International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

FYR Macedonia: Tax treatment of interest income


Elena Kostovska

The FYR Macedonian government considers any interest income arising from loans as regular income, but there are specific points in relation to the interest rate worth surveying in detail, which are often neglected by taxpayers. In terms of loans between related entities (including physical persons who are capital shareholders in a resident company), the legislation has a specific perspective on the acceptable interest rates. For example, a loan extended by a resident legal entity to a physical person – shareholder or founder – can be defined to give rise to a specific annual interest rate but an average interest rate available from commercial banks in the country will also be taken into consideration and will impact the tax base for the entity extending the loan. Specifically, if a loan is granted from a legal entity to a shareholder (physical person) at a rate lower than that used by commercial banks, the difference in the interest income the entity would have generated if using the interest rate of the commercial banks and the income that the entity has in fact generated by using the lower rate is considered as "hidden revenue" and has the same treatment as an unrecognised expense, therefore effectively raising the year-end tax base for corporate income tax purposes.

By the same token, resident companies receiving loans from related entities (including physical persons) at an interest rate higher than those available at commercial banks actually increase their tax base for corporate income tax by the amount equal to the difference in interest paid at the higher rate and interest that would have been paid if the loan agreement was under interest conditions available in banks.

Furthermore, interest paid on the basis of a loan granted from shareholders or founders who own at least 25% of the capital in the company and are in amount that is more than or equal to three times the capital participation of the loan grantor (for example a loan in amount of €1 million ($1.4 million) or more from a shareholder who has invested €333,333 in the entity) are considered as unrecognized expense for tax purposes. This provision, however, is not applicable in the first three years of the company's operation.

Yet another interest-related aspect that changes the tax base for corporate income tax is interest payments for loans received and used for purposes not related to the main business activity of the loan recipient. Interest paid for such loans is considered an unrecognised expense for tax purposes and thus increases the tax base. The same applies for interest paid on loans used for the purchase of furniture, artwork and decorative objects.

Elena Kostovska (

Eurofast Global, Skopje Office

Tel: +389 2 2400225


more across site & bottom lb ros

More from across our site

The German government unveils plans to implement pillar two, while EY is reportedly still divided over ‘Project Everest’.
With the M&A market booming, ITR has partnered with correspondents from firms around the globe to provide a guide to the deal structures being employed and tax authorities' responses.
Xing Hu, partner at Hui Ye Law Firm in Shanghai, looks at the implications of the US Uyghur Forced Labor Protection Act for TP comparability analysis of China.
Karl Berlin talks to Josh White about meeting the Fair Tax standard, the changing burden of country-by-country reporting, and how windfall taxes may hit renewable energy.
Sandy Markwick, head of the Tax Director Network (TDN) at Winmark, looks at the challenges of global mobility for tax management.
Taxpayers should look beyond the headline criteria of the simplification regime to ensure that their arrangements meet the arm’s-length standard, say Alejandro Ces and Mark Seddon of the EY New Zealand transfer pricing team.
In a recent webinar hosted by law firms Greenberg Traurig and Clayton Utz, officials at the IRS and ATO outlined their visions for 2023.
The Asia-Pacific awards research cycle has now begun – don’t miss on this opportunity be recognised in 2023
An intense period of lobbying and persuasion is under way as the UN secretary-general’s report on the future of international tax cooperation begins to take shape. Ralph Cunningham reports.
Fresh details of the European Commission’s state aid case against Amazon emerge, while a pension fund is suing Amgen over its tax dispute with the Internal Revenue Service.