19th September 2023, Skopje – Tax reform as part of the broader public finance reform process, was supported by the Parliament. Today, amendments to the Profit Tax Law and the Value Added law were adopted, being geared towards creating more optimal tax system, which will provide for grater justness, underpin the economic growth and ensure further harmonization with the EU Directives. Moreover, the Solidarity Tax Law was also supported, being focused on coping with the consequences of the energy and the price crisis, and the funds arising therefrom will be used for the anti-crisis measures.
“Tax reform is part of the major public finance reform we launched more than tow years ago, coupled by last year’s intensive and inclusive process, covering all stakeholders, all to the end of defining the proposals, which will contribute to greater taxation justness and fairness. It is based upon the 2021-2025 Tax Reform Strategy adopted by the Government at the end of 2020, as part of its Program. Its main objective was to ensure fair, efficient, transparent and modern tax system based on state-of-the art digital technologies and innovations, all to the end of attaining an accelerated, inclusive and sustainable economic growth”, Minister of Finance, Fatmir Besimi said, adding the this reform is also supported by the EU and the international financial institutions.
Tax reform concept focuses on ensuring greater fairness of taxation, i.e. expanding the tax base by revising the tax exemptions and the preferential rates, as well as combatting the informal economy. More specifically, under the draft Law on Value Added Tax, harmonization is carried out with the EU Directive as regards the place of supply of services, the introduction of the tax representative concept and governing the tax treatment related to the supply via valuable vouchers. It is also proposed to extend the application of the preferential rate of 5% for the first sale of residential buildings and flats used for residential purposes, within 5 years from the construction thereof, followed by revision in applying the preferential VAT rate, i.e. the VAT rate on the sale of period products is reduced from 18% to 5%, whereby the 10% preferential rate will start to be applied at some of the food products, which are not commodities. Innovations are also introduced, which will contribute to simplifying the VAT collection procedure.
Another law, being part of the tax reform is the Profit Tax Law, whereby the harmonization thereof relates to the recommendations by the EC and the international financial institutions, all to the end of ensuring longer-term public finance stability by expanding the tax base, while also contributing to reducing the administrative burden of companies by simplifying certain procedures under the profit tax system.
In addition to these two legal solutions, the draft Solidarity Tax was also adopted. This Law is not part of the tax reform, it is rather a one time solution introduced amid exceptional circumstances, in crisis situation. Main feature of this Law is the provision of funds for managing the crisis, i.e. the funds collected on this basis to be injected in the Budget, will be projected under the anti-crisis program (P1 Programme) aimed at supporting the companies and the citizens. Companies generating turnover of over Denar 615 million during last year will be subject to this tax, pertaining to the average of the taxable profit upon the exemptions for a period of three years increased by 20%. The basic feature of this Law, which is also recommended by the EC, is implementing solidarity in practice, which will also have a positive impact on maintaining the public debt level.
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