After 10 years of a flat personal income tax rate of 10% in
the FYR Macedonia, the Ministry of Finance introduced a
progressive personal taxation rate (Law on Personal Income
Tax), effective January 1 2019. Aimed at the creation of a
fairer tax system, the new provisions result in the following
changes for companies doing business in the country.
Introduction of two tax brackets
A personal income tax rate of 18% will apply to incomes
exceeding MKD 90,000 per month ($1,660). Incomes up to that
amount will continue to be taxed at 10%. Effectively, the tax
reform introduces an additional tax bracket.
It is expected for most citizens, the tax rate will remain
10% due to the relatively high threshold for additional
personal tax. The ministry noted that the threshold was
selected as it only affects the highest earners (1%) among the
However, high-earning employees across a wide range of
sectors have loudly voiced their concerns and requested that
employers harmonise net earnings with the old system,
effectively raising the payroll expenditures of companies who
have decided to keep net earnings the same.
Our advisors have observed a definite trend in companies
(who are facing revolt from employees difficult to replace)
increasing the gross salaries of skilled employees with high
earnings in order to maintain their net earnings.
Property rights, rent and capital income taxation
Income from industrial property rights, rent (lease) and
subleases, as well as income from capital, capital gains, gains
from games of chance, insurance, and other income will be taxed
at 15%, as opposed to the current tax rate of 10%. The new rate
affects companies that pay such rights/lease/sublease amounts
to individuals (as per the law). The payment of personal income
tax for the aforementioned income is the obligation of the
Introduction of a tax on interest
Following several delays in the introduction of tax on bank
interest, interest from deposits exceeding MKD 15,000 a year
will be taxed at 15%. However, this provision will only apply
from January 1 2020 and there are still several unanswered
questions regarding how it will be implemented. Also, a 15% tax
will be levied on income from securities from 2020.
Tax base deductions for rental income
Currently, a deduction of 30% of the gross rental income tax
base (for furnished units) and a deduction of 25% (for
unfurnished units) applies. Respectively, the percentages are
lowered to 15% and 10% from 2019. This change also affects
companies leasing real estate from individuals.
We advise businesses active in the FYR Macedonia to seek
professional advice to ensure compliance with the changes. The
amendments will affect many active businesses with employees as
it will impact payroll processing and may require HR-related
advisory to make sure employment documents 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
Sonja Kaljoshevska (firstname.lastname@example.org) and Elena