30th December Skopje – As of 1st January, amendments to the Law on Personal Income Tax will apply, according to which the application of progressive personal income tax is put on hold. During the next 36 months, the income from employment, the income on the basis od independent activity, the income on the basis of copyrights and related rights and the income from sale of own agricultural products, will be taxed with a 10% rate. The 15% rate will be also put on hold, meaning that 10% rate will be also applied to taxation of the income on the basis of industrial property rights, lease and sub-lease, capital, capital gains, insurance and other income.
Minister of Finance Nina Angelovska, when announcing the amendments to the Law on Personal Income tax, said that it was not a matter of its abolishment, whereby the Government holds the stance that the progressive taxation may improve the income distribution in the system, thus yielding better social effects that would result in more just and more developed society.
-In order to achieve such effect, progressive taxation should have an optimal design whereby the household is in the center thereof, it should be adopted upon consultation with all stakeholders, there should be effective mechanisms for eliminating the gray economy in place, as well as strong confidence in institutions, wherein efficient and effective processes should be determined, by taking advantage of the potential of technology, so as to reduce the administrative burden, which will be distributed to all – Angelovska said.
The decision to put the progressive taxation on hold, is based on the analysis of big data, which provide for following the dynamics of tax revenue collection and making a conclusion on the basis of electronic reporting and collection of personal income tax. According to the analysis, the revenues, which could have been collected from the progressive taxation and the higher personal income tax, are lower by 51.2% compared to the potential collection. The total lost revenues that could have been collected, but were not collected, are estimated at EUR 6.5 million, these are funds that could have been available, but were not generated, due to the change in taxpayers’ behavior, the analysis shows.
As of 1st January, the VAT payer threshold is increased from Denar 1 million Denar 2 million. The amendments to the Law on Value Added Tax also change the period during which the taxpayer is obliged to remain within the VAT system, being shortened to three years from the current five years. This will allow for all legal entities and natural persons who have not exceeded the newly set threshold in 2019 to be able to voluntarily deregister themselves from the system.
As of 1st January, the application of two tax solutions has been delayed. Application of taxation of capital gains on the basis of securities has been delayed from two years from now. The new solution, which will be put into force as of 2023, includes the shares of investment funds in the taxation, being omitted under the so-far solution. Two tax rates are introduced, depending on the period of possession of the securities and the shares i.e. the 15% rate for all those speculative traders on the capital market, i.e. who hold them for up to one year and the rate of 10 percent for taxing income on the basis of capital gains from securities and shares issued by an investment fund, which the investors hold for 1 to 10 years. Long-term investors which keep the securities and the shares issued by an investment fund, for more than 10 years since the day of the sale, as well as the securities acquired from an initial public offer will be exempt from this tax, in order to encourage the companies to issue shares via initial public offer. Citizens will not bear the burden from implementing the provisions of the Law and the tax will be automatically calculated and paid into the Budget.
As of 1st January 2020, the tax on interests from deposits will also not start to apply. Decision for the delay is based upon the need for normative finalization as regards the reporting by the banks and the saving houses, as well as for simplifying the tax administration. In addition, along with the delayed application, as of 2023, the taxation of savings will be treated as same as capital gain taxation on the capital market.
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