Content Group 4 of North Macedonia

Foreign Direct Investment Policy

1. Invest North Macedonia is the Agency for Foreign Investors and Export Promotion of North Macedonia, and it is the official government investment and export promotion agency responsible for attracting foreign investments and supporting the export promotion of the country.


2. North Macedonia is heavily dependent on FDI for employment and growth, so it welcomes foreign investment that can provide a substantial numbers of jobs. Legislation places foreign and domestic firms on roughly equal footing, with foreign investors regularly receiving national treatment. The government also provides numerous incentives and has promised to institute transparent policies for attracting FDI. North Macedonia has adopted a number of multilateral conventions protecting foreign investors, and has also concluded a number of bilateral investment protection treaties.


3. Foreign investors are permitted to invest directly in all industries and business sectors, except those limited by law. Investment in the production of weaponry and narcotics is subject to government approval, and investors in industries such as banking, financial services and insurance must meet specific licensing requirements that apply equally to both domestic and foreign investors. Foreign investment may be in the form of money, equipment, or raw materials. According to the law, foreign investors have the right to receive the full value of their investment in the case of nationalisation, a provision that does not apply to domestic investors.


4. Indicative of its liberalisation efforts, North Macedonia has created one of the most attractive tax systems in Europe with a simple flat tax rate of 10% on corporate and personal income. In order to stimulate investment, corporate tax on retained earnings is set at 0%.


5. Special tax incentives are offered for companies operating in the Technological Industrial Development Zones (TIDZs), including a 10-year personal and corporate income tax exemption. The aim of the TIDZ is to support the development of modern technologies in North Macedonia. The North Macedonian Free Zones Authority is the governmental managing body responsible for the development of the country's free trade zones and assists foreign investors in the TIDZs.


6. The standard value-added tax (VAT) rate is 18%. This rate applies to overall turnover and imports of goods and services. A lower rate of 5% applies to supplies of certain goods and services.


7. All legal entities must be registered with the Central Registry of North Macedonia. A one-stop-shop system has made investment easier, making it possible for foreign investors to register a business within a day at a single location.


8. Foreign tax credit: The taxpayer is allowed a tax credit for the tax paid on foreign income abroad, up to the amount of tax payable for that income in North Macedonia. However, a tax credit for the withholding tax paid abroad is allowed only if a double tax treaty is in place and in the case where the North Macedonian company obtains proof for the amount of tax paid in the foreign country.


9. Taxes on reinvested profit: Corporate Income Tax 2018 introduces a possibility for decreasing the tax base for the year for the amount of profit reinvested for development purposes of the local taxpayer. In order to be able to utilise this tax relief, the taxpayers must maintain ownership over the assets purchased with the reinvested profit for a period of five years as of the day of their purchase.
10. North Macedonia has an Agreement for Promotion and Protection of Foreign Direct Investments with the following countries: Albania, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Mainland China, Croatia, the Czech Republic, Egypt, Finland, France, Germany, Hungary, India, Iran, Italy, Luxembourg, Malaysia, Montenegro, the Netherlands, North Korea, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Taiwan, Turkey and Ukraine.

Sources: WTO - Trade Policy Review, ITA, US Department of Commerce, Invest North Macedonia