Introduction of Tax Liability for Non-Resident Suppliers of Digital Services in North Macedonia

The amendments of the Law on Value Added Tax adopted in the last quarter of 2023 introduced the obligation for the foreign providers of digital services to register for the VAT when they are treated as providers of electronically supplied services to final customers residing in North Macedonia. 

Timeline 

Starting from January 1, 2024, the non-resident suppliers of electronically supplied services are obliged to register for VAT and comply with all the VAT obligations applicable to VAT-taxable persons. 

Foreign Providers and VAT compliance

The non-resident suppliers of digital services that don’t have a tax domicile or permanent establishment in North Macedonia that could include the likes of digital platforms, online merchants, and e-retailers that provide ESS to non-taxable persons whose place of residence is within the country, are obliged to register for VAT. 

There is no threshold stipulated for this group of suppliers. Before the commencement of the taxable activity where the place of turnover is in the country, the foreign provider should register for VAT with the responsible tax authority. 

The services of the local tax representative should generally be mandatory. The domestic fiscal representative will carry out all the VAT compliance duties imposed on the foreign provider by law. 

These are some of the types of taxable electronically supplied services defined by VAT Law: 

  1. development of websites, web hosting, remote maintenance of programs and equipment;

  2. software and its updating;

  3. images, text, and information and making databases available;

  4. music, films, and games, including games of chance, as well as political, cultural, artistic, sports, scientific and entertainment broadcasts events and;

  5. distance learning.

Impact 

The foreign providers of digital services should be aware of this significant change. Before the introduction of this specific amendment to the Law on VAT, non-resident providers of ESS didn’t have this sort of responsibility. 

From January 1, 2024, however, this is significantly different. Newly introduced VAT liability imposes on foreign providers the obligation to charge, collect, and remit tax for digital services, as it was previously introduced only to domestic taxable persons. 

Taxable persons should usually charge a standard VAT rate upon providing this group of services.