Doing Business In.. 2020

Last Updated July 15, 2020

North Macedonia

Law and Practice

Authors



Popovski & Partners is a modern, full-service law firm in the Republic of North Macedonia with offices located in the capital city Skopje. The team consists of seven attorneys at law, all well-respected, experienced and known for their legal expertise. Popovski & Partners provide clients with assistance in all legal aspects of corporate and commercial relations and business dealings. The team is also highly experienced in representing clients in all types of disputes arising from all types of commercial activities. The team assists clients in a wide variety of industries, among which are: energy and natural resources, food production, retail and consumer goods, healthcare and pharmaceuticals, information and communication technologies, infrastructure, financial services, etc.

The applicable legal system in North Macedonia is the civil law system. The judicial power is independent from the legislative and the executive power.

In the judicial order, the judicial power is exercised by the principal courts, the appellate courts, the Administrative Court, the Higher Administrative Court and the Supreme Court of the Republic of North Macedonia.

There are 35 courts in the Republic of North Macedonia, according to the Law on Courts, 27 of which are courts of first instance, four are appellate courts, one Administrative Court, Higher Administrative Court and the Supreme Court and the Constitutional Court whose judges are elected by the Assembly.

Equal treatment to all market participants is guaranteed under the Constitution of the Republic of North Macedonia. Foreign investors have the right to freely transfer and repatriate investment capital and profits. Attracting and encouraging foreign investments is an essential part of the country’s main government policies for economic growth and job creation. Therefore, apart from treating the foreign investors as equal to domestic investors, the country also provides numerous incentives and state aid to attract foreign investments – for example, investing in the Technological Industrial Development Zones, the so-called ”Free Zones”.

North Macedonia has concluded numerous bilateral investment treaties with other countries aimed at reciprocal encouragement, promotion and protection of investments, and it is a signatory to multilateral conventions protecting foreign investors.

There is no general law for foreign investments that incorporates all foreign investments rules and regulations. The general laws applicable to trade companies, as well as the specific laws that cover specific industries, also cover foreign investments.

In general, foreign investors can invest freely and directly in all industries, save for specific industries for which additional approvals are required by law – for example, investments in the production of weapons and military equipment. Licensing and approvals are also required for conducting business in other industries and sectors (eg, banking, insurance, energy); however, these requirements also apply to domestic investors, and therefore impose no additional restrictions on foreign investors.

Under the Law on Foreign Exchange Operations, foreign direct investments (FDI) must be registered in the Registry for Direct Investments of the Central Registry of the Republic of North Macedonia within a period of 60 calendar days after the capital transaction is made. The following cases are considered as FDIs:

  • establishing a company or increasing the principal capital of a company which is wholly owned by the foreign investor, establishing a branch office or acquiring total share capital of an existing company;
  • participation in a newly formed or existing company with more than 10% in the principal capital of the company or in decisive powers;
  • long-term loan with a maturity period of five or more years, in cases when the loan is granted by the foreign investor for the company which is wholly owned by the investor; and
  • long-term loan with a maturity period of five or more years, when the loan is aimed at establishing a permanent economic involvement and if it is granted between economically intertwined subjects.

In general, foreign investors do not need specific approvals for doing business in North Macedonia.

Approvals are needed only for specific industries such as production of weapons and military equipment (WME). If a foreign investor fails to obtain necessary approval in this specific industry, it will be punished with a fine in the amount of EUR8,000.

Foreign investors receive the national treatment, or even the most favoured national treatment by reciprocity with the country of residence of the foreign investor. Therefore, specific additional commitments as conditions for approvals, save for those required by law which are applicable to both domestic and foreign investors (banking, insurance, energy sector, telecommunications, and similar), are not imposed on the foreign investors.

The Constitution of the Republic of North Macedonia guarantees the right to appeal.

The investor may seek legal protection against the decision in an administrative procedure or to commence an administrative dispute at the Administrative Court, under the same rules as domestic investors.

The most-often preferred business structure is the limited liability company (LLC). This form of legal entity is suitable for all kinds and sizes of businesses (including greenfield projects, holding companies and joint ventures). LLCs may be established by a sole shareholder (DOOEL), two shareholders or up to 50 shareholders (DOO), which can either be natural or legal persons. The founders participate with their shares in a predetermined principal capital of the LLC.

One of the key features which makes this type of business entity attractive for incorporators is the management structure and liability of the shareholders.

