Transfer Pricing in North Macedonia

The legal framework

North Macedonia's transfer pricing regime is compact, wholly statutory and unusually narrow in reach. The substantive rules sit in Articles 12, 12-a and 12-b of the Law on Profit Tax, with the related-party definition in Article 16; the consolidated text in force runs from Official Gazette 112/14 through Official Gazette RSM 199/23, last amended on 25 September 2023. The detail comes from a single instrument, the Rulebook on the form and content of the transfer pricing report and the pricing methods (Official Gazette RSM 59/2019), made under Article 12-a(3) and running to 25 articles. Administration sits with the Public Revenue Office, an administration body of the Ministry of Finance. The profit tax rate is 10 per cent.

Article 12(2) states the arm's length principle in orthodox terms, and Article 12(3) casts it across tangibles, intangibles, services, royalties, shares, derivatives and any other transaction capable of moving profit or loss. Article 12(1) is where the asymmetry lies: only the positive difference is brought into charge, as excess expense or understated income. There is no downward adjustment, no domestic corresponding adjustment and no secondary adjustment regime — nothing recharacterises an adjusted amount as a dividend, loan or capital contribution.

Two carve-outs in Article 12-b do most of the work. Resident-to-resident related-party transactions are excluded outright, and so are taxpayers whose total annual income is MKD 300 million or less. The regime therefore reaches only large taxpayers dealing across borders. Before concluding that a client sits outside it, read Article 16 closely: alongside the familiar 20 per cent capital, voting, common-director, loan-guarantee and profit-share tests, Article 16(1)(7) deems relatedness from the counterparty's jurisdiction alone where its profit tax rate is 25 per cent lower than the Macedonian rate — on the only sensible reading, below 7.5 per cent. That test can manufacture a related party out of a genuinely unconnected counterparty, and it is easily missed.

One structural point frames everything below: the OECD Transfer Pricing Guidelines are not incorporated. Neither the Law on Profit Tax, the Rulebook nor the Law on Tax Procedure mentions them, and North Macedonia is not among the 90-plus jurisdictions with an OECD transfer pricing country profile. The drafting borrows visibly from BEPS Action 13 and Chapter II, but it operates as free-standing domestic law, and the Guidelines are persuasive material rather than authority.

Methods, comparables and benchmarking

Article 12(4) lists six methods — CUP, resale price, cost plus, transactional net margin, profit split and an open sixth category — and Article 12(5) requires the most appropriate method for each category of transaction. There is no statutory preference for the traditional transaction methods. Rulebook Article 14(2) anchors selection in the nature of the transaction, the availability and reliability of data, the degree of comparability and the suitability of third-party financial data. Article 15(2) permits combining methods; Article 15(3) requires whatever is chosen to be practically applicable and to actually resolve the arm's length question.

Two Rulebook rules bite harder than OECD practice. First, Article 14(3) imposes a domestic-first search: comparables must primarily be drawn from North Macedonia, and only where domestic data cannot establish comparability may the search widen, with reasoning on the comparability of the foreign market. In reality the domestic market is far too shallow, so regional and pan-European sets are the working norm and are accepted. The file must nonetheless record the failed domestic screen and justify the wider geography rather than start abroad silently.

Second, Article 16(5) and (6) hard-code the range. The market range is the interquartile range. A result inside it is arm's length; a result outside it is adjusted to the median — not to the nearer quartile, with no de minimis tolerance and no discretion to use the full range. That single rule dominates the economics of Macedonian benchmarking and makes headroom above the lower quartile a live planning question rather than a technicality.

Article 16(4) requires external comparables to be publicly available, which effectively mandates published databases, while Article 14(2) prefers internal comparables where they exist. Article 17 supplies six comparability factors and permits reasonable adjustments. Nothing presumes the Macedonian entity is the tested party: Article 10(7) simply requires the choice to be explained, and Article 22(5) directs TNMM testing on transaction-level operating income and expense rather than entity-wide results. Multi-year analysis is available under Article 10(9) but the reasons must be documented.

Documentation: what the Public Revenue Office expects

Since 1 January 2024 the transfer pricing report is no longer filed as a matter of course. The amending law in Official Gazette RSM 199/2023 removed the old 30 September deadline, and its transitional Article 11 made business year 2022 the last year of routine submission. The PRO's 2024 Annual Report confirms the purpose — reducing administrative burden on taxpayers and on the authority — and confirms that reports must still be prepared, kept and produced on request.

