Regarding the Republic of Macedonia, political uncertainty that marked 2016-2017 has been overcome, and recovery is expected as confidence is being restored. Macro balances are sustainable, the economy is well adjusted to the fixed exchange rate and the relatively low fiscal deficit. The financial sector is in better shape than in most Balkan countries, e.g. in terms of nonperforming loans.
The open trade regime has been well functional, and Macedonian external balances have proved sustainable in the last decade. Credit agencies have confirmed Macedonia’s credit rating with positive outlooks. The government has been formed in May 2017, and it has relatively stable majority in the National Assembly. Local elections have been held in 2017, and presidential elections are scheduled for April 2019. The government has business-friendly orientation and has taken a pro-active approach in implementing critical reforms to rekindle growth and give EU and NATO accession prospects a new push.
Republic of Macedonia has been a candidate for accession to the European Union since 2005, and the country actively supports the NATO-led missions and works with the Allies and other partner countries in many other areas, whilst actively working on the needed democratic, institutional, security sector and defence reforms. The negotiations with Greece regarding the country’s naming issue are going in good direction, and the country is expecting the EU and NATO accession processes to be intesified in the months to come.
The Republic of Macedonia has been nurturing an attractive business climate by offering investment incentives in the form of more favourable tax regimes when compared to other countries, bilateral double-taxation and multilateral trade agreements, as well as a cheap and effective labour force. Macedonia has generally strived to achieve a high level of foreign trade liberalization by being a signatory of five trade agreements – EFTA, CEFTA, SAA (Stabilisation and Association Agreement) with EU member-states, Turkey and Ukraine. Furthermore, it signed agreements for the avoidance of double taxation and investment protection treaties with many European countries.
The Stabilization and Association Agreement between the Republic of Macedonia and the EU entered into force on 1 April 2004. It guarantees the alignment of national legislation with EU laws, while conditions for investment and business are becoming recognizable and predictable for foreign investors.
1. Investment laws - Macedonian legislation related to investment is comprised of national laws and bilateral and multilateral international treaties and aims to enhance the investment environment in the Republic of Macedonia and provide equal treatment of foreign and domestic investors. The legislation puts foreign companies on roughly the same ground, while Macedonia consistently provides support and treatment to foreign investors among other methods of attraction. The Government also provides numerous incentives, such as tax breaks and subsidies, to attract foreign investment. Foreign investors are allowed to invest directly in all industry and business sectors except those limited by law. Investment in the production of weaponry and narcotics is subject to Government approval. Investors in some sectors, such as banking, financial services, and insurance, must meet certain licensing requirements that apply equally to both domestic and foreign investors. Macedonia has taken considerable steps to establish a greener presence and a reputation in the region by establishing a system of integrated permits for industrial facilities considered to be significant polluters.
2. Corporate law - Foreign investors wishing to establish a business presence in Macedonia have an opportunity to incorporate a branch office or representative office of the foreign company. In general, a business presence in Macedonia can be established within 1-2 working days. There are 5 forms of business entities: general partnership, limited partnership, limited liability company, joint stock company and limited partnership with stocks.
3. Tax regime - Macedonian tax regime is among the most competitive for business activities. Corporate income tax is 10% for all entities and is one of the lowest in Europe. The country introduced one of the most attractive tax packages in Europe – 0% tax on retained earnings, 10% corporate income tax, 10% personal income tax, sales tax on real estate and rights from 2% to 4%, from 0.1% to 0.2% property tax, VAT at 18% (5% on specific items). Macedonia has for some time now introduced the Technological-Industrial Development Zones (“TIDZ”) – which are investment-friendly areas on the territory of the Republic of Macedonia, conceived to serve high-tech clean industry. Companies enjoy certain incentives in regards to special customs and tax regimes, such as (i) corporate income tax exemption for the first 10 years; (ii) personal income tax exemption on salaries for the first 10 years; (iii) certain custom fees exemptions, as well as additional incentives with regard to building costs, free infrastructure and connection to utilities as well as assistance for education costs for workers.
4. Free trade regime - Macedonia is a signatory of five trade agreements – EFTA, CEFTA, SAA (Stabilisation and Association Agreement) covering 40 trading partners: 27 EU Member States, 4 EFTA countries, 7 CEFTA parties, Turkey and Ukraine. Furthermore, it signed agreements for the avoidance of double taxation and investment protection treaties with many European countries.
5. Labour Law - The Macedonian Labour Law and other labour legislation regulate the relations between employees and employers by individual agreements and collective agreements. The Labour Law is generally in line with international labour standards and, as such, applies to both domestic and foreign investments equally. From a potential investor’s point of view, the main disadvantage of the existing Labour Law is the strengthened protection of employees and the difficult conditions for cancelling employment agreements. The procedure for obtaining residency and work permits as well as temporary residence are regulated by the Law on Foreigners and the Law on Employment and Work of Foreigners.
6. Visa regime - Macedonia grants visa-free entry to EU member countries and most signatories of the Schengen Agreement, and residence in them for up to 90 days within a 6-months period. It also grants visa-free entry to several additional countries – Azerbaijan, Botswana, Cuba, Kazakhstan, Kosovo, Russia and Turkey.
