In an era of increasing labor mobility, a growing number of individuals earn income from employment, consulting services, professional fees, or other activities abroad.
One of the most common issues is whether this income must be declared and taxed in the Republic of North Macedonia and the answer depends on the individual’s tax status, namely, whether they qualify as a tax resident under domestic legislation.
According to the Personal Income Tax Law, a tax resident is a natural person who has a permanent residence in the Republic of North Macedonia or resides on its territory for 183 or more days in any 12-month period. However, when determining resident status, it is not enough to consider only the formally registered address, but the center of the person’s vital and economic interests, i.e. where his family, real estate, professional activities and other permanent personal and economic ties are located, is also of particular importance.
If an individual holds the status of a tax resident, they are obligated under the Personal Income Tax Law to declare and pay tax on their “worldwide income”, meaning income generated both within the Republic of North Macedonia and abroad. This rule applies to various categories of income, including employment income, income from independent activities, professional fees, and other taxable sources of revenue.
In practice, it is not uncommon the same income to be subject to taxation both in the source state (where it was earned) and in the state of tax residence.
To prevent double taxation, the Republic of North Macedonia has entered into Double Taxation Avoidance Agreements (DTAAs) with numerous countries.
Furthermore, the Personal Income Tax Law provides for the possibility of using a tax credit, i.e. reducing the tax liability in Macedonia by the amount of tax already paid abroad, provided that the legal requirements are met and that appropriate documentation is available.
There is a common public misconception that residing abroad for more than 183 days automatically exempts an individual from tax obligations in North Macedonia. Nevertheless, the 183-day rule does not apply automatically and is not the only criterion for determining tax residency. Depending on the specific circumstances and the provisions of the applicable Double Taxation Avoidance Agreement, the individual may still be deemed a tax resident of the Republic of North Macedonia and remain under an obligation to declare their foreign-sourced income.
Therefore, individuals who earn income outside the resident country should promptly determine whether they have tax resident status, whether there is an agreement with the country from which the income originates to avoid double taxation and whether they have evidence of any tax paid abroad.
The correct application of these rules allows for the fulfillment of legal obligations and the avoidance of unnecessary tax risks.
It is also important to keep in mind that the Public Revenue Office has the legal right to determine tax liabilities for undeclared income and for previous tax periods.
According to the general rules, the right to determine tax expires after five years, which is why timely fulfillment of tax liabilities is of particular importance.