In 2009, as an anti-crisis measure, the FYR Macedonian government introduced the possibility to apply for the preferential VAT rate of 5% on the first sale of residential buildings. While initially planned to be in force until the end of 2011, the application period has already been extended twice: the first time in late 2011 whereby its validity was prolonged until the end of 2015, and the second time in July 2015 when it was prolonged for three more years.
The third renewal was adopted in June 2018 and, with it, the measure will continue to apply until the end of 2023.
By way of background, with this measure, the first sale of residential buildings before they are first occupied and within five years of their completion, is subject to the reduced VAT rate of 5% (instead of the standard rate of 18% which was applied before 2009). To be eligible for this reduced VAT rate, the building must be used for residential purposes. In the case of a mixed-purpose building, a proportional VAT application is enforced – the portion of the building to be used for residential purposes will be levied with 5% VAT while the rest of the building will be levied with the standard 18% rate.
This further extension of the preferential VAT regime is expected to provide yet another impetus for the booming residential construction sector.
