Pillar 2 Dashboard: North Macedonia

On January 3 2025 the Law on Global Minimum Corporate Income Tax was published in the Official Gazette. This applies the IIR and a DMTT from January 1, 2024 and the UTPR from January 1, 2025.

GLOBE APPLICATION

General

As expected, the Law closely follows the EU Directive. There are very few options given to member states in the EU Directive in terms of flexibility over national implementation.

The Law only includes the provisions as applied by the EU Directive. As such there are few references to the OECD Model Rules and there are no aspects of the OECD Administrative Guidance included in the Law, aside from references to Safe Harbours.

The Law provides that certain aspects (eg the operation of the DMTT) is subject to Regulations to be provided by the Minister of Finance.

Administrative Guidance

There are no aspects of the OECD Administrative Guidance included in the Law.

Safe Harbour and Penalty Relief Guidance

Article 34 of the Law includes a provision for Safe Harbours. It states that jurisdictional top-up tax will be zero if the effective level of taxation of the constituent entities located in that jurisdiction meets the conditions of a qualified international safe harbor agreement.

A qualified international safe harbor agreement is defined as an international set of rules and conditions to which the IF/OECD have agreed.

Article 56 of the Law does specifically state that when applying the provisions of the Law, and if elected by a Constituent Entity, qualified international agreements on the Transitional CbCR Safe Harbour, the QDMTT Safe Harbour and the Transitional UTPR Safe Harbour will apply.

Article 13(5) of the Law provides that if a QDMTT for a fiscal year is based on financial statements prepared in accordance with the acceptable accounting standard of the UPE or with financial reporting standards applicable in the Republic of North Macedonia (and which is corrected in the event of a material competitive distortion), no top up tax is calculated for the MNE group (or large domestic group located in Macedonia), aside from Additional Tx arising from a recalculation of the effective tax rate.

ELECTIONS

Elections in the OECD Model Rules

The Law includes all of the key elections as provided in the EU Minimum Tax Directive, including the:

-Excluded Entity Election (Article 5(4))

-Election to use the Realization Method (Article 18(6))

-Stock-Based Compensation Election (Article 18(3))

-Election to Spread Capital Gains (Article 18(11-15))

-Consolidation Election (Article 18(8))

-GloBE Loss Election (Article 25(1))

-Tax Transparency Election (Article 44)

-Taxable distribution Election (Article 45)

-Unclaimed Accrual Election (Article 24(1))

-Distribution Tax Regime Election (Article 42)

-Substance-Based Income Exclusion Election (Article 30(2))

-Prior Year Adjustment Election (Article 27(1))

-De minimis Election (Article 32)

-Safe Harbour Election (Article 34)

Elections in the Administrative Guidance

There are no elections from the OECD Administrative Guidance included in the Law.

DEVIATIONS FROM THE OECD MODEL RULES/EU GLOBAL MINIMUM TAX DIRECTIVE

As expected, the Law closely follows the EU Directive. There are very few options given to member states in the EU Directive in terms of flexibility over national implementation.

The key differences are with the OECD model rules. ie:

-The Law extends the GloBE rules to include large scale, purely domestic groups,

-North Macedonia applies the IIR to not only foreign subsidiaries but also to all domestic constituent entities. This is permitted but not mandatory under the GloBE Model Rules.

The OECD Model Rules allow flexibility as to how to apply the UTPR. North Macedonia’s approach is to apply a UTPR top-up tax rather than a denial of deduction.

As such the carry forward provisions in Article 2.4.2 of the Model Rules for UTPR amounts not sufficient to provide for the additional cash tax expense are not relevant and these rules are not included in the Law.

As noted above, none of the provisions of the OECD Administrative Guidance are included in the Law.

DOMESTIC MINIMUM TAX

General

Article 13 of the Law provides for a QDMTT (or at least a domestic minimum tax that is likely to be classed as a QDMTT) for accounting periods beginning from January 1, 2024.

QDMTT Design Features

Article 13(3) of the Law provides that the general provisions in the Law for calculating top-up tax also apply for the DMTT.

Article 13(4) provides that the Accounting Standard used is IFRS if that is used by the Constituent Entity, however, a local accounting standard as required under a regulation applicable in North Macedonia (and corrected for a Material Competitive Distortion) can be used.

Article 13(9) of the Law provides that the method of calculation and collection of the DMTT shall be prescribed by the Minister of Finance.

There are therefore none of the mandatory or optional deviations in the design of the DMTT as provided by the OECD Administrative Guidance.

Registration

Not provided.

Filing

The relevant aspects of the submission of a GloBE Information Return (GIR) are included, as provided in the EU Directive.

Every Constituent Entity located in North Macedonia will have an obligation to file a GIR in North Macedonia. However, this obligation can be discharged if the GIR is filed by:

-The Ultimate Parent Entity, or

-The Designated Filing Entity.

Where the GIR is being filed by either the Ultimate Parent Entity or the Designated Filing Entity, the Constituent Entity, must file a notification with the Revenue.

The notification must contain:

-Details of the entity that is filing the GIR, and

-The jurisdiction in which such an entity is located.

Where the GIR is filed by the Designated Local Entity it needs to outline the Constituent Entities that it is filing on behalf of.

Both the GIR and associated notifications must be filed no later than 15 months after the end of the fiscal year (with an 18-month deadline for the Transition Year).

Article 48(1) of the Law provides that an IIR/UTPR top-up tax return is required to be submitted within 30 days from the deadline for filing the GIR.

Article 49(1) of the Law provides that a QDMTT top-up tax return is required to be submitted by the deadline for filing the GIR.

Payment

Articles 48(4) and 49(4) of the Law provides that the payment of top-up tax must be made within 30 days from the relevant top-up tax return filing deadline.

Articles 48(5) and 49(5) apply joint and several liability for MNE/domestic group members in Macedonia for the payment of top-up tax.

Penalties

Under Article 52(1) a fine of between 6,000 to 10,000 euros (in the denar equivalent) applies for failure to file the GIR. This increases to between 6,000 to 20,000 euros for failrure to file a top-up tax return.

None issued.

Not included.

See ‘Domestic Rules’.

See ‘Domestic Rules’.