What replaced it is a disclosure. Article 39(5) requires annex П/ТЦ, on transactions between related parties, to be filed with form ДБ, the tax balance. It was first due with the 2023 tax balance during 2024. Both go in electronically through etax.ujp.gov.mk by 28 or 29 February, extended to 15 March where the annual accounts were lodged electronically with the Central Registry. The annex is a two-page grid covering nine transaction categories, with sale and purchase columns for asset and inventory flows and income and expense columns for interest, services, royalties and other transactions. It is a data return, not a defence — but it is the trigger that tells the PRO where to look.

The report itself follows a Master File and Local File architecture. Rulebook Articles 3 to 7 require group structure, business and value-chain description (the five largest products or services plus any exceeding 5 per cent of group revenue), intangibles and cost contribution arrangements, central financing functions with their place of management, consolidated financials and existing unilateral APAs. Articles 9 to 11 require, at entity level, management reporting lines and the states where those managers sit, business strategy, competitors, and then for each transaction category a functional and comparability analysis, method and tested-party justification, the search process and data source, adjustments, the arm's length conclusion and a reconciliation of the data used back to the statutory accounts. Article 12 adds six annexes, including every relevant contract.

Where cross-border related-party transactions do not exceed MKD 10 million, Article 12-a(2) allows an abbreviated report, and Rulebook Article 13 sets its content at a description, a value and a counterparty per category. No benchmarking, no functional analysis, no method. For groups near that line, staying below it is the single highest-value compliance decision available.

Audits, penalties and the enforcement climate

Article 12-a(5) gives 15 days to deliver the report once the PRO asks, and Article 12-a(6) bars any request until 30 days after the Article 39 tax balance deadline. The earliest valid demand is therefore around 30 or 31 March for a February filer and around 14 or 15 April for a taxpayer on the 15 March deadline; practitioner sources commonly quote 15 April, which is the safer planning assumption but not the only statutory outcome. Fifteen days is not time to build a benchmarking study, which makes this a contemporaneous documentation regime in substance if not in name. Article 12-a(4) then requires ten-year retention — twice the ordinary five-year assessment window under Article 110 of the Law on Tax Procedure, which stretches to ten years for evasion.

Penalties are expressed in euro but paid in denar equivalent, and they scale by trader size. Failure to keep, deliver or file attracts EUR 300–1,000 for a micro trader up to EUR 3,000–10,000 for a large one under Article 46, plus a personal fine of EUR 50–500 on the responsible individual. Understatement through inaccurate data on the tax calculation form — the head that catches a transfer pricing adjustment — runs from EUR 600–2,000 to EUR 6,000–20,000 under Article 43, and Article 43(3) mandates a three to 30 day ban on carrying on the activity. Article 44(1)(2) adds a distinct fine for related-party arrangements aimed at reduced tax, and Article 36(3) allows the PRO to strike a company from the total-income tax register. There is no penalty protection: a taxpayer with a compliant file that is nonetheless adjusted still faces the Article 43 exposure in full.

The climate is tightening from a low base. The PRO ran 4,249 external audits in 2024, up 67 per cent on 2023, with irregularities in 40.7 per cent of them, and selection has been risk-software driven since 2019. Its 2024 report also records a UNDP project on the practical implementation of transfer pricing audits, an internal action plan on building that capacity, and participation in Tax Inspectors Without Borders. With no country-by-country reporting, cross-border facts are verified through exchange of information — 36 requests received and 36 sent in 2024. Expect enforcement intensity to rise.

Dispute resolution and advance certainty

There is no advance pricing agreement programme. Nothing in the Law on Profit Tax, the Rulebook or the Law on Tax Procedure establishes one, and the Rulebook mentions APAs only as foreign instruments the taxpayer must disclose (Articles 7(2), 10(14) and 12(4)) — which shows the drafters understood the concept and chose not to create it. The nearest domestic analogue is the binding agreement under Articles 105 to 108 of the Law on Tax Procedure, and it is a different animal: available only after an audit, only for facts actually audited and recorded in the report, requested within three months and decided within 15 days, binding only on identical facts and lapsing when the regulations change. It buys forward comfort on settled history; it cannot price a future structure.

