Country Report Macedonia

 

Macedonia is a country in Balkan, located in Southeast Europe. It is one of the successor states of the former Yugoslavia, from which it declared independence in 1991 and became a member of the United Nations in 1993.

The Republic of Macedonia has borders with Kosovo to the northwest, Serbia to the north, Bulgaria to the east, Greece to the south, and Albania to the west. It constitutes approximately the northwestern third of the larger geographical region of Macedonia, which also comprises the neighboring parts of northern Greece and smaller portions of southwestern Bulgaria and southeastern Albania.

The country’s geography is defined primarily by mountains, valleys, and rivers. The capital and largest city, Skopje, is home to 507,000 inhabitants. The major ethnic groups are: Macedonians and  Albanians, followed by Turks, Romani, Serbs, and others.

GOVERNMENT 

The individual income and corporate tax rates are a flat 10 percent. Other taxes include a value-added tax and a property transfer tax. The overall tax burden equals 24.6 percent of total domestic income. Government spending has amounted to 32.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.9 percent of GDP.

Regulatory Efficiency

Streamlined processes for business formation and operation provide an environment that is fairly conducive to private investment and production. After years of high unemployment, recent reforms have focused on making the labor market more flexible.

Open Markets

Trade is extremely important to Macedonia’s economy; the value of exports and imports taken together equals 113 percent of GDP. The average applied tariff rate is 2.0 percent. In general, foreign and domestic investments are treated equally. State-owned enterprises distort the economy. The financial sector has become more dynamic.

Bank competition has increased, and the foreign presence accounts for more than 80 percent of total banking-sector assets.

Foreign Direct Investment

As a small, land-locked Balkan country, Macedonia is heavily dependent on FDI for employment and growth, and therefore welcomes foreign investors who can provide substantial numbers of jobs.  Legislation puts foreign and domestic companies on roughly equal footing, and Macedonia consistently provides national treatment to foreign investors.

The government also provides numerous incentives, such as tax breaks and subsidies, to attract foreign investment.  Under the previous government, incentive packages for foreign investors were not disclosed to Parliament or the public.  The new government has promised to live up to past contracts while instituting transparent policies for attracting FDI.

Macedonia has adopted multilateral conventions protecting foreign investors and concluded a few bilateral investment protection treaties, but none with the United States.

Multiple ministers and agencies promote Macedonia as an investment destination. The Agency for Foreign Investments and Export Promotion of the Republic of Macedonia is the primary government institution in charge of facilitating foreign investments in the country.

The government maintains an ongoing dialogue with large foreign investors through frequent meetings and polls to solicit feedback.  Large foreign investors can also directly contact government leaders for assistance in resolving issues.

 The Foreign Investors Council articulates foreign investors’ views and suggests ways to further improve the business climate, but has not been invited as an association to join Macedonia’s Economic-Social Council.

Business Facilitation

All legal entities in the country must register with the Central Registry of Macedonia.  Foreign businesses may register a limited liability company, single-member limited liability company, joint venture, joint stock company, as well as branches and representative offices.

Macedonia introduced a one-stop-shop system that enables investors to register their businesses within a day by visiting one office, obtaining the information from a single place, and addressing one employee.  In addition, all investors may register a company online using the secure system for electronic registration of all types of businesses in the Trade Registry and the Registry of Other Legal Entities, available at.

Applications must be submitted by an authorized registration agent.  The online business registration process is clear and complete and available for use by foreign companies.

In addition to the registration of all business activities as stipulated by the Trade Companies Law, some business activities must obtain additional working licenses or permits before starting their operations.  For those, the registration process is followed by a licensing process with the relevant authorities covering the matter of licenses and/or permits.

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