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Macedonia Double Taxation Avoidance Treaties and Agreements

Macedonia Double Taxation Avoidance Agreements

Updated on Friday 05th November 2021

Macedonian or foreign investors with businesses opened here must pay a corporate income tax of 10% while the withholding taxes on dividends, interests and royalties paid to foreign entities is also 10%.
 
The foreign companies with subsidiaries in Macedonia or in other countries must usually pay these taxes here and also the specific taxes in the country of origin. In order to avoid this situation and attract the foreign investments, double tax treaties are signed by the Macedonian government every year. 
 
So far Macedonia has signed avoidance treaties with Albania, Egypt, Austria, Belarus, Bulgaria, Croatia, Czech Republic, Denmark, Iran, Italy, Latvia, Germany, France, Serbia and Montenegro, Hungary, Moldova, Netherlands, China, Poland, Romania, Russian Federation, China, Slovenia, United Kingdom, Sweden, Switzerland, Turkey, Ukraine, Finland, Spain, Lithuania, Qatar. Other drafts are waiting to be ratified and entered into force.
 
Usually the double tax treaties are elaborated under the OECD model and are regulating the taxation of profits and the withholding taxes on dividends, interest and royalties. Due to these regulations, the withholding taxes on dividends, interests and royalties paid to foreigners are exempt or minimized and the profits are taxed only in Macedonia and then a credit is offered by the foreign entity or only in the foreign country. These methods are called the method through credit and the credit through exemption. Mostly the exemption method is used in Macedonia.
 
In order to avoid the tax frauds each treaty elaborated under the OECD model has stipulated that information related to the tax payers must be provided at the request of the foreign tax authority.
If these provisions are not included in the treaties, then a Tax Exchange Information Agreement containing regulations related to the modality of exchanging tax related information between the countries can be concluded. This is also advisable to be used in relationship to tax heaven jurisdictions where the double tax treaties are not usually signed.
 
In order to beneficiate from the double tax treaties provisions, the tax payers must deliver a valid and solid proof that the taxes are already paid in the country of origin such as a valid certificate of tax payer issued by the foreign tax authority. This is usually registered at the Macedonian tax authorities (the Macedonian Public Revenue Office).