Macedonia investment guide: foreign investment rules and incentives

Agency of the Republic of Macedonia for Transformation of
Enterprises with Social Capital


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):

  • Foreign Investments Law (31/93)
  • Concession Law (42/93)
  • Transformation of Enterprises with Social Capital Law (38/93)
  • Companies Law (77/88 & later)
  • Securities Law (5/93 & prior)
  • Profit Tax Law (80/93)
  • Customs Law (4/93 & 20/93)
  • Foreign Trade Law (31/93 & later)
  • Foreign Currency Operations Law (311/93 & prior)
  • Credit Relations with Foreign Countries Law (4/93 & 31/93)
  • Banks and Savings Institutions Law (31/93 & 78/93)
  • Obligations Law (57/89 & prior)
  • Industrial Property Law (42/93)
  • Basic Ownership Legal Relations Law (6/80 & 36/90)
  • Employment Relations Law (80/93 & etc)
  • Personal and Property Insurance Law (65/93 & prior)

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:

  • foreign investors are allowed everything which is not strictly forbidden by law;
  • contracting parties are permitted autonomy and wide latitude in relations;
  • enterprises with foreign capital shall enjoy equal status, rights and responsibilities as local firms in the Macedonian market - principle of national treatment;
  • foreign capital is given maximum accessibility to productive and service sectors;
  • foreign investors have security to operate together with domestic companies freely and without time limitations;
  • foreign entities may establish their own enterprises;
  • definitions of foreign and domestic investors are expanded;
  • conversions of foreign debt into equity are allowed;
  • in compliance with the Concession Law, foreign investors may be granted concession rights to certain social activities or assets of public interest.

Definition of foreign investor

The Foreign Investments Law has widened the definition of the foreign investor as follows:

  • foreign legal entities with head offices abroad, ie, foreign legal entities established in a foreign country in compliance with foreign laws, including legal entities established abroad by Macedonian legal entities and natural persons;
  • foreign natural persons;
  • Macedonians who have acquired permanent citizenship in a foreign country;
  • foreign natural persons who own enterprises in Macedonia that were founded under the same conditions and in the same way as local owners.

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:

  • to participate in the profit in proportion to the invested capital, and free transfer and reinvestment of that profit;
  • to restitution of particular invested items, if explicitly so stated in the investment contract;
  • to repatriate capital invested in a domestic enterprise;
  • to participate in the net assets and repatriate that portion, if funds have been invested in a mixed capital company following the demise of that company;
  • to transfer rights and obligations stated in the investment contract to other domestic and foreign investors;
  • to manage the enterprise or participate in the management of the firm in accordance with the amount invested;
  • to have free access to the books and records of the company, and to review the annual financial statements.

Investment contracts

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:

  • identification of the parties;
  • nature of the company's business and its proposed name;
  • value and form of each investor's investment;
  • kinds of shares to be issued;
  • methods of distributing profits and covering losses;
  • means and organs for decision making;
  • methods for restitution of the investment or redemption of the shares;
  • duration of the contract or of the company;
  • how disputes are to be settled.

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:

  • any kind of local enterprise;
  • banks and other financial institutions;
  • insurance companies;
  • co-operatives or collectives.

Consequently, foreign and local legal entities and natural persons may establish various kinds of enterprises:

  • simple private enterprise;
  • Joint stock company;
  • Limited liability company;
  • Limited partnership company;
  • Unlimited partnership company;
  • Mixed bank or other financial institution;
  • Mixed insurance company;
  • Contractual enterprise.

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.

Investment incentives

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.

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