1. THE SHORTAGE AND COST OF CRUSH-CRUSH-SCATTER AS TRADE IN GOODS

Within the scope of specific transactions without compensation that are considered as transactions with compensation for the purposes of VAT, from Article 3 paragraph 3 of LVAT (such as grants, appropriations, retentions) also include:

– Shortages of goods that are not caused by extraordinary events (theft, fire or other natural disasters) and

– The stated amount of the cost of damage, destruction, breakage and spoilage of goods above the normalized cost amounts determined for the relevant economic activity, provided that the same did not occur as a result of an extraordinary event or natural disasters.

2. REGULATION OF TAX TREATMENT OF VALUE VOUCHERS

In terms of specific rules for the tax handling of vouchers, the recommendations of the European directives have been implemented so that through 3 new articles in the VAT Law (8-a, 8-b and 8-c), the VALUE VOUCHER is first of all defined as an instrument for which there is an obligation to accept as compensation for the turnover of goods or services, and then in relation to their content and a specific reflection of the turnover they compensate for, the different tax treatments (from the point of view of VAT) of two types of value vouchers are arranged:

– single-purpose value voucher and

– multipurpose value voucher.

A value voucher for which the place of sale of goods, i.e. the place of sale of services, to which the value voucher refers, as well as the amount of value added tax that should be calculated and paid for the sale of those goods and services is known at the time upon issuance of the value voucher is considered a SINGLE-NAME VOUCHER. Any transfer of the single-purpose voucher performed by a taxpayer, on his own behalf, is considered a sale of goods, i.e. a sale of services to which the value voucher refers, while the actual sale of goods, i.e. a sale of services in exchange for the single-purpose voucher, which accepted by the seller as a fee or part of a fee, it is not considered a sale of goods or a sale of services.

When it comes to a voucher with multiple uses or options, VAT is calculated and charged at the end, ie. at the moment of the actual delivery of goods or services to which the voucher refers, i.e. only the actual turnover of goods, i.e. turnover of services in exchange for a multi-purpose value voucher, accepted by the performer of the turnover of goods or turnover of services, as compensation or part of compensation for that turnover, is subject to taxation with value added tax, while any previous transfer of that multi-purpose voucher is not subject to taxation with value added tax.

3. SOLIDARITY LIABILITY FOR TAX OBLIGATIONS IN A RELATED ENTITY FOR VAT

Pursuant to Article 9-a of the VAT Law, voluntary tax connections are made to request of the taxpayers – the members who are consolidated or become official ordered by the competent tax authority (when the existence of a certain ownership, organizational or management relationship between separate taxpayers registered for VAT, if he finds a violation of tax principles among these persons or the possibility of their violation).

The concept of tax linkage provides for the unpaid value added tax from the representative of the related party to be jointly and severally liable and each person in the related party person.

But since this was not prescribed by a legal provision, it is now “legalized” through the new paragraph 5 of article 9a, which stands: All persons that are consolidated are jointly and severally liable for the unpaid value added tax of each separate person in the related person for the period in which they are members of the related person.

4. PREDEFINED SPECIAL TAX BASES FROM ARTICLE 19 OF THE LAW

To overcome certain problems in practice and to define a new rule in taxation of used vehicles, three segments of the special tax bases from the current article 19 is redefined as follows:

– the turnover realized by means of an auction (the tax base represents the achieved final price less VAT);

– the transfer of movable and immovable property in a procedure for forced collection/execution (tax base represents the achieved final price minus the tax on added value, calculated by applying a calculation rate determined on basis of the prescribed tax rate, except in the case where the creditor is acquired with the movable or immovable property, for which it represents a tax base the final price achieved);

– the sale of imported second-hand non commercial motor vehicles within 3 years of importation, which is a completely new type of tax base provided for by the new paragraph 7 of Article 19, which provides for the first and every subsequent turnover with imported used non commercial motor vehicles within 3 years from the day of import the tax base cannot be lower than the value determined by the competent customs authority. (This way of determination of the tax base will not be applied to sales of used passenger cars motor vehicles that have been imported into the territory of the Republic of North Macedonia until today upon the entry into force of this law.)