Treaty MAP is the only route to relief from economic double taxation, and the MLI does not yet assist. North Macedonia signed on 29 January 2020 but has never ratified or deposited its instrument — the OECD signatories list, status 18 June 2026, records it at entry 76 with the deposit and entry-into-force columns blank — so the Convention modifies none of its treaties and its positions remain provisional, to be confirmed on deposit. Those provisional positions reserve under Article 16(5)(a), keeping the requirement to present a case in the residence state rather than either contracting state, with bilateral notification where the receiving authority rejects the objection; they notify Italy and Romania under Article 16(6)(b)(i) as having shorter presentation periods; and under Article 17(4) they notify existing Article 9(2) provisions in 37 of the 49 listed agreements rather than across the whole network. Part VI was not elected, so there is no mandatory binding arbitration in prospect, and as a candidate country North Macedonia sits outside the EU Arbitration Convention and the Dispute Resolution Directive. Reported MAP caseload is negligible. Until ratification, the corresponding-adjustment position rests entirely on each bilateral treaty as it stands.

Domestically the administrative appeal stage no longer exists — Part Three of the Law on Tax Procedure has been deleted. Article 176 leaves a direct administrative dispute before the Administrative Court, with onward appeal to the Higher Administrative Court, and filing does not suspend enforcement of the assessment. The procedural leverage therefore sits earlier, in the audit: the closing discussion under Article 101 and the written report with a right to comment under Article 102. Note also Article 50, which imposes an enhanced duty of co-operation on cross-border facts, requiring the taxpayer to secure evidence when structuring foreign relations, and Article 104, which requires co-ordinated audits of groups with combined external turnover of at least MKD 800 million. No notable transfer pricing judgments are publicly reported.

Pillar Two and what changes in 2026

North Macedonia has moved faster on Pillar Two than on Action 13. The Law on Minimum Global Profit Tax was published in Official Gazette RSM no. 3 of 3 January 2025, aligned with the GloBE Model Rules and EU Directive 2022/2523: EUR 750 million consolidated revenue in two of the four preceding fiscal years, a 15 per cent minimum effective rate, a qualified domestic minimum top-up tax and an income inclusion rule for fiscal years beginning on or after 1 January 2024, and an undertaxed profits rule from 1 January 2025. The implementing rulebook on calculating and paying the top-up tax followed in Official Gazette RSM no. 270 of 31 December 2025 and applies from 1 January 2026, prescribing the return forms; the PRO has published the QDMTT return, form КДДД/П.

The gap is in the plumbing. North Macedonia has signed neither the CbC MCAA nor the GloBE information exchange agreement, so in-scope groups cannot rely on central filing with automatic exchange into North Macedonia. Local filing and local payment of the Macedonian top-up tax is the operative route for 2026, and the constituent entity — not the ultimate parent — carries it.

The contrast is the thing to watch. A jurisdiction with a 10 per cent headline rate that has enacted a domestic minimum top-up tax has created a direct interaction between its transfer pricing outcomes and its GloBE effective tax rate calculation. Country-by-country reporting, meanwhile, remains unimplemented and the OECD's 2025 peer review recommends legislating for it. Amount B is a further open option: North Macedonia is on the June 2024 list of covered jurisdictions but has not adopted the simplified and streamlined approach, and the unmodified five-method framework stands.

How practitioners should respond

Start with scope, because most groups are outside the regime and the analysis stops early. Test total annual income against MKD 300 million, then confirm that any related-party counterparty is non-resident, then run Article 16 properly — including the low-tax jurisdiction test, which catches parties that no commercial person would call related. Where the group is in scope, test the MKD 10 million line next; the abbreviated report is a genuinely different compliance burden and the threshold is worth managing deliberately.

Then treat the file as a standing asset rather than an annual project. The abolition of routine filing has not reduced the substantive obligation, it has removed the deadline that used to force the work to happen. With 15 days to produce and a request possible from late March or mid-April, a study started on receipt of the request is already too late. Build the report to the return timetable and keep it for the full ten years, which runs well past the ordinary assessment window.

Benchmark defensively against the median rule. Because an out-of-range result adjusts to the median rather than the nearer quartile, the cost of a marginal position is the full distance to the middle of the range, and it is worth pricing with headroom rather than at the edge. Document the domestic search under Article 14(3) even when it fails, use publicly available data, justify the tested party expressly, and reconcile the tested figures to the statutory accounts as Article 11 of the Rulebook requires.

Finally, plan for the absence of remedies. There is no APA, no penalty protection, no arbitration backstop, no suspensive appeal and — until the MLI is ratified — no multilateral overlay on the treaty network. The leverage is in the audit file and in the treaty itself. Keep the English Master File translation-ready, take the Article 101 closing discussion and the Article 102 comment right seriously, and where an adjustment is likely to cause economic double taxation, identify the relevant treaty Article 9(2) and MAP route before the assessment issues rather than after.