Until very recently, Macedonia, a small country in the Western Balkans, was most famous for its lively culture, delicious food, and unique flora and fauna. Over the last few years, Macedonia has obtained the status of the country with the second-highest concentration of independent contractors in the world.
There are 3.41 independent contractors per 1,000 people. With a population of roughly two million, 7,155 are registered as independent contractors. The number is likely much higher, considering the report only accounted for independent contractors who are registered on popular talent sites.
Unfortunately, being an independent contractor in Macedonia can be an overwhelming and challenging venture, mainly due to a lack of information and guidelines provided by the authorities.
This guide will teach you everything you need to know to become and manage as an independent contractor in Macedonia. It’ll help you understand the tax requirements and regulations to become fully compliant with the law and provide additional information on how to better manage your payments.
Disclaimer: This post was originally published in January, 2022 and might be regularly updated to include more valuable information. The goal of this guide is to inform and educate. It does not and is not intended to, constitute legal advice. Please consult with a lawyer for any legal questions.
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Most of the independent contractors in Macedonia working with foreign companies are working without registering their own companies. In such cases, the independent contractor is responsible for paying their taxes according to the local law.
Being familiar with the legal requirements and regulations can help avoid getting into trouble with local fiscal authorities.
In terms of taxes, the climate in Macedonia is somewhat favorable for independent contractors compared to most European countries. There are a few main reasons for that:
- You can operate as an independent contractor without a registered business and be subjected to only 10% of tax on your income.
- You are under no obligation to register a company or any other formal entity.
- You are not required to pay for pension and health benefits.
You would need to submit a monthly report to the authorities and pay a flat 10% fee on your income. For example, receiving $5,000 means you as the contractor will have to pay $500 in tax.Independent contractors are eligible to pay for health insurance individually. The cost is 1,500MKD per month. The application takes place at the Health Insurance Fund. You are also eligible for the third pension pillar, also called the private pillar.
What are employment agencies for independent contractors?
Employment agencies help you gain an "employed status" while working as an independent contractor in your country. In other words, you can work for any employer, anywhere in the world, while being properly employed. These agencies act as your employer of record and cover all your benefits just as a proper employer would do.
Will you be eligible for health insurance and retirement benefits?
Gaining an employment status from an employment agency makes you eligible for health insurance and retirement benefits. You'll also be eligible for private insurance.
Is this right for you?
If you are considering getting a mortgage, or you’d like to be part of the public healthcare and insurance system, this might be the best option for you.
Registering a Company in Your Name
Some independent contractors in Macedonia decide to register a company in their name. Doing so grants you access to health and retirement benefits. If you’re opening a company alone, you need to register an LLC (limited liability company). If you have co-founder(s), you need to open an LLP (limited liability partnership).
Some of the requirements for opening your company in Macedonia are the following:
- An initial investment of €5,000. That investment can be cash or non-cash (like laptops, mobile phones, working desks, etc.), and does not have to be paid immediately, but can be made during the first 12 months of operation. If you want to make a non-cash investment, you will need to hire an appraiser to determine the value of your non-cash items.
- Accountant expenses that can range from €50-€100 per month, depending on the size of your company, the number of employees you have, etc.
- Bank account. You will be required to open an account in the bank where you made the initial €5,000 investment. You will need to bring the document issued by the Central Registry and the 3P form, which usually needs to be notarized.
Learn how to register your own company in Macedonia here.
Is this right for you?
The perks of opening a company is that you can create a real growing business. Having a company also means you'll have a fixed monthly salary and are eligible for tax reduction, meaning you can deduct expenses like internet, utilities, equipment, etc. And as long as your yearly turnover doesn't exceed 2.000.000 MKD, you don't have to pay your Value Added Tax (VAT).
At Adeva, we take care of Payments and Compliance for independent contractors in Macedonia. Sign up and explore more.
What is a sole proprietor?
A sole proprietor (трговец поединец) is a person who performs any of the commercial activities defined by the Law on Trade Companies. Anyone with a permanent residence in Macedonia is eligible for a sole proprietor.