5. AVERAGE INSTEAD OF SELLING RATE FOR TAX DEBT IN FOREIGN CURRENCY

By amending Article 20 of the VAT Law, the exchange rate for determining the the tax debt for VAT purposes when the compensation owed by the recipient of the good or the user of the service is calculated in foreign currency. With the changes instead of using selling rate course, the middle exchange rate determined by the National Bank of the Republic of Macedonia will be used the day the tax debt was incurred, in accordance with Article 31 of the VAT Law.

6. THE MODEL OF PAYING TAX DEBTS IS ABANDONED TO ANOTHER TAXPAYER THROUGH THE VAT RETURN

The possibility of paying tax debts to another has been deleted from Article 45 paragraph 1 of the LVAT taxpayer through the VAT return, i.e. for highlighting a tax claim which a taxpayer states it in his VAT Return as a request for a waiver of the claim for the purpose of settlement of tax obligations of another taxpayer, which are applied from January 1, 2021.

The options remain: if the amount of previous tax in a certain tax period is greater than the amount of the tax calculated for the turnover he performed, as well as for turnover for which he is a tax debtor according to Article 32-a of this law, the difference is his returns to the taxpayer based on his request expressed in the tax return application. If the taxpayer does not express a claim for the return of the difference expressed in the tax return, such difference is transferred as a tax advance for the next one tax period.

7. NEW RULES FOR VAT REFUND OF FOREIGN DIPLOMATIC AND CONSULAR REPRESENTATIONS AND AN INTENDED SYSTEM OF RECIPROCITY AT THE TAX EXEMPTIONS ON IMPORT FOR THESE AND OTHER BENEFICIARIES FOREIGN ENTITIES

The conditions from Article 48 of the Law, under which a VAT refund is approved from procurement of goods and services for official needs of foreign diplomatic or consular offices representative offices, so that the refund can only be realized for individual amounts invoices that exceed 9,000 denars (instead of the previous amount of 5,000 denars) including the value added tax, and the Refund Request to be submitted at the latest within six months after the end of the calendar year in which it was carried out turnover to the petitioner (and not within five years after the expiry of the calendar year in which the transaction was made), as it was until now.

Tax exemptions for the importation of goods by diplomatic and consular authorities representative offices of foreign countries in RS Macedonia (as well as from their heads and diplomatic and consular staff, then heads and representatives of foreign heads states, international and interstate organizations) will be valid only in accordance with the terms of reciprocity, in that, for the exemption during importation by the staff of the foreign diplomatic and consular missions in RS Macedonia provided for by Article 27 paragraph 1 point 4 g) it is specified that the same applies to the administrative-technical staff.

8. CONTINUED PREFERRED TREATMENT OF APARTMENTS AND RESIDENTIAL BUILDINGS

The preferential treatment of the first turnover of residential buildings and apartments in that part in which the same are used for residential purposes and which will be carried out within five years after construction (Article 30 point 14 of the LVAT), continues until 31.12.2025.

(This is regulated by an amendment to the Law on Amendments and Supplements to the Law on Tax on added value from the “Official Gazette of the Republic of Macedonia” no. 198/18, where in the article 1 the words “December 31, 2023” are replaced by the words “December 31, 2025 year).

II. NEWS AND CHANGES WITH “APPLICATION FROM SEPTEMBER 1, 2023”

1. DIVISION OF PRODUCTS FOR HUMAN NUTRITION INTO TWO PREFERRED RATES OF VAT

In Article 30 of the VAT Law with a list of goods and services that are taxed at 5% only goods from the “Basic products for human consumption” category remain, while for other products for human consumption will be subject to a preferential tax rate of 10% from Article 30-a.

2. INTRODUCTION OF PREFERENTIAL TREATMENT OF SOME NON-FOOD PRODUCTS

With the changes in the Law, a preferential rate of 5% is also given to: electronic/digital textbooks and menstrual products (for the sale of which the general tax was previously applied VAT rate of 18%), while for the products: pellets, pellet stoves and pellet boilers, who had preferential treatment and for whom a return to the general rate was proposed for taxation of 18% VAT, the preferential rate of 5% remains to be applied.

