North Macedonia’s transfer pricing laws align with the Guidelines set by the Organization for Economic Co-operation and Development (OECD). They are incorporated within the Law on Profit Tax.
Arm’s Length Principle
Under Article 12 of the Law on Profit Tax in North Macedonia, related parties must set prices and conditions for their transactions as if they were unrelated, in similar market situations. This rule applies to all types of transactions that can affect profits, including goods, services, royalties, and financial dealings.
Related Party Definition
In North Macedonia related parties are considered:
- When one party owns at least 20% of the other’s shares or voting rights, either directly or indirectly to a company;
- a third party owns at least 20% of both entities; the parties share the same directors or board members;
- one party has given or guaranteed loans that make up more than 20% of the other’s total assets;
- one party earns at least 20% of the other’s profit through a cooperation agreement; one is a permanent establishment of the other;
- or one party conducts business with another located in a country where the income tax rate is at least 25% lower than that of North Macedonia.
Transfer Pricing Methods
The methods that can be used to determine the arm’s length price are:
- Comparable Uncontrolled Price Method
- Resale Price Method
- Cost Plus Method
- Transactional Net Margin Method
- Profit Split Method
The taxpayer chooses the most appropriate method for each group of similar transactions. This choice depends on factors like the type of transaction, the quality and availability of data, how similar the compared transactions are, and whether reliable information from unrelated parties is available to support the analysis.
Comparability Analysis
The Macedonian Corporate Income Tax Act requires that related-party transactions be grouped by type and priced using the most appropriate method, following the arm’s length principle. To determine the right method, a comparability analysis must be carried out, which involves comparing the transactions with similar ones between independent parties. This involves a detailed review of similar transactions that have taken place in similar markets to make sure that dealings between affiliates (or sister companies) line up with normal fair market standards.
For the benchmark studies, there is a preference for local and regional companies, but as well EU-comparable companies can be hired for the service. Macedonian tax authority does not use ‘secret comparable”, and nor provides TP ‘safe harbors’.
Documentation Requirements
Companies that have transactions with related parties are required to submit a transfer pricing report in line with the rules set by the Ministry of Finance. They must also pay any additional tax that results from necessary adjustments. This reporting requirement does not apply if the company’s total annual income is below 300 million denars or if the transactions are only between domestic related parties.
The report must include information at both the group level (Master File), such as the group’s structure, activities, intangible assets, financial arrangements, and tax positions, and at the company level (Local File), including details about the enterprise, its related-party transactions, and financial data. Relevant attachments must also be included.
If the total value of cross-border transactions with related parties is below 10 million denars, a simplified report can be submitted, which must include a description of each transaction, its value, and the related party involved.
Advance Pricing Agreements (APA) and Mutual Agreement Program (MAP)
North Macedonia does not provision with advance rulings or pricing agreements.
Approach to Transfer Pricing Audits
Transfer pricing (TP) is becoming more important in North Macedonia as tax authorities pay closer attention to cross-border transactions between related companies. With globalization, intercompany transactions are more common, and TP policies are now seen not just as a legal requirement, but also as a useful tool for tax planning and business strategy. Tax authorities are increasingly conducting audits to ensure that prices in related-party transactions match those that would be charged between unrelated parties (arm’s-length principle). Companies need to provide sufficient documentation showing that the prices they trade among themselves are all just as local laws say and as the OECD suggestions recommend.
Penalties
If a taxpayer doesn’t meet the requirements and submit the transfer pricing report on time, they will face penalties. The fine depends on the size of the company: micro companies can be fined 300-1,000 EUR, small ones 600-2,000 EUR, and large ones 1,800-6,000 EUR. In addition, the responsible person in the company can also be fined between 50 and 500 EUR, depending on the company’s size.
Taxation at a Glance
In North Macedonia, the main tax laws regulate profit tax, personal income tax, property tax, and tax procedures. The Ministry of Finance is responsible for taxation policies’ governance and the collection of taxes across the country.
The currency of North Macedonia is the Macedonian Denar.
The official name of the North Macedonia tax authority is the Public Revenue Office of the Republic of Macedonia.
The table below provides a summary of the main taxation rates related to businesses:
Tax Type | Tax Rate |
Corporate Tax | 10% |
VAT | 18% |
Withholding tax on dividends to non-residents | 10% |
Withholding tax on interest to non-residents | 10% |
Withholding tax on royalties to non-residents | 10% |
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