The founders of an LLC are not personally liable for debts or other duties and obligations arising from the company's operations. Therefore, a shareholder to an LLC would be liable only up to the amount of its share in the principle capital.

Macedonian law requires a minimum principal capital of EUR5,000 for the establishment of an LLC. The contribution in the principal capital can be monetary or in-kind. Contribution in the form of labour or services is not permitted. The value of a single share may not be less than EUR100.

The most suitable form for large-scale businesses, as well as the mandatory form for certain companies – that is, companies owned by more than 50 persons or companies that undertake certain types of business activities (such as banks and insurance companies) – is the joint stock company (JSC). The JSC is a form of a trade company in which the principal capital is divided in parts – stocks among one or more stockholders. Stockholders in the JSC may be either natural persons or legal entities. In addition, LTC allows the JSC to acquire stocks itself. The JSC stockholders’ liability is limited – ie, it is secured with the capital of the company, and shareholders may not be imposed further liabilities for the company’s duties and obligations, save for limited cases of piercing the corporate veil.

The nominal principal capital for simultaneous incorporation must be at least EUR25,000, whereas the nominal principal capital for successive incorporation must be at least EUR50,000. The nominal value of a single stock must be at least EUR1. The stocks are transferred and held in an e-registry at the Central Depository for Securities of the Republic of North Macedonia and may be freely transferred and exchanged on the secondary stock market.

Main steps for incorporation of companies in North Macedonia are: preparation of necessary founding documentation, registration of the company in the Trade Registry at the Central Registry of the Republic of North Macedonia, registration in the register of direct foreign investments, where applicable, and deposition of contributions to the principal capital.

Incorporation Process: LLC

Forming an LLC requires conclusion of a company agreement (CA) by the shareholders, that is, issuing a statement of incorporation (SI) if the LLC is owned by a sole shareholder. LTC prescribes the mandatory content of the CA (or SI).

The contributions must be deposited within a year after the registration of the company. If the contribution is monetary and is paid prior to registration, it is deposited to a temporary account of the company in a commercial bank in the country, where the company will later (after the registration) open its bank account.

The process for registration of the company with the Trade Registry is а standardised procedure which requires filing an application for registration of the company to which the legally required documentation must be enclosed and its lasts up to three business days.

Incorporation process: JSC

LTC prescribes two types of incorporation of JSCs: simultaneous and successive. By a simultaneous incorporation, the JSC is formed without issuing a public call for acquiring stocks since all stocks are undertaken by the founders. Successive incorporation presumes issuing a public call for acquiring stocks – whereby the public is invited to participate in the initial principal capital – and is rarely used in practice.

Prior to the registration of the JSC, there is no obligation for deposition of the total contributions to the principal capital. However, LTC prescribes the minimum amount that has to be paid prior to registration. The remainder must be paid no later than three years after the registration to the Trade Registry is made, unless a shorter period is provided by law for specific companies.

The JSC is registered at the Trade Registry by submitting an application for registration and filing its Articles of Association (AoA) along with other documentation evidencing that the principal capital is deposited, the managing bodies are appointed, and that any remaining legal requirements are fulfilled (eg, some companies must obtain certain necessary licences by the authorities prior to registration). The usual time for registration should not exceed a few working days.

All companies are subject to registering any changes to management, amendments to AoA, as well as any other modification of the company’s status, including bankruptcy and liquidation proceedings or deletion of company from the Trade Registry. The data provided to the Trade Registry is available to the public.

All companies (including branch offices of foreign companies) must file their annual financial statements to the Trade Registry for each business year, no later than the end of February for the previous business year. In addition to this, large and medium-sized companies, companies which conduct specific business activities (eg, banks and insurance companies), companies listed on the stock-exchange as well as companies whose financial statements are incorporated into the consolidated financial statements of the previously-stated companies, must also submit audited annual financial statements.

Companies listed on the stock-exchange have additional reporting and disclosure obligations. These companies must, on a regular basis, publicly disclose financial reports, balance sheets, price-sensitive materials as well as public calls and materials for shareholders’ assembly. In addition, JSCs which are not listed on the stock exchange, but whose principal capital is more than EUR1 million with more than 50 shareholders, are also subject to additional duties for reporting and disclosure to the Securities and Exchange Commission.

In accordance with the Law on Prevention of Money Laundering Financing of Terrorism enacted in 2019, all companies must report their "ultimate beneficiary owner" (UBO) to the Registry for UBOs of the Central Registry of the Republic of North Macedonia. Certain institutions, organisations and companies also have a duty for keeping UBO data for their clients (banks, other financial institutions, lawyers, notaries, etc).