A final and specific arrangement in the groups of preferential products will be carried out through amendment of the Government’s Decision that will more closely determine the goods and services that will be are taxed at preferential tax rates.

Warning:

It seems illogical and retroactive to apply the changes in article 30 and 30-a of 1 September 2023, when the amended Law enters into force on September 25, 2023, however the actual application of the changed tax rate will be possible by entering into force of the amended Decision with which the Government more closely determines the type of goods as and the time period of application of the preferential tax rate of 5% and 10% established in paragraph 1 of Article 30 and Article 30-a respectively.

III. NEWS AND CHANGES BEGINNING WITH IMPLEMENTATION FROM JANUARY 1, 2024

1. INTRODUCTION OF “TAX REPRESENTATIVE” OF A FOREIGN PERSON, FOR TRANSACTIONS IN THE COUNTRY

With the changes in the Law, the category “tax representative” is introduced for the first time in our country.

Namely, with the new article 9-b, it is mandated to every foreign person who has neither a registered office nor subsidiary in the territory of the Republic of North Macedonia, which trades in goods and services in the country that are subject to VAT taxation according to this Law, to be reported for value added tax purposes and to appoint a tax representative, except foreign persons who carry out sales in the sense of Article 32 point 4 of the Law.

The foreign person in this case is obliged to register for the purposes of the VAT value before starting to perform the taxable turnover in the country.

A foreign person can appoint only one tax representative.

Appointment of a tax representative is made by submitting the Registration Application for the purposes of the value added tax to the competent tax authority.

The tax representative has an obligation to calculate the tax (Article 40) for submission tax declaration (Article 41), for the payment of the tax (Article 43) and for the payment of interest in case of late payment of the tax (Article 44) as well as to keep records on behalf of the taxpayer he represents (in accordance with Article 52, 53, 54, 55 and 56) on behalf of the foreign person. But the most important prescribed obligation of the tax representative is jointly and severally guarantees the value added tax owed by the foreigner.

The tax representative is consistently listed in the list of tax debtors from Article 32, under the newly added point 6. of this article.

2. TAXATION OF SERVICES ACCORDING TO A PREDEFINED PLACE OF SALE OF THE SERVICES

With the Law on Amendments and Supplements to the Law on VAT, Article 14 was completely amended with which determines the place of turnover of services, in the terms of this law, as well as the rules for determining the place of performance of services. For this purpose, it is first defined the category “taxpayer” for the purposes of determining the place of turnover when the service is taxable in the place of the taxpayer as a provider or as recipient of the service, and then the general rule for taxation according to the place of the taxpayer who is the recipient of the service and there are prescribed exceptions to this rule for two groups of services (similar to the solution from the current article 14 of the Law).

• Determination of “taxpayer” for the purpose of applying the rules for the place of performance of the services With the amended Article 14 paragraph 1 of the Law, for purposes of determining the place of sale of services, except for the persons listed in Article 9 of this law (who carry out economic activity, production, trade, service) as taxpayers will also be considered persons who perform activities or carry out sales that are not defined as taxable sales of goods or services in the sense of Article 2 of this law, i.e. of any supply of services made to them.

Hence, GENERALLY, for a place of supply of services to a “TAXABLE PERSON”, according to the amended article 14 paragraph 2, is considered:

– The place of the RECIPIENT OF THE SALE, that is, where that “taxpayer” has real seat.

– If the turnover of services is carried out to a subsidiary that the “taxpayer” has outside the place of the actual headquarters, then it is considered as a place of supply of services the place where the “taxpayer” has a subsidiary.

– If such a place (headquarters) does not exist, it is considered a place of supply of services the permanent residence or abode of the “taxpayer” who is the beneficiary of the service.

For the place of supply of services to a PERSON WHO IS NOT A TAX PAYER (someone who does not perform an activity) according to the amended article 14 paragraph 3, it is considered:

– the place where the PROVIDER of services has a real seat.

