Agency of the Republic of Macedonia for Transformation of
Macedonia has enacted legislation to establish a favourable environment for foreign investment which, together with other laws, should create a legal basis to attract foreign investors and provide protection of legitimate Macedonian interests vis-à-vis foreign capital.
The main pieces of legislation that impact on foreign investors would include the following laws (the issue of the Official Gazette in which the law was published is indicated by issue number/year in parentheses):
Bills are being drafted in a number of areas, including companies, commercial code, bankruptcy, collateralisation, accounting and concessions, among others. Interested parties should check with legal counsel on the latest laws that have been enacted.
Principles of Foreign Investments Law
The Foreign Investments Law is based on the following principles:
Definition of foreign investor
The Foreign Investments Law has widened the definition of the foreign investor as follows:
Foreign investment forms and activities
The definition of what constitutes foreign investment is very broad and consists of every kind of property value: currency, assets and rights. It includes foreign currencies, capital equipment, spare parts for the equipment, raw materials, semi-finished stocks and intellectual property rights. Conversion of foreign currency debts qualifies, as does domestic currency arising from foreign debt for equity swaps, in accordance with the Credit Relations with Foreign Countries Law.
The foreign investor may engage in all fields of activity, unless specifically excluded by law (eg, military and weapons activities) or limited by a concession contract (see below).
Rights of foreign investors
Enterprises with foreign investment have equal rights with any other domestic company operating on the territory of the country. The Foreign Investments Law also lists the principal rights of foreign investors, which may be more precisely determined in each particular investment contract or shareholders' agreement:
The rights of the foreign investor are determined on the basis of the investment contract, in accordance with the rules and regulations in force at the time it became effective. That means that the rights are protected by law and cannot be impaired or diminished by a subsequent law or a new regulation.
Such agreements must be in writing in order to have legal force. They would normally cover investment in an existing company, establishment of a company with mixed capital or founding of a wholly-owned enterprise. The parties are completely free to negotiate any terms and conditions they wish, provided they do not violate the law.
However, depending on the type of company to be established, the contract must address the following matters:
The investment contract and company charter/statutes must be filed with the Ministry of Foreign Affairs within 30 days of the signature date. Registration is automatic, since the Ministry is only empowered to determine whether the documentation is in accordance with the Constitution of the Republic of Macedonia and other laws. If the application is not denied within 30 days of receipt, it will be considered approved. Appeals against negative decisions may be made within 15 days.
New enterprises must also register the documentation with the competent district Commercial Court and receive a certificate. The documentation must be in the Macedonian language and in the language of the foreign partner. Company seals and stamps must be acquired. In addition, enterprises must obtain an identification number from and open an account at the Payments Operations Service (ZPP - Zavod za Platen Promet), formerly known as the Public Accountancy Office (SOK - Sluzba za Opstestveno Knigovodstvo). Finally, the enterprise must be registered with the Statistical Office and the Customs Administration, and open a bank account. Operations may commence after these formalities have been completed. Foreign individuals should obtain work and residence permits from the police.
Besides original investments, any reinvestments, additional investments, transfers and repatriations of investments, and amendments, modifications and terminations of investment contracts must be reported to the Ministry of Foreign Affairs for statistical and record keeping purposes.
Types and kinds of investment
On the basis of the investment contract and subject to appropriate approvals and/or licensing requirements, foreigners may invest in:
Consequently, foreign and local legal entities and natural persons may establish various kinds of enterprises:
Foreigners may also invest in accordance with the Concession Law. An amendment covering sub-surface and above-surface land rights is being drafted. Pursuant to a negotiated concession contract with the Government, one may be granted rights to exploit certain social activities or assets of public interest.
To stimulate foreign investment the Government makes available various kinds of incentives in the areas of taxes, customs duties, foreign currency remittances, and so on.
If the foreign company's participation is greater than 20 per cent of the total equity then it is entitled to a credit on profit tax for the first three years commencing from the date of investment. The tax payable is reduced in proportion to the percentage of foreign equity. The Profit Tax Law also provides for tax exemption on reinvested assets.
For further information visit http://www.soros.org.mk/mk/privat/en