Protected investments/investment guarantees
The legislative framework for foreign investments is consisted of the Constitution of North Macedonia (1991), national laws and bilateral and multilateral international treaties. On the institutional level, there is a special state agency named Invest North Macedonia responsible for promotion of investments and assisting investors and exporters.
Foreign investors enjoy two-level protection under the Constitution i.e. (i) guarantee for repatriation of the invested capital and gained profits, and (ii) elimination of the possibility for reduction of the rights which arise from the invested capital by law or other regulation. The goals and obligations for ensuring free movement of capital and protection of investments, stipulated in the Stabilisation and Association Agreement between North Macedonia and the European Union are also in line with the principles guaranteed by the Constitution.
The protection of foreign investments is further strengthen through bilateral and multilateral international treaties. In particular, North Macedonia is a signatory party to the ICSID Convention and has signed around 40 bilateral investment treaties (BITs) which enable ICSID arbitration for the nationals of the counterparties – regional neighbours, European Union member states, countries from Asia and Africa. The BITs foresee transparency, free transfer of all payments relating to investments in some cases, as well as banning expropriation and guaranteeing compensation for losses. In addition, North Macedonia has signed:
In order to further facilitate the free trade and the business operations of foreigners around 49 double taxation treaties are concluded with countries like Russia, Great Britain, Luxembourg, Switzerland, Qatar, etc. These agreements provide a range of taxation reliefs as low as 0% on dividends, depending on the signatory-country, as well as reliefs on interest, royalties from copyright and other income.
The national legislation ensures non-discriminatory and equal treatment with respect to the protection of the rights of the foreigners before the institutions of North Macedonia. Foreigners can seek protection of their contractual and statutory rights before the courts of North Macedonia. Also, eligible disputes can be resolved before international arbitrations. All foreign arbitral decisions can be enforced after being recognized in accordance with the terms of the New York Convention. Within contractual relations, the parties can opt for competence of a foreign court whose decision would be subject to recognition as well.
Incentives for investors
An essential part of the incentives for investors are focused on the companies within the Technological Industrial Development Zones (TIDZs). TIDZs are investment-friendly areas of territory of the Republic of North Macedonia conceived to serve high-tech clean industry. Companies enjoy significant incentives in regards to special customs and tax regimes.
Becoming an entity registered for performing a business activity in North Macedonia is the first step to being a TIDZ user, followed by signing an agreement to perform business activities in the TIDZ with its founder, as well as obtaining a decision for commencement of operations.
Having in mind the environmental precautions necessary, the TIDZs welcome foreign and domestic companies willing to perform activities in the area of (i) manufacturing and service activities; (ii) storage of goods for the purposes of the company user of the TIDZ; (iii) bank and other financial activities; (iv) insurance activities and reinsurance of real estate and people; and (v) other activities exclusively for the purposes of the performance of the working activities in the TIDZs.
The TIDZs have become North Macedonia’s most attractive investment opportunities, due to the generally favourable economic climate, but mostly due to the incentives the Government has provided to attract foreign investors, as follows:
Besides the aforementioned tax reliefs, the user of a TIDZ is also exempt from VAT for trade of goods and services within the TDIZ and import of goods in the TDIZ which are intended for purposes of production. This exemption is not applicable for trade, nor import of goods and services which are intended for end users.
A new Law on the Financial Support of Investments was adopted in 2018, regulating the procedure for granting financial support to investments of the business entities that will invest in the Republic of North Macedonia. The investment project for which the financial support is granted cannot last longer than 5 years from the start of its realization. Beneficiaries of financial support may be business entities that started a productive initial investment, if they fulfil certain conditions. The beneficiary of the financial support participates in the investment with its own funds, with at least 25% of the total eligible investment costs. The total financial support that can be paid cannot exceed 50% of the amount of the eligible costs realized. For large investment projects, the amount of financial support represents a percentage of the justified investment costs.
Financial support cannot be granted to an entity in the TIDZ, as well as to entities outside TIDZ, for the same eligible costs for which state aid has already been granted.
The types of financial support include:
Financial support for investments for the support of:
The competent authorities to which the request for granting financial support (with accompanying documentation) are filed are the state agency Invest North Macedonia and the North Macedonia Free Zones Authority, while support is granted by the Government.
Outside the above, companies incorporated with foreign capital can enjoy the same incentives as the domestic ones (e.g. exemption from certain taxes and contributions when hiring certain categories of the population; grants; etc.).