Macedonia becomes more attractive for entrepreneurs

Apart from introducing flat tax in 2007 and the gradual reduction of the social security contributions starting on January 1, 2009 Macedonia is taking further measures for making the country more attractive for investors.

Over the past years the development of the Macedonian economy had been influenced by several external occurrences. Macedonia’s then important home market collapsed when former Yugoslavia broke up and the Kosovo-War economically paralysed the country. Soon after the crisis Macedonia could, ironically, profit from this very crisis, as the demand for western consumer goods strongly increased. Moreover, Serbia levied a 5-per-cent transportation tax on all shipments, which made many companies conduct their trading with Kosovo via Macedonia. The tax was abolished in 2005, but nevertheless the lion’s share of the trading still runs via Macedonia. However, foreign investments keep lagging behind and are insufficient. Therefore the south-eastern European country introduces a series of measures to promote economy.

First important steps towards economic stabilisation were set by obtaining the status of an EU-candidate country and by joining CEFTA and WTO. In 2007, Macedonia introduced a flat tax rate of 12 per cent which was reduced to 10 per cent at the beginning of 2008. As a further measure social security contributions are gradually reduced on January 1, 2009. This is expected to bring an overall reduction of 10 per cent till 2011. The new rates for social security contributions are as follows:
The health insurance rate (9,2 per cent for 2008) is reduced to 7,5 per cent on Jan.1, 2009.

The unemployment insurance contribution (1,6 per cent) remains unchanged, while the retirement pension insurance is reduced from 21,2 to 19 per cent. Till 2011 the total rate of social security contributions of presently of 32 per cent will be reduced to 22 per cent. Furthermore gross pay calculation of wages shall be introduced in April 2009. This will result in cancelling so far compulsory wage supplements like allowances for travelling expenses and meals.

The World Bank also finds that the situation for entrepreneurs has improved in Macedonia and recently pronounced Bitola the most entrepreneur-friendly town in Southeast Europe. The study compared cities in seven south-eastern European countries in the fields of starting a company, obtaining licences, registering property and asserting contractual claims.