of revalued buying cost of the tangible and the intangible assets.

Regarding the transfer pricing, the legal framework for determining the transfer pricing in the Republic of Macedonia is set out in the Corporate Income Tax Law Articles 12 and 12-a and the Rulebook on the Form and the Content of the Transfer Pricing Report, the types of methods for determining the transaction price in accordance with the arm’s length principle and how they are applied.

In accordance with the articles of the Corporate Income Tax Law, when submitting the tax balance the taxpayer is also obliged to submit a Transfer pricing Full Report or Transfer pricing report – short form on the business and financial transactions between the related parties. The reporting obligation does not apply to taxpayers who have generated less than 60,000,000 MKD in total revenue during the year.

A Transfer pricing report – short form is submitted by taxpayers who have a total income of more than 60,000,000 MKD but the total transactions with related parties during the year do not exceed 10,000,000 MKD or provided that the only transactions made are with related parties – residents of the Republic of Macedonia.

According to the Law the following methods should be applied:

1. Comparable uncontrolled price method (CUP method);
2. Resale price method / ‘trade price method’;
3. Costing method /cost plus/ “method of adding gross profit to costs”;
4. Profit sharing method/ Transactional profit split method and
5. Transaction net margin method / “net profit method” TNMM. 

The Transfer Pricing Report contains multinational enterprise level data (Master File), taxpayer level data (Local file) and attachments.

At the workshop, the participants were introduced to the new articles of the Corporate Income Tax Law that refer to tax exemption for financial donations in the field of sports.

Pursuant to Article 30-a of the Corporate Income Tax Law, for the taxpayer who has donated funds to sports entities paid into a special account for donations, there is reduction of the calculated income tax on the amount of donated funds, but up to 50% of the input tax. In addition to the Tax Balance, taxpayers who have donated funds to the sport are also entitled to a deduction in income tax advances.

The articles of the Corporate Income Tax Law provide that taxpayers who have donated funds to the sport have the right to reduction of the monthly advance payments up to the amount of the donation given but up to 50% of the amount of the monthly income tax advance.

In accordance with the articles of the Rulebook, the donor, the taxpayer, submits a request for tax exemption to the Public Revenue Office to donate funds to sports entities before making a payment to the special account for donations of the sports entity. The request shall be submitted electronically on a prescribed form.

The Public Revenue Office approves or rejects the request within 15 days. The donor shall, within 15 days upon the confirmed request, submit an electronic notification of the donation to the Public Revenue Office. The notification shall be accompanied by proof of a donation. Upon submission of the notice, the Public Revenue Office approves or rejects the right on deduction of the input tax.

At the same time, the participants got acquainted with the amendments to the Law on Corporate Income Tax which are in Parliament’s procedure for their adoption.

The text of the Draft Law on Changing and Amending the Law on Corporate Income Tax proposes news items regarding the obligation to submit a Transfer Pricing Report to the Public Revenue Office.

The amendments relate to the extension of the deadline for submission of the transfer pricing report, that is to say instead of having the taxpayers obliged to submit it together with the tax balance until February 28 / March 15 of the year, to do it so by September 30. It is also proposed that the obligation to submit a Transfer Pricing Report should not apply to transactions between related parties residents in the Republic of Northern Macedonia, as well as to taxpayers who have generated a total income of up to 300,000,000 MKD during the year.

It is proposed as tax deductible expenses to be determined the internship fee over the amounts prescribed under the Internship Law and the fee for practical training of students and practical education of students in the amount of over 8.000 MKD per month. At the same time, with the proposed articles an adjustment of the criminal provisions is being made with the Criminal Law.