North Macedonia Enacts Global Minimum Tax Law From January 1, 2024

General

On January 3, 2025 the Law on Global Minimum Corporate Income Tax was published in the Official Gazette to implement the EU Global Minimum Tax Directive (the ‘EU Directive’).

As provided in the EU Directive, the Law includes an income inclusion rule (IIR) and an under-taxed profits rule (UTPR).

The IIR is to apply to financial years beginning from January 1, 2024. The UTPR will generally apply to financial years beginning from January 1, 2025.

A domestic minimum tax (DMTT) (intended to be a Qualified Domestic Minimum Top-Up Tax (‘QDMTT’)) also applies for financial years beginning from January 1, 2024.

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 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)

QDMTT 

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.

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.

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.

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.