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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:
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.
The fulfillment of the obligation to perform inventory of the assets and liabilities was discussed at the workshop which was organized by Knigoprima Consulting, and held on 16.12.2019 at Hotel “Porta”.
The inventory is also a legal obligation that the legislator has established for all traders, that is to say, has prescribed an obligation to perform an inventory of the assets and the liabilities at least once a year in the fiscal year and to reconcile the accounting balance of assets and liabilities with the actual position determined with the inventory. The commencement that is to say completion of the inventory is not subject to normative regulation in the laws and bylaws, however this matter is left to be regulated by a general act of the entities.
The Managing Authority makes a Decision for inventory, in which among others the time limits should be determined, within which the inventory Commissions will conduct an inventory for the calendar year 2019.
Reconciliation of the accounting with actual balance means:
1) reconciliation of the physical balance and the accounting value of the assets recorded in the accounting records during the accounting period with the actual balance determined by the inventory;
2) reconciliation of the accounting value of assets and liabilities determined by recording business events in analytical records of consumers demands , liabilities to suppliers, used and approved credits and loans, advances received and granted, and other, up to the date of inventory with their actual value determined by the inventory; and
3) reconciliation of the value of the assets and liabilities determined in the manner described previously and the value of the assets and liabilities determined by applying a method different than the historical cost method (value determined using the replacement cost method, fair value, net realizable value; present value of future cash flow and other).
An inventory is carried out on the trader’s entire property, including assets owned by the trader, such as:
– the material assets owned by the trader,
– tangible assets leased,
– intangible assets,
– investments in real estate,
– biological assets,
– long-term and short-term financial resources,
– the stocks,
– demands,
– money,
– monetary equivalents,
– advances paid,
– active time partitions and
– other assets owned by the trader.
The work plan of the inventory commission is prepared prior to the beginning of the inventory and the inventory commission are given data on the nomenclature numbers, names, types and unit measures of the assets subject to the inventory, data on the names of buyers and suppliers with whom the trader has entered into debt-to-credit relationships, business banks in which he/she has opened accounts, loans approved, and similar, as well as other data that can facilitate the work of the inventory commission.
The inventory commission should not have access to the accounting data on the quantities and value of the assets which are subject to the inventory prior to recording the factual condition in the inventory lists and their submitting to the responsible or authorized person for verification.
The inventory lists are compiled separately, according to the analytical accounts of the assets and liabilities which are the subject of the inventory in at least two copies. In the inventory lists are entered data on nomenclature numbers, names, types, units of measure, actual quantities, if it is applicable, and actual values, individually for the assets and liabilities which are the subject of the inventory.
The data on the assets and the liabilities whose actual condition on the date of the inventory cannot be ascertained or for which there is no proper documentation are entered in separate inventory lists.
The report of the inventory which was carried out contains in particular:
– data on the start and end date of the inventory;
– an overview of the material (physical) and value differences between the factual and accounting condition and the reasons for the differences;
– an overview of the accounting value of the assets and the liabilities whose actual value on the day of the inventory is not established, with appropriate justifications;
– remarks and explanations regarding the identified differences given by the persons handling the assets, that is to say, who are in charge of material (physical) and monetary values;
– proposals for liquidation of the identified differences (offsetting of shortages and surpluses arising on the basis of replacement of the same and similar types, that is to say assets and value, the way of compensation of the shortages and the income of the surpluses, write-off of the outdated receivables, income on outdated liabilities, and
– other remarks and suggestions by the inventory commission.
The inventory report, together with the inventory lists and the act of the trader’s responsible person for the procedures of reconciling the accounting with the factual condition of the inventory assets and liabilities, shall be submitted for entry to the person to whom the trader entrusted the keeping of the commercial books and compilation of the annual account and financial statements, for the purpose of reconciling the accounting with the actual condition of assets and liabilities.
At the workshop organized by Knigoprima Consulting, participants were introduced in detail with the new regulations related to value added tax.
During 2019, several amendments to the Law on Value Added Tax and amendments to the Decision on Determining Goods and Services subject to the Preferential Rate of Value Added Tax were adopted.
Some of the amendments and additions to the law relate to specifying and amending the tax exemptions in the country without the right to deduct the previous tax.
The legislator has amended Article 30 concerning the preferential tax rate, setting a preferential tax rate of 5% for:
With reference to the above mentioned, a Decision has also been adopted, which is amending and completing the Decision on determining the goods and services subject to the preferential rate of value added tax, which is thereby attached to the working materials.
There is an ongoing procedure in the parliament for adoption of amendments and additions to the Law on Value Added Tax. The Law on Amending the Value Added Tax proposes the following:
-possibility of taxpayers registered for value added tax purposes, to exercise the right to deduct previous tax also by owning a fiscal receipt whose total turnover does not exceed 6.000 MKD issued in accordance with the Law on Registration of Cash Payments, that is to say abolishing the confirmation-of-payment-receipt as a document on fiscal receipt for justification of expenses up to the amount of 6.000 MKD.
-Increase of the threshold for the mandatory registration for value added tax purposes from MKD 1,000,000 to MKD 2,000,000 and prescribes shortening of the period of stay of the value added tax system from 5 to 3 years;
-possibility for taxpayers who were registered for value added tax purposes and who did not exceed the threshold of 2.000.000 MKD in 2019 to have the right to request revocation from the registration for value added tax purposes;
-possibility for taxpayers who were not registered for value added tax purposes and who in 2019 exceeded the threshold of MKD 1,000,000 but did not exceed the threshold of MKD 2,000,000, to have no obligation to register for value added tax purposes;
– exemption from paying of value added tax for goods imported by the military forces of other states that are members of the North Atlantic Treaty Organization (NATO), the imposition of a tax exemption during imports for the needs of those forces or accompanying civilian personnel, as well as for supplying their mess rooms or canteens, if these forces participate in joint defense activities and
– reconciliation of the articles of the Law on Value Added Tax with the Criminal Law.
The Law on Refunding Part of the Value Added Tax to Individuals from the perspective of responsibilities for the issuer of fiscal receipts was also discussed at the workshop.
The issuers of fiscal receipts, in accordance with the articles of the law, are obliged to the Public Revenue Office to report the fiscal receipt of reversal payment and the reversed receipt for which individuals are not entitled to VAT refund.
The Rulebook of the Minister of Finance prescribes the technical characteristics and the way of using the application software for reporting the data of the fiscal receipt and the mobile or desktop application for reporting the fiscal receipt of reversal payment or the reversed receipt.
Regarding the criminal articles, the Law on Refunding Part of the Value Added Tax on Individuals, sets a fine in the amount of 250 to 1,000 euros in MKD counter value for the issuer of the fiscal receipt who will not report the fiscal receipt of reversal payment or the reversed receipt to the Public Revenue Office the and a fine in the amount of 150 to 250 euros in MKD equivalent for the responsible person in the legal entity.
Supervision over the implementation of the articles of this Law is performed by the Public Revenue Office.