The Macedonian VAT regime recognises a standard rate of 18% and a preferential rate of 5%. The preferential rate is applicable to the supply of a wide range of goods and services including, among others, food products, medicine, publications, food for livestock, drinking water and agricultural machines.
As of 2009, the first sale of residential buildings completed less than five years ago but which have not yet been occupied also became 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 will be enforced – the portion of the building to be used for residential purposes will be subject to 5% VAT while the rest of the building will be charged the standard 18% rate.
The most recent amendment to the VAT Law in this area was published in the Official Gazette No.129 of July 31 2015. It entered into force on August 8 2015, extending the application of the reduced VAT rate until December 31 2018.
The government has argued that the measure has caused a significant increase in the number of residential apartments built each year as well as a reduction in the average price of residential properties. This further extension of the preferential VAT regime is expected to provide an additional boost to the already very active residential construction sector and support the trend of decreasing prices of residential buildings.
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