ANALYSIS
length, which is good. Furthermore, Macedonian tax
legislation includes provisions for supporting the verification of transfer prices, as taxpayers may need to
present satisfactory information and evidence to the
Public Revenue Office which would confirm that the
related party transactions have, in fact, been carried
out at arm’s length.
However, in my opinion, these provisions are limited, as the legislation does not set out further requirements or provide detailed guidance on the manner in
which this information and evidence should be prepared. This leaves space for subjectivity in assessing
whether the information and evidence is sufficient
and appropriate, and subjectivity may bring uncertainty; this is what multinationals want to avoid.
In an effort to fill in the gap, AmCham Macedonia,
supported by KPMG in Macedonia decided to translate and publish the OECD Transfer Pricing Guidelines
for Multinational Enterprises and Tax Administrations
in Macedonian. Macedonian is the 12th language into
which this important book has been translated so far
and we expect that it will be widely used by both taxpayers and the Public Revenue Office. The next step
should be for Macedonian legislation to refer directly
to the OECD Guidelines.
EM: In your opinion, are corporate income
tax avoidance and tax evasion major issues in
Macedonia?
Mierzejewski: Tax avoidance and tax evasion are major issues for every country, not just Macedonia. This
has been specifically emphasized by the European
Commission, which noted that each year, billions of
euro of public money are lost in the EU due to tax
evasion and tax avoidance. The negative effects are
not just loss of public revenue – businesses find themselves at a competitive disadvantage with respect to
tax evaders, while honest citizens carry a heavier tax
burden due to increases of tax rates or spending cuts
aimed to compensate for unpaid taxes.
The tax rate in Macedonia is 10% which is one of the
lowest rates in Europe. Low tax rates generally contribute toward decreasing tax avoidance and evasion. Furthermore, under the Macedonian corporate
income tax system, the payment of tax is actually
postponed until distribution of dividends, which is in
fact a stimulus for some companies to invest in the
country. However, this leaves space for companies to
avoid paying tax by setting transfer prices at levels
that essentially eliminate the need to pay dividends.
Hence, I believe that the Public Revenue Office will
pay greater attention to transfer pricing in the coming period and will more often challenge the terms by
which such transactions are agreed. However, considering that multinationals generally do pay great
attention to transfer pricing, their Macedonian subsidiaries are not likely to face major problems, provided that they have readily available transfer pricing
documentation.
EM: Why is it important that international standards
are consistently applied?
Mierzejewski: Transfer pricing involves associated
enterprises in different tax jurisdictions. As such,
international aspects arise that are difficult to deal
with, as they always involve more than one tax jurisdiction. Any adjustment to the transfer price in one
jurisdiction may mean that a corresponding change
in another jurisdiction might be needed.
The application of international standards in a consistent manner determines the rules of the game.
This ensures an appropriate tax base in each jurisdiction, avoids double taxation and minimizes conflicts
between taxpayers and tax administrations as well as
those between different tax jurisdictions. This should
be seen as a “win-win” for both taxpayers and the tax
administration.
Emerging Macedonia Spring 2014 Issue 41
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