16th December 2022, Skopje – Parliament of the Republic of Macedonia adopted the amendments to the Law on Personal Income Tax, which, as of 1st January 2023, providing for extending the application of the 10% flat tax, i.e. abolishing the progressive taxation and postponing the taxation of interests on savings until North Macedonia’s accession to the EU.
This is part of the tax reform concept, prepared by the Ministry of Finance, which will contribute to greater fairness and more just distribution of the tax burden, all to the end of accelerated and sustainable economic growth.
“Proposed modifications and amendments to the Personal Income Tax Law, adopted by the Parliament on Friday, are part of our commitment to putting fair, efficient, transparent and modern tax system, all to the end of attaining accelerated, inclusive and sustainable economic growth”, Minister of Finance, Fatmir Besimi pointed out.
He added that amendments under this legal solution have been achieved via dialogue and inclusive process with all stakeholders, implemented by the Ministry of Finance, and that the reforms is based upon the Tax Reform Strategy, being also supported by the international financial institutions.
“As per the existing Law, progressive taxation was supposed to be applied as of 1st January 2023, being previously postponed for a period of three years. Therefore, we opened the topic and based on the analyzes, as well as by having organized discussions with all social stakeholders, we came up with this solution for abolishing the existing model. In the period to come, new model will be prepared, by which the set goal will be accomplished, Minister stressed.
As per the accepted amendments, the tax base is expanded, by targeting tax exemptions and relief in the existing personal income tax system, ensuring greater fairness of the tax system and more just distribution of the tax burden based on the personal income tax between income on the basis of labor and capital, whereby the existing provisions are also additionally clarified.
Amendments, among the other things, also stipulate taxation of capital gains generated from sale of securities and units issued by investments funds acquired from 1st January 2023, as regards the period of acquisition, taxation rate and the manner of calculating and paying the tax; additional clarification and regulation of the base for taxing the non-monetary benefits of taxpayers generating income thereupon, abolishment of the tax exemption as regards the paid life insurance premium, paid premium for voluntary health insurance and paid contribution in a voluntary pension funds for the employed people, determining the treatment of unrecognized expenditure for the whole amount of the life insurance premium at persons performing independent activity, additional regulation of the procedure for tax exemption or reduction as per the international agreements on avoidance of double taxation on income generated by foreign natural person and similar.
Modification and amendments to the VAT Law and Profit Tax Law are to be adopted in the upcoming period by the Parliament, being also part of the tax reform concept.