Becoming a sole proprietor
There are two main ways to apply to become a sole proprietor:
- Option #1: Physically submitting an application at the Central Registry - The application must be submitted by the individual who requests to be registered as a sole proprietor in person, or by their legal representative.
- Option #2: Online application - You can do the whole procedure online without applying at the offices of the Central Registry in person.
You can get all the necessary forms free of charge from all Regional and Registration offices of the Central Register or download them electronically.
How much does the application cost?
Please find detailed information here.
What is the tax rate for sole proprietors in Macedonia?
Sole proprietors have to pay a 10% tax on their income.
Are sole proprietors eligible for health insurance?
Sole proprietors are eligible to pay for health insurance individually. The cost is 1,500MKD per month. The application takes place at the Health Insurance Fund.
Are sole proprietors eligible for pension?
There are three pension pillars in Macedonia: state, occupational and private retirement provision. Being a sole proprietor in Macedonia means you are not eligible for the state nor the occupational provision. However, you are eligible for the third, also called the private pillar. There are different plans you can choose from.
Is this right for you?
Registering as a sole proprietor is the most affordable option that’ll make you fully compliant with the law. As a sole proprietor, the only expense you have is your monthly income tax (10% flat fee), plus health insurance, which is optional (1,500MKD per month). It is also important to note one critical difference between registering a company in your name (LLC or LLP) and working as a sole proprietor. Аs a company owner, in case someone sues you for unfulfilled obligations under a contract, you are liable only up to the amount of the invested capital (€5,000). However, as a sole proprietor, you are liable for all the property you have registered in your name (for example car, apartment, etc.).
Filing Your Taxes Online
Here is a quick overview of how you can file your taxes online.
Independent contractors should submit every money transfer electronically through the E-PDD platform by the 10th of the following month. For example, if you received your money transfer on the 17th of April, you must submit the money transfer by the 10th of May.
Here's a short overview of the process:
- You create an account on the platform (E-PDD). You'll need to provide your basic private information, like name and last name, social security number, and email address.
- Each time you receive a money transfer, you must submit it via the system. The system will generate a payment slip for you to pay your taxes to the Public Revenue Office (УЈП). Paying your taxes can happen electronically if you have the online banking option activated at your local bank.
- All fillings will automatically be added to your yearly tax report at the end of the year.
You can read the step-by-step instructions in Macedonian here.
Contracting and Invoicing
Contracts with Clients
Formal contracts with clients are important. It is critical to sign an independent contractor agreement before starting your working relationship with a client. These documents ensure both you and the client understand and agree to the scope of work and the terms under which that work will be completed. Depending on the nature of the work, clients might also ask you to sign a non-disclosure agreement (NDA) and Intellectual property (IP) agreement. You might even need to sign a Non-Compete Agreement in some cases.
What is an independent contractor agreement?
An independent contractor agreement is a legal document signed by the independent contractor and the company hiring them. The document outlines the working relationship and the end product(s) to be delivered by the independent contractor. It includes information such as the type of work needed, the project scope, compensation, deadlines, and other conditions.
What should the agreement contain?
The agreement you sign with a client needs to be modified to specify the needs of the client, your personal requests, and other specifications that are critical to the job. In general, all independent contractor agreements should include the following components:
- Independent contractor relationship
- The scope of work
- The timeline for the work to be completed
- Payment terms
- Obligations the contractor must fulfill
- Confidentiality and trade secrets
- Intellectual Property
- Non-compete and non-solicitation clauses
- Grounds for termination
What is an NDA?
An NDA is a contract between two parties, where one party agrees to share confidential information with the other party. They are commonly used for agreements between companies and individuals that are discussing sensitive business matters. NDAs are typically very detailed and specific about the type of information that is covered by the agreement, who can access it, how long it will be kept confidential, and what happens if the agreement is broken.
What is Intellectual property (IP) agreement?