Management Structure: LLC

The legal regime for the management structure of an LLC is very simple and flexible.

An LLC must have one or more managers, appointed by the shareholder(s). An LLC may (however, is not obliged to) constitute a supervisory board or controller to carry out supervision over the operations of the company. If no supervisory body is established within the company, the shareholders, individually or jointly, carry out the supervision.

The shareholders decide upon issues of the company at the shareholders’ meeting

Management Structure: JSC

A JSC may be internally organised by a one-tier system (board of directors) or a two-tier system (management board and supervisory board). The type of management structure is provided in the AoA at the time of the registration of the company and may be amended.

One-tier system

The board of directors consists of at least three, but not more than 15, members appointed by the assembly of the shareholders, as executive and non-executive members. At least one (or one-fourth in cases of more than four non-executive members) non-executive member must be an independent member(s). The board of directors manages the company in line with the laws, the AoA and by direct authorisations granted by the assembly of the shareholders.

The executive members of the board of directors are authorised to cover a wide range of activities within the business scope of the company, and are authorised for managing the work, executing decisions and conduct of day-to-day business activities of the company, as well as for representation of the company. The non-executive members are authorised for supervision of the work of the executive members. 

Two-tier system

The management board consists of at least three, but not more than 11 members, appointed by the supervisory board. The management board is authorised to conduct all activities linked to the managing of the business and daily activities, as well as to represent the company, save for activities reserved for the supervisory board and the assembly of the shareholders. 

The supervisory board consists of at least three, but not more than 11 members, appointed by the assembly of the shareholders. The supervisory board must include independent member(s). The supervisory board supervises the work of the management board.

A member of the supervisory board may not be a member of the managing board at the same time.

The shareholders of a JSC exercise their rights at the assembly of the shareholders.

Macedonian Law on Trade Companies provides for a general provision applicable to piercing of the corporate veil for shareholders by which the shareholders are unlimitedly and jointly liable for the company’s liabilities in cases when:

  • the company, as a legal entity, was misused for goals which for them, as individuals, are prohibited;
  • the company, as a legal entity, was misused with the aim to damage their creditors;
  • contrary to the law, the shareholders disposed of company assets as if it were their own;
  • for their own benefit, or for the benefit of any other person have decreased the assets of the company, and they have known or ought to have known that the company is not capable of executing its obligations towards third persons.

Persons involved in the management of the companies have the duty to work in line with the laws, corporate acts and other applicable regulations, as well as abide by the standard of due care. Breach of such duties might lead to liability for compensation of damages in term of five years to the company, the shareholders, as well as third persons. This applies to both the managing structures of the LLC and the JSC.

Employment relationship is regulated with the Law on Labour Relations (LLR), other laws, collective agreements and employment contracts. The employment of civil and public servants is governed by separate regulations.

The employment contract must be concluded in writing.

The employment contract can be concluded for an indefinite or definite period of time. The employment contract not determining the time for which it has been concluded, shall be considered as an indefinite time period employment contract. A contract that is concluded for a definite period of time after five years of operation (with or without termination between the contracts) with the same employer will be transformed into a contract of indefinite period of time, except the contracts for seasonal workers.

Employment contracts can be concluded for full or part-time work. The working week has 40 hours per week, which is considered to be full-time work. By law and/or collective agreement, it may be stipulated that the working time will be shorter than 40 hours a week, but not shorter than 36 hours a week, and still be considered as a full working time. Part-time work is any work where the working time is shorter than full-time work as defined above.

The employee may be obliged to carry out work exceeding the full working time (overtime work) at the employer’s request, in the following cases:

  • exceptional increase of the volume of operation;
  • need for continuation of the business or production process;
  • when it is necessary to avert damaging the work equipment, which would otherwise result in suspension of work;
  • if it is necessary to provide safety of persons and property and security of turnover; and
  • in other cases, stipulated by law or collective agreement.

The LLR provides that overtime work may last no longer than eight hours a week, and a maximum of 190 hours a year, except for work which cannot be terminated due to specific process of operation or for work without conditions and possibilities to be organised in shifts. The overtime work within three months cannot exceed eight hours per week, on average. For each introduction of overtime work, the employer is obliged to send a prior written notice to the regional state labour inspector.

The basic salary of the employee increases by at least 35% per hour for the overtime hours.

