ANALYSIS
Corporate Income Tax Rules
Change Again
Just before going on summer vacation this year, the
Macedonian Parliament unexpectedly reintroduced
corporate income tax on undistributed profits after a
5 year break, given as an anti-economic crisis measure in FY2009. The main justification for reintroducing the profit tax requirement was that the world
economic crisis had ended, eliminating the need for
the measure.
Despite the fact that the new legislation wasn’t
adopted until the middle of the year, its rules will
apply to profits generated throughout all of FY2014.
As a result, companies are likely to be unprepared
because they didn’t anticipate this expense in their
FY2014 budgets. Unfortunately, Parliament’s adoption of retroactive measures that carry financial
impact is not unusual in Macedonia. Predictably, the
practice reduces companies’ readiness and ability to
comply when the new
rules come into force,
Despite the fact that
thereby decreasing the
the new legislation
likelihood of their full
wasn’t adopted until the compliance. This unnecessarily increases stress
middle of the year, its
rules will apply to profits on companies working
here as well as enforcegenerated throughout
ment-related
costs
all of FY2014.
incurred by oversight
authorities.
Tax relief for reinvested profits
The new Law isn’t just the reinstatement of the old
CIT. It also creates a way for companies to decrease
their annual tax base by the amount of last year’s
profit that was reinvested for development purposes.
This tax relief covers investments in both tangible and
intangible assets, but excludes certain types of assets
intended for administrative purposes. To take advantage of this measure, taxpayers must own the assets
purchased with reinvested profit for five full years.
Unfortunately, the Law is unclear on whether the
reinvested profit tax relief could be applied to profits
generated in FY2013 and reinvested in FY2014. Thus,
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Author: Ana Shajnoska, Senior Tax Consultant,
PricewaterhouseCoopers, Ltd. Skopje
more clarification is needed to prevent confusion and
legal uncertainty early next year.
Carrying forward financial loss
The new Law stipulates that losses incurred in a
company’s annual income statement (adjusted by
non-deductible expenses) can be carried forward
against future profits for up to three years. However, this practice requires an explicit approval from
tax authorities. With this change, companies are no
longer allowed carry forward the tax credits that
exceed their taxable base.
Taxation of previous years’ accumulated
profits
The new CIT Law stipulates that profits accumulated
from FY2009 - FY2013 are taxable upon their distribution. Unfortunately, the new Law doesn’t address
dividends that were paid in advance from FY2014
profits. Since the new rules don’t come into force
until January 1, 2015, dividends that companies distributed during FY2014 will apparently be subject to
the 10% CIT. The lack of an exemption for FY2014
Emerging Macedonia Fall 2014 Issue 43