In the Official Gazette of the Republic of North Macedonia, No. 199 dated September 25, 2023, the Law amending and supplementing the Value Added Tax Law has been published. According to Article 24, the Law enters into force on the day of its publication in the Official Gazette of the Republic of North Macedonia. However, it should be noted that the Law includes provisions that will start to be applied from January 1, 2024, and these will be the main focus of this article.
Namely, the amendments supplement the provisions outlined in Article 6 of the Value Added Tax Law, specifically enhancing and clarifying the provision of services, which, according to the law, constitutes any activity that is not the sale of goods as per the provisions of the law. In Article 6, paragraph 2, after point 5, a new point 6 is added, stating that the provision of telecommunication services for the transmission, emission, or reception of signals, words, images, sounds, or information of any nature through a connection, radio, optical, or other electromagnetic systems, is considered a service. According to the newly added point 7, services provided electronically are also considered, including the creation of websites, software and its updates, music, movies, and games, including games of chance, as well as political, cultural, artistic, sports, scientific, and entertainment broadcasts, distance learning, etc.
A significant amendment and addition to the Value Added Tax Law is the introduction of a tax representative. According to the new Article 9-b of the Law, starting from January 1, 2024, a foreign entity that does not have a registered office or a branch on the territory of the Republic of North Macedonia but engages in the sale of goods and services in the country that are subject to value-added tax under this law is obliged to register for value-added tax purposes and appoint a tax representative.
Specifically, the foreign entity registers for value-added tax purposes before commencing taxable transactions in the country, and it can appoint only one tax representative. The appointment of a tax representative is done by submitting a registration application for value-added tax purposes along with the required documentation.
It is important to note that the legislator has clearly specified that a tax representative can be appointed only if registered for the purposes of value-added tax for at least 12 months before submitting the application for the appointment of a tax representative. On the day of submitting the application for the appointment of a tax representative, there should be no overdue and unpaid tax obligations. If it is a legal entity, it should not be undergoing bankruptcy or liquidation proceedings, and if it is a natural person, it should not be criminally convicted. The tax representative has the obligation to calculate the tax, submit tax returns, pay the tax, and pay interest in case of late payment of the tax. At the same time, they jointly guarantee the value-added tax owed by the foreign entity.
Also, starting from January 1, 2024, and based on Article 6 of the Law Amending and Supplementing the Value Added Tax Law, Article 14 of the Law is amended. Concerning the place of service provision to a taxable person, the place is considered to be where the taxable person has its actual headquarters. If the provision of services is made to a subsidiary located outside the place of the actual headquarters, then the place of service provision is considered to be where the taxable person has a subsidiary. If such a place does not exist, the place of service provision is considered to be the habitual residence or the usual residence of the taxable person who is the recipient of the service.
For the place of service provision to a non-taxable person, it is considered to be the place where the service provider has its actual headquarters. If the provision of services is carried out by a subsidiary of the service provider located outside its actual headquarters, then the headquarters of the subsidiary is considered the place of service provision. If such a place does not exist, the place of service provision is considered to be the habitual residence or the usual residence of the service provider.
According to the provisions of the law, there are exceptions to the aforementioned rules for determining the place of service provision. Specifically, the place where real estate is located is considered the place of service provision when it comes to services related to real estate, including intermediation in real estate transactions, services provided by experts and real estate agents, real estate appraisal, accommodation commissions in the hotel industry, or similar areas. The place where passenger transport is carried out, proportionally to the portion of the transport executed, is also considered the place of service provision when it comes to passenger transport. Additionally, according to the provisions of the law, the place where the service is actually performed is considered the place of service provision for services involving the delivery of food and beverages for consumption on-site, as well as catering services. However, for the exception related to the place of service provision for the delivery of food and beverages for consumption on-site and catering services performed on a ship, plane, or train, the place where the transportation of individuals begins is considered.
We note that the aforementioned exceptions for determining the place of service provision are just a part of the exceptions explicitly outlined in Article 6, paragraph 4 of the Law Amending and Supplementing the Value Added Tax Law.
Furthermore, in order to prevent double taxation, non-taxation, or violations of competition conditions, the legislator has stipulated that the Minister of Finance is authorized to determine the place of performance of individual services based on where the service is utilized. The method for determining the place of supply of services, as outlined in Article 6 of the Law amending and supplementing the Value Added Tax Law, is also prescribed by the Minister of Finance.