North Macedonian law does not provide for “employment at will”.

According to the LLR, the employment contract shall be terminated in the following cases:

  • upon the expiration of the period for which it was concluded;
  • upon the death of the employee or the employer (natural person);
  • due to proceedings by which the employer ceased to exist in accordance with law;
  • with a consensual cancellation on the basis of a written settlement;
  • with a notice of dismissal;
  • by a court judgment; and
  • in other cases stipulated by law.

The employee may terminate the employment contract if it states in writing that it wants to terminate the employment contract with notice period of one month, unless a longer period is agreed.

The employer may only terminate the employment contract if there is a justified reason for termination related to the conduct of the employee (ie, personal reason of the employee, but only after warning has been issued and no improvement has been achieved), or due to violation of the work order and discipline or the work responsibilities (ie, fault reason, with or without notice period).

Prior to termination, the employer must obtain a written statement from the employee regarding the reasons for termination.

A decision on termination must be in writing and be well explained.

A decision on termination must be made in term of three months from the day when the employer became aware of the reasons for termination, but, in any case, in term of six months of occurrence of such reasons (ie, facts).

A notice period cannot be less than one month nor longer than three months. A notice period can be replaced with monetary compensation on the basis of mutual agreement between the employer and the employee.

If the employer intends to adopt a decision to terminate the labour relation to a larger number of employees for business reasons – ie, to at least 20 employees for a period of 90 days with each termination of the labour relation regardless of the total number of employees with the employer – it shall be considered as collective termination (collective redundancy) for business reasons.

A notice period is one month in case of a lesser number of redundant employees; if such number is more than 150 employees, or more than 5% of the total number of employees, then a notice period is two months.

Prior to making a decision on redundancy based on a decrease of the number of employees in particular working positions, the employer must apply relevant criteria and assessment for every employee in such working positions. If the employer abolishes the working positions, then no criteria and assessment would apply.

The employer is obliged to initiate consultation procedure with the representatives of the employees or union, where applicable, at least a month in advance and provide all relevant information prior to the commencement of the consultations.

The employer is obliged, after the completion of the consultations, to notify the service competent for employment mediation in writing in order to provide assistance and services to the redundant employees.

In case of collective redundancies, the following severance has to be paid to the redundant employee:

  • up to five years of employment – one net salary;
  • from five to ten years of employment – two-and-a-half net salaries;
  • from ten to 15 years of employment – three-and-a-half net salaries;
  • from 15 to 20 years of employment – four-and-a-half net salaries;
  • from 20 to 25 years of employment – six net salaries; and
  • over 25 years of employment – seven net salaries.

The basis for calculation of the severance pay shall be the average monthly salary of the employee in the last six months prior to the termination; however, such severance pay is not to be lower than 50% of the net salary paid per employee in North Macedonia within the last month prior to the termination.

Employment shall be considered to be the period of time the employee was employed with the same employer.

The employer cannot employ another employee for the same assignments, with the same professional training and occupation, within a two-year period after the redundancy. If, prior to the expiry of this period of two years, there is a need for the performance of the same assignment, the employee who was made redundant shall have the priority to conclude an employment agreement.

The employees have the right, but not the obligation, to constitute a trade union and become members thereof of their own free choice. The trade union is an independent and democratic organisation of employees, which they join voluntarily for the purpose of representing, promoting, protecting, and acting on behalf of their economic, social and other individual and collective interests.

The activity of the trade union and its representative may not be limited by the employer’s act, if it is in compliance with law and collective agreement.

Also, no one may be put in a less favourable position because of their membership or non-membership in the trade union, participation or non-participation in the activity of the trade union. Also, the trade union may not be dismissed or their activity may not be ceased by administrative measures, if they are constituted and perform their activity in compliance with law.

The obligation for information and consultation refers to the trade company, public enterprise and other legal entities containing over 50 employees and institutions containing over 20 employees.

The employers should inform the trade union or the representatives of the employees prior to the transfer of a company, prior to the introduction of night work, if the night work is carried out regularly by employees who work at night at least once a year, night work, about the forms of organisation of the night work, about the measures of health and safety at work, as well as about social security measures and other cases provided by law.

According to the Law on Personal Income Tax (LPIT) personal income tax on employment income is withheld by the employer from the employee’s salary at a tax rate of 10%.