7. Macedonian Law on Concessions and Public-Private Partnership - The concept of a long-term co-operation between a public and a private partner in order to provide finance, construction, reconstruction, operation or maintenance of infrastructure and other facilities of public interest, and to provide services of public interest was introduced by the previous Law on Concessions and Other Types of Public-Private Partnership in 2008, and was refined and further regulated by the Law on Concessions and Public-Private Partnership in 2012.
|Five free trade agreements|
|Subsidies for investors|
|Low tax rates|
|Wide range of DTTs|
|Flexible labor regulations|
Macedonia has a very favorable tax policy, whereas Value added tax (VAT) is 18% and corporate tax is 10%. There a€re numerous tax incentives for investors for creating new jobs, for establishing and enhancement of the cooperation with local suppliers, for establishing technological development and research departments, for investment projects of significant economic interest for Macedonia, for increase of capital investments and incomes, and for acquisition of companies that are facing difficulties. Additionally, there are incentives for investments in Technological industrial development zones (TIDZ), and the country has signed treaties on avoiding double taxation with 49 countries.
The government in 2018 is planing to implement set of investment incentives for supporting investors according to the Plan for economic growth. A total of €50.4 milion in the 2018 Budget is to be alocated for economic development, and €16.3 milion is to be alocated to active employment measures.
The set of incentives is comprised of tax relief measures and/or cash grants for diferent purposes. The various supports may be combined.
The companies applying for the measures of the industrial policy on stimulating investments and competitiveness of the Macedonian economy need to meet the following fundamental (and eligibility) criteria:
The measures provide for the following incentives:
The payment of the assistance is performed annually after the submission of the final statement of the company for the previous years. The fulfilment of the criteria is proved using documents for the value of the production input and the total value of the procurements.
The support is granted under the following criteria:
The payment is performed annually after the company submits the final statement for the previous year and documents proving the amount of the incurred justified investment costs for industrial research.
The investment project shall be considered as of significant interest if one of the following criteria is met:
where the beneficiary must (shall) maintain the investment and the created jobs for at least 5 years after the completion of the investment project.
The state aid can be realized in the following forms:
- 300 persons – €2.000 per position;
- 300 – 500 persons – €3,000 per position;
- 500-1000 persons – €3,500 per position,
- 1,000-2,000 persons – €4,000 per position.
The realization of the support stipulated in measures A, B and D is performed annually after the company submits the final statement for the previous year and documents proving the fulfilment of criteria, while the realization of the support stipulated in item C will be performed the following year after the investment was completed (maximum: €1 million).
The payment of the financial support is performed annually after the company submits the final statement for the previous year including documents which prove the value of the investment in the previous year and submit a list of invoices for the investments in the premise/premises, equipment and halls.
The assistance is one-time payment provided after the renewal of the manufacturing process. Documents are delivered proving the value of the purchased assets and prove the commencement or restarting of the activity.
The aim of the TIDZ is to support the development of high modern technologies through an application of the highest environmental standards. The establishment, development and monitoring of the zones is carried out by the Directorate for Technological Industrial Development Zones. There are currently several operational TIDZs in Macedonia – two in Skopje, one in Tetovo, Stip, Struga, Prilep, Kichevo and Rankovce.
Investors in TIDZ are offered the following incentives:
The users of the TIDZ may also benefit from the incentives provided through the „Plan for economic growth“ if eligibility criteria are met and if the interested applicant is not user of the same type support thorugh any state aid scheme or other types of public resources suport.
The Republic of Macedonia has signed the agreements on avoidance of double taxation with 49 countries which refer to the laws that regulate corporate income tax, property tax and individual income tax. Depending on the particular country, it is provided to pay certain taxes only in one country, if the taxpayer is operating a business in two countries which have signed the agreement. There is the list of countries in the following table.
|No.||Countries||Avoiding double taxation|
|6.||Bosnia and Herzegovina||In force|
|10.||Czech Republic||In force|
|20.||Iran, Islamic Republic of||In force|
|35.||Russian Federation||In force|
|36.||Saudi Arabia||In force|
|46.||United Arab Emirates||In force|
|47.||United Kingdom||In force|
|Global Competitiveness Index||/|
|Ease of doing business||11|
|Starting Business rank||RANK 22|
|Global logistics report||106|
|EU - 28||0.209||0.205||0.204||0.121||0.116||0.114|
Data from the National Bank of The Republic of Macedonia (NBRM) are the only official data on foreign direct investments in Macedonia, with the National Bank of The Republic of Macedonia publishing aggregated data on foreign direct investments by countries of payment and branch of activity, while official data on investments by individual companies are not available.
|Countries with the biggest nominal investment||Total in € million|
“One big advantage for our company is our position geographically. We are situated in the crossroad of the Balkans and have easy access by road to most European countries.”
“Strengths: geographical position, regular VAT returns, flat tax, professional relationship with the governmental institutions.”