– If the turnover of services is carried out by the subsidiary of the provider of the turnover of services, which is located outside its real headquarters, then the headquarters of the subsidiary are considered a place of turnover of services.

– If such a place does not exist (no headquarters or subsidiary), for the place of turnover of services is considered the permanent residence or place of residence of the supplier services.

• FIRST EXCEPTION – special rules for determining the place of sale of services:

– Intermediary services – is the place of turnover where the service is performed, when it comes to services performed to a person who is not a taxpayer;

– Services related to real estate – the place of sale is the place where it is located immovable property when dealing with the sale of services in connection with immovable property, including real estate brokerage, services by real estate experts and agents, real estate appraisals, commissions for accommodation in the field of hospitality or a similar field such as accommodation campsites or sites intended for camping that function as campsites/sites for accommodation, guaranteeing rights to use real estate and preparation services and coordination of construction activities, such as architectural services and activities related to supervision of construction activities.

– Transport services – the place of turnover is the place where the passengers are transported performs, in proportion to the section or part of it, along which the transportation is performed when it comes to the transportation of passengers, that is, the place where the goods are transported performs, in proportion to the section or part of it, along which the transportation is performed when it comes to the transportation of goods to persons who are not tax payers.

– The place of supply is where the services are actually performed when referring to the following services: right of entry to cultural, artistic, sporting, scientific, educational, entertainment or similar events, such as fairs and exhibitions, including ancillary services related to the same, carried out to a taxpayer; provision of services and related activities in relation to cultural, artistic, sporting, scientific, educational, entertainment or the like activities, such as fairs and exhibitions, including the services of organizers of the specified services, which are performed to a person who is not a taxpayer; auxiliary transportation services such as loading, unloading, shipment, storage or other services that usually related to transportation, made to non-taxable persons bonds; appraisal services and works on movable material goods performed to persons who are not taxpayers; services of delivery of food and beverages for consumption on site and catering services.

– Short-term rental of a means of transport – the place of sale is in the place where that the means of transport is actually made available to the user of the service, while when it comes to non-short-term rental of a means of transport, to a person who does not is a taxpayer, the place where the user of the service has a real seat, permanent residence or abode.

• SECOND EXCEPTION: The place of supply of services should be in the place of the recipient who is not a taxpayer

For the place of sale of the following services, performed to a person who is not a taxpayer, all considers (contrary to the general rule) the place in which the user of the service has real seat, permanent residence or abode:

– transfer and assignment of copyrights, patents, licenses, trademarks and other similar ones rights;

– services in the field of advertising;

– services of advisors, engineers, consulting firms, lawyers, accountants and others similar services, as well as data processing and information provision;

– banking and financial services and insurance and reinsurance services, except rental of safes;

– providing staff;

– rental of movable tangible property, except for all types of means of transport;

– mediation services for access to natural gas systems or other similar network, providing access to the electricity network in case of congestion appropriate allocation unit when assigning cross-border transmission capacities of interconnecting lines;

– telecommunication services;

– radio and television broadcasting services and

– services performed electronically.

Warning:

If the general rule of place of taxation is taken into account (when the service is provided to “Taxpayer” to be the place of recipient), then, for the last group of services it follows that the place of taxation is always with the recipient of the service, whoever he is “taxpayer or not”.

3. DEFINING TELECOMMUNICATION SERVICES AND SERVICES PERFORMED ELECTRONICLY

This addition to the Law is for the purpose of improving and clarifying the law matter, thus defining more closely the telecommunications (transmission services, transmitting or receiving signals, words, images and sounds or information from any nature by means of communication, radio, optical or other electromagnetic systems, including the related transfer or assignment of the right to use the capacity for such transmission, emission or reception, including the provision of access to global information networks) and services performed electronically (creation of web pages, web hosting, remote maintenance of programs and equipment, software and its updating, images, text and information and making databases available, music, films and games, including games of chance, as well as political, cultural, artistic, sports, science and entertainment broadcasts and events and distance learning), and what was it necessary due to the wide representation and regular appearance of new content and types of services within these services.