Intellectual property agreement is a type of contract that governs the ownership, use, and transfer rights of intellectual property. When working with clients, independent contractors are often asked to sign an IP agreement so that the client gets ownership rights over the work product. In other words, anything you are paid to create for the company under this type of contract is owned by the company
What is a Non-Compete Agreement?
A non-compete agreement is a legal contract between independent contractors and clients that restricts the contractor's ability to work for a competitor, usually during and after the working relationship ends. These agreements are less common than NDAs or IP agreements.
When it comes to payments, wire transfer to your local bank account might be the safest option. Outside of that, there are few other payment providers such as Payoneer, Skrill, and Wise that you can use.
Wire transfers are a great way for independent contractors to be paid by foreign clients. Although international wire transfers could take a day or two to process, they are still a relatively safe way of receiving payment.
One downside of wire transfers is the fees involved. Depending on where you are receiving the money, you can be charged anywhere from $10-35. Additionally, you may be subject to the exchange rate your bank charges.
The money you receive via wire transfer is subjected to a 10% tax.
Independent contractors can also use Payoneer to receive payments from clients. When you withdraw your Payoneer money to a local bank account, a process that takes 2-5 days, you'll be subjected to a 10% tax fee. Alternatively, you can use the money via a Payoneer debit card.
ATM withdrawals are charged at a flat withdrawal rate of $3 USD for each transfer + a currency conversion/cross-border fee. Macedonian banks tend to charge a maximum of 300MKD for conversion. A surcharge imposed by the owner of the ATM you are using might also occur.
Most banks let you withdraw 30-40K MKD per withdrawal. You can make up to 30 ATM withdrawals for a total of $5,000. You can make up to 30 point of sale transactions for a total of $2,500.
Wise (formerly TransferWise)
Wise opens accounts to clients residing in Macedonia. Individuals can receive money, transfer money to other Transferwise accounts for free, and pay for products and services online. The Wise card is not available yet.
At some point, Wise will ask you to verify your ID, and they may also ask you to take a photo of yourself holding it.
Depending on where you live and how much money you’re sending, different verification requirements will apply. Once you’ve registered, you can send money abroad and open a multi-currency account.
Wise doesn't currently support MKD as a balance currency. In regards to the fees they charge for sending money, you can check their pricing calculator here.
Skrill provides payments services to customers from Macedonia. People who have an account registered with Skrill can act as both the sender and the receiver of money transactions.
To open an account with Skrill, you need an ID Card or Passport and proof of address (e.g. a utility bill or a bank account statement). Everything is submitted via Skrill's platform. Unfortunately, Bank Withdrawals are not available in Macedonia. People may withdraw funds to a VISA Card from the 'Withdraw' section.
Withdrawing Money to a Bank Account
Withdrawing funds from a payment platform, such as Payoneer, to your local bank account, is fairly simple.
Here's a more detailed explanation of the process:
- Go to your preferred local bank and open a foreign currency account. This lets you receive, hold and send funds in foreign currencies. You can make and receive payments in currencies such as EUR, USD, GBP, etc.
- Give your client your account details so they can send you the funds. If you are sending the money from a payment platform like Payoneer, simply connect your bank account with the platform and you shall be able to send funds quickly and easily.
- When the funds arrive, you will receive a notification from your local bank. You will be required to visit your bank physically and sign an authorization document enabling all future payments from a specific sender to be automatically added to your foreign currency account. For every new sender that issues money to your account, you are required to sign an authorization document.
- In addition to an authorization document, you will be required to submit a document that confirms the validity of the transaction. This can be a contract with a client or a confirmation form from a talent platform.
- Once the funds arrive at your account, you will be able to manage everything from your bank's mobile app.
Being an independent contractor in Macedonia is incredibly convenient and affordable. You are under no obligation to register a company in your name, and the income tax is one of the lowest in Europe, standing at only 10%. Even better, several options are available for those who want to receive retirement and health care coverage.
Understanding how you can operate as an independent contractor in Macedonia can help you navigate your career and always stay informed with the latest rules and laws affecting your business. Keeping informed is the best way to achieve professional bliss and avoid financial damage caused by misinformation.
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