(INVESTING IN THE TECHNOLOGICAL INDUSTRIAL DEVELOPMENT ZONES)
1. GENERAL INFO
The Republic of North Macedonia is a small country that offers great investment opportunities that are best represented through the opening of technological – industrial development zones set up with only one goal, which is to attract foreign and domestic capital so as to develop new technologies and through their application in the national economy increase the competitiveness and employment. Currently in the Republic of North Macedonia 15 technological – industrial zones have been opened which someone fully functional and other one are in different stage of preparation. In these zones so far, according to official statistics of the Government of the Republic of North Macedonia; several world renowned companies have started working, such as Johnson Matthey, Vanhool, Kostal, Kemet Electronics and many others. These companies generate high profits, despite the low cost of operation of its business offered by the Republic of North Macedonia and their benefits are guaranteed by law to all foreign investors who decide to invest in the technological – industrial zones.
The benefits for the foreign investors are regulated by the Law on technological – industrial development zones adopted in 2007. This law is lex specialis in the area that determines the manner of providing investment gains allocated to investors by granting state aid in the form of regional aid under the conditions determined by the Law.
2. BENEFITS
2.1 STATE AID
The law on technological – industrial development zones states that the maximum intensity of the regional aid shall amount up to:
– 50% of the justified investment costs or of the salary costs for the newly created jobs in the period of two years;
– 70% for small-sized enterprises and up to 60% for medium-sized enterprises of the justified investment costs or of the salary costs for the newly created jobs in the period of two years.
The contribution of the recipient of the assistance should be at least 25% of the justified investment costs and that contribution should not be a product of state aid.
The amount of regional aid also may amount up to 100% of the maximum intensity of the regional aid with regard to the part of the justified investment costs up to 50 million euros in denar counter value;
– 50% of the maximum intensity of the regional aid – with regard to the part of the justified investment costs between 50 and 100 million euros in denar counter value, and
– 34% of the maximum intensity of the regional aid – with regard to the part of the justified investment costs exceeding 100 million euros in denar counter value.
2.2 TAXES and CUSTOM DUTIES
The convenience to invest in the development zones is represented through tax exemptions and relief for investors in the zones. In that direction, they are completely exempt from income tax for 10 years from the commencement of their activity, but not longer than two years, after the year of obtaining the decision for starting the work, under conditions determined by the Law on technological – industrial development zones.
In addition, they are granted full exemption for 10 years from the commencement of their activities regarding the personal income tax on income from salaries of employees and personal income tax based on wages of new employees.
The supply of goods and services in the technological industrial development zones, except for sales for final consumption, is not subject to taxation with VAT.
The import of goods in the technological industrial development zones shall be exempted from value added tax, provided that they are not released in free circulation, that is, they are not intended for final consumption.
Apart from tax exemptions and relief, the developer or the user of the zone is also a subject to customs exemptions under the provisions of the Customs Law, as stipulated by the Law on technological industrial development zones. In this section, the investors are exempted from customs duties and value added tax on all products that are produced for export. Customs exemptions are possible because the technological industrial development zones have the character of a free zone in terms of the customs law and the tax law.
The reductions and exemptions related to taxation and customs, mentioned above, can be achieved if the investor is in the field of production activities, activities in the field of information technology (software development, hardware assembly, digital recording, computer chips, and alike.), scientific and research activities and production based on new technologies with high environmental standards and services directly related to the import of goods which enter the zone, provided that the goods are not intended for end use.
2.3 AID FOR TRAINING AND DEVELOPMENT
The technological and industrial zones can be granted assistance amounting up to 50% of eligible costs in the case of general improvement, and the amount of up to 25% of eligible investment costs in the case of special improvement. This assistance applies to training and development of theoretical and practical knowledge of current and future workers among the investors.
The aid intensity may be increased by 10% of the justified investment costs regarding special improvement and 20% of the justified investment costs regarding the general improvement in small and medium-sized enterprises, 10% of justified investment costs in the territory of the Republic of North Macedonia and 10% of the justified costs, provided that the professional improvement is to be undertaken by persons who have difficulties in finding employment.
2.4 OTHER BENEFITS
Other benefits offered to investors are the exemptions from fees regarding the construction land, in accordance with the Law on Construction Land. The Government of the Republic of North Macedonia can participate in the construction costs of a building developer in the zone up to almost:
– 100,000 euros in denars – for productive investments of 1 to 2 million euros in denars or 20 new jobs;
– 200,000 euros in denars – for productive investments from 2 to 5 million euros in denars or 40 new jobs;
– 300,000 euros in denars – for productive investments of 5 to 10 million euros in denars or 60 new jobs;
– 400,000 euros in denars for productive investments of 10 to 15 million euros in denars or 80 new jobs;
– 500,000 euros in denars – for productive investments over 15 million euros in denars or more than 100 new jobs.
The land in the zones is given to investors under long- term concession lease for a period of 99 years and the government of the Republic of North Macedonia allows free connection to gas, electricity, water and similar supplies. Foreign investors are also allowed to purchase property and land in the country.
3. BUSINESS OPPORTUNITES
Besides the above mentioned advantages and benefits offered to investors in these zones, it must be pointed out that the business climate in Republic of North Macedonia outside the zones is in real correlation with the benefits which are realized in the zones.
Consequently, registering a company in Republic of North Macedonia is done electronically in period of 1-2 days. The lowest amount of capital to start businesses or stakes establishing the company is 5,000 euros and the same amount of money can be paid within 1 (one) year of the incopration of the company.
The expenses related to the operation of the newly established company are also very low. The workforce that can be employed in zones has been declared as the most competitive in Europe, and the average monthly gross salary for an employee in Macedonia amounts to 506 euros, or 374 euros in production activities.
It must be emphasized that the position of the Republic of North Macedonia, as well as the position of the industrial zones is of great geo-strategic importance. The infrastructure is excellent, including the two corridors (Corridor 8 and Corridor 10) that establish a connection with Europe. All parts of Europe can be reached via Macedonia within 1-2 days of road or rail traffic, having in mind that the international ports of Thessaloniki and Durres are only at a distance of 250 km – 300 km.
The Republic of North Macedonia also has 2 new international airports that connect the country fully with Europe and the rest of the world.
The excellent location of the country allows the foreign investors access to the 650 million dollar market without trade barriers, and the country has signed free trade agreements with the EU (market of 500 million), CEFT (30 million), EFTA (12.5), Turkey (74 million) and Ukraine (46 million) and statrting from 27.03.2020 North Macedonia is a member state of NATO (North Atlantic Treaty Organization).
Considering these favorable business conditions, we hope that you will consider the Republic of Macedonia for your next investment decision and doing business, particularly regarding investments in technological industrial development zones.
For all detail information or legal assistance regarding your investment in Republic of North Macedonia, fell free to contact our law office.