Page 42 - Central and Eastern European Transfer Pricing Review

42 | CEE Transfer Pricing Review

to set the exact amount of the penalty. developed transfer pricing practice, and, however the withholding tax can be
As per the general penalty regime accordingly, it is diffcult to ascertain reduced down to 0 percent under an
if taxpayers do not provide the facts whether or not the tax authorities use effective double tax treaty.
necessary for the tax assessment, such information.
penalty can be imposed ranging Are year-end transfer pricing
from EUR1,500 to EUR2,000 for the However, in past years the tax authorities adjustments permitted?
taxpayer and EUR750 for the person have used similar types of information in Yes, as generally under the CIT Law
responsible. The tax authorities can regards to the assessment of personal taxpayers should report any differences
assess a ban on performing business income tax on rental income. due to overstated expenses/understated
activities for a period of 30 days. revenues in their annual CIT return.
Is there a preference, or
requirement, by the tax
To what extent are transfer pricing Other unique attributes?
penalties enforced? authorities for local comparables
in a benchmarking set? The Macedonian tax system is rather
Rarely, although it is expected that the unique, considering that, starting from 1
practice followed by the tax authorities The CIT Law prescribes that market January 2009, the Macedonian income
will be changed in the forthcoming prices are determined on the basis of taxation regime was changed, whereby
period. comparable prices that could have been the base for income tax computation
realized between unrelated parties was shifted from the proft before tax
What defenses are available with on the domestic market or a similar concept to the income distribution
respect to penalties? foreign market. However, use of local concept.
comparables might be considered as an
It is recommended that companies advantage.
have readily available information and In this respect, on an annual basis
evidence which would confrm that Do tax authorities have taxpayers pay tax at 10 percent on
related-party transactions have been requirements or preferences expenses not recognized for tax
carried at arms length, thus providing regarding databases for purposes and understated revenues
a stronger argument against assessing comparables? (including transfer pricing), whereby the
(maximum) penalties in cases of dispute tax is due irrespective of the taxpayer s
with the tax authorities. Not applicable. fnancial result.
What level of interaction do tax
What trends are being observed Other recent
currently? authorities have with customs
authorities? developments
Considering the (i) specifcs of the
Macedonian taxation system, and (ii) High, particularly in the area of VAT, yet, There were recently amendments made
recent changes in the CIT legislation in no particular cases have been witnessed to the Macedonian Law on Trading
relation to transfer prices, it is expected in regard to transfer pricing. Companies, which introduced the
that transfer pricing will become one of Are management fees deductible? requirement of an auditor s opinion in the
the focal points for the tax authorities. process of approval of business deals
However, currently we are not seeing Yes, under the general requirements that with interested parties. Among others,
many cases where the tax authorities the receipt of services can be witnessed the auditor s opinion should address
have challenged transfer prices. and that they relate to the taxpayer s whether the transaction is fair, and at
business activities. market level. The respective provisions
apply to listed companies where the
Special considerations Are management fees subject to transaction exceeds the set thresholds
withholding? (exceptions do apply).
Are secret comparables used by tax
authorities? Management services paid to foreign
entities is subject to a 10 percent
Considering the recent changes to the
CIT legislation in regard to evidencing withholding tax under local legislation,
transfer pricing, there is not yet a well

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