Skopje, 12 November 2023 (MIA) - The European Commission's latest report on the country's progress notes that North Macedonia is moderately prepared in the area of taxation, adding that some progress was made specifically in amending its preferential tax regime in the technological and industrial development zones.

"As a result, North Macedonia was removed from the Annex II list of the non-cooperative jurisdictions for tax purposes. The country has yet to start the automatic exchange of financial account information as per the Organisation for Economic Co-operation and Development (OECD) standard," reads the report.

As some of last year’s recommendations were not fully implemented, they remain valid. In the coming year, according to the EC, North Macedonia should develop a new integrated IT tax system for the Public Revenue Office (PRO), improve its compliance risk management and the strategic reform process of the PRO, and start preparations for putting in place a mechanism to implement the automatic exchange of financial account information with EU Member States effectively, in line with the OECD global standard. 

On indirect taxation, the VAT exemptions and preferential rates for essential products were removed at the end of 2022. A preferential VAT rate of 10 % was applied for some energy products to alleviate the effects of high international energy prices. The preferential VAT rate of 10% for electricity for households was applied until 30 June 2023. 

The report notes that delays still remain in the VAT refund process, as only 45% of the requests submitted in 2022 were refunded within the legal deadline of 30 days. 

The Commission points out that North Macedonia has signed 49 double taxation agreements, including with all EU Member States except Cyprus, Malta, Portugal and Greece, with whom negotiations are ongoing. The country has not yet committed on a date to start the automatic exchange of financial account information as per the OECD standard. 

"Regarding operational capacity and computerisation, the PRO still has to improve its business processes, implement a new integrated IT tax system replacing the current fragmented IT system, develop compliance risk management and continue to expand e-services," reads the report, adding that the PRO is obliged to provide data from the unique register of taxpayers to the SCPC, in accordance with the Law on prevention of corruption
and conflict of interest. 

Photo: MIA archive