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News/ A Quick Guide to the New Macedonian Government’s Reform Promises
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11/07/2017
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The new Macedonian Government took office on the 1st of June, after the Parliament approved the coalition government of the new Prime Minister, Zoran Zaev. The government programme provides for many reforms, including changes in the tax system, labour law and foreign investments.

"Fair" taxes

The "fair" tax system should introduce higher tax rates for the wealthy. The Government announced the introduction of a personal income tax with two rates (10% and 18%). The idea is to keep the existing rate of 10% for the majority of the population, while the additional rate of 18% will be imposed only on people with an of income over EUR 1,000. The paid personal income tax will be returned to those with the lowest income.

So far, there have not been any suggestions to amend the profit tax rate, which remains at a steady 10%. However, the Government will offer tax relief for all ICT companies exporting software and services, and reduce the profit tax for information technologies to 5%.

The property tax rate on residential and non-residential real estate with a market value higher than EUR 400,000 might be increased by 0.1 percent. Also, the tax rate would increase if more property is owned. 

Prime Minister Zaev announced a new Value Added Tax ("VAT") system named "More Money for Citizens" by which 15% of the paid VAT will be returned to citizens, except the VAT paid for (unspecified) luxurious products. Also, the Government intends to increase the rate of excise tax on passenger cars worth more than EUR 40,000.

Finally, the programme advertised by the new Macedonian Government abolishes two duties: the broadcasting fee and the maximum upper limit for the payment of salary contributions.

Labour market

The Government emphasised that its main objectives in the labour area are:

  • the employment of 64,000 persons in the private sector using active measures;
  • raising the minimum wage to MKD 16,000 by the end of the term; and,
  • stimulating the payment of higher wages (which will lead to an increased average net salary to MKD 30,000).

Regarding the rights of workers, an amendment to the Law on Labour Relations will be suggested in order to establish an overtime work registry and make collective agreements mandatory for all legal entities with more than 20 employees.

The programme further envisages a shared parental leave in the first three months after a child's birth. It also includes a guarantee of keeping the same job position upon their return from parental leave within the next year.

New investments policy

Even though the new Government promised to pursue an active policy in order to attract foreign direct investments, its programme is mainly focused on the development of domestic enterprises - primarily small and medium business ("SMEs"). Special attention will be paid to connecting domestic and foreign enterprises in the technological-industrial development zones. The plan is to incorporate a support mechanism for investment projects by domestic enterprises to the amount of 25% of the sum of the total investment cost and the gross cost for each new job. The ultimate goal is to achieve an average rate of economic growth higher than 5% during the term.

The programme includes the establishment of an investment fund for start-up businesses in which the state will have a minority interest, with over 51% of the capital owned by private entities. Also, service activities with a higher added value (IT companies, telecommunications, architecture, etc.) will receive support by covering up to 50% of the cost of equipment necessary for a new investment, up to EUR 50,000. The Government will offer tax incentives for investments by citizens who work abroad.

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