The tax base for determining the income tax is the sum of gross income earned on all grounds (in money, in securities, in kind or in some other form) in the country and abroad, during the tax period, reduced by the amount on:

  • the contributions from the compulsory social insurance;
  • tax reduction; and
  • the standard or actual costs provided by the LPIT.

In addition, the employer should pay compulsory social insurance contributions at the following rates:

  • 18.8% for compulsory pension and disability insurance;
  • 7.5% for compulsory health insurance;
  • 0.5% for additional health insurance contributions;
  • 1.2% for compulsory insurance contribution in case of unemployment.

The basis for calculating and paying social insurance contributions by the employer is the salary, and additional income from employment (bonuses, and similar).

All resident and non-resident legal entities operating through a permanent establishment are liable to pay corporate income tax (CIT) in North Macedonia. The resident entities are taxed on their worldwide income. Non-resident entities are taxed on the profit realised through their permanent establishment in North Macedonia.

The CIT rate in North Macedonia is 10%.

The tax base for CIT is the profit realised for the current year, as determined according to the applicable accounting standards, adjusted for the amount of non-deductible expenses incurred during the fiscal year.

The base for calculation of the profit tax shall be determined as the difference between the total revenues and expenses of the taxpayer in the amounts determined in accordance with the prescriptions for accounting and the accounting standards.

Withholding tax (WHT) at a rate of 10% is to be withheld by the payer when certain types of income are paid by a national legal entity to foreign legal entities, provided that the income is not derived through a permanent establishment of the foreign legal entity in North Macedonia.

Withholding tax is applied to the following income, whether paid in the country or abroad:

  • dividends;
  • interest;
  • royalties;
  • entertainment or sporting activities;
  • management, consulting or financial services;
  • research and development services;
  • telecommunication services;
  • insurance and re-insurance premiums;
  • rental of real estate located in North Macedonia.

If there is a Double Tax Treaty existing between North Macedonia and a foreign country where the recipient of income is considered a tax resident, the provisions of the Double Tax Treaty prevail over North Macedonian legislation, meaning that lower rates can be applied on the income if provided by the treaty. If not, the provisions of the Law on Profit Tax will apply.

Value added tax (VAT) can be charged only by VAT-registered persons. Mandatory VAT registration applies to all taxable persons carrying out independent business activity if their annual VAT taxable turnover for the last calendar year exceeded MKD2 million.

The standard VAT rate that applies to most VAT taxable supplies is 18% and the reduced VAT rate is 5%.

Owners of real property are subject to a municipal level tax at rates ranging from 0.1% to 0.2%.

The transfer of real property is subject to a municipal level tax at rates ranging from 2% to 4%.

Also, there is a garbage collection fee and communal taxes which rates vary.

According to the Law on Profit Tax, the tax base shall decrease for the amount of the investments from the profit of the previous year (ie, reinvested profit). The tax base is reduced for the amount of investment of profits (reinvested profit) for development purposes – ie, investment in tangible assets (property, plant and equipment) and intangible assets (computer software and patents) intended to expand the activity of the taxpayer. The assets for which this incentive is utilised must not be disposed of for a period of five years from the year the investment was made.

The calculated profit tax is reduced by:

  • the approved tax exemption of the purchased and put into service fiscal systems for registering cash payments (ie, up to ten fiscal systems);
  • the amount of tax included in taxable income/profits abroad (withholding tax) to the prescribed rate;
  • the amount of taxes paid by the subsidiary abroad for the profit included in the income of the parent entity in North Macedonia up to the amount of tax assessed according to the tax rate in North Macedonia;
  • the estimated amount of tax relief for a donation given to: sports federations, the Macedonian Olympic Committee, football, basketball, handball and other sports clubs, active athletes from Olympic and non-Olympic sports under the terms and amounts of legally determined procedures.

Tax exemptions prescribed for special categories of taxpayers, in accordance with the rules which regulate their establishment and functioning:

  • companies for employment of disabled persons;
  • economic units within the penitentiaries and correctional institutions within the sector for re-socialisation, for the purpose of work of the convicted persons and children; and
  • Technological Industrial Development Zones (for a period of ten years).

There is no tax consolidation in North Macedonia.

Two or more VAT-registered persons can apply for VAT grouping (VAT registration as a single VAT taxpayer), if so decided by them due to ownership, organisational or management relations.

A proportional part of the interest related to a loan received from a non-resident shareholder, who directly holds at least 20% of the capital in the company, that exceeds three times its share in the equity in the company, will be taxable during a tax period under the thin capitalisation rule applicable in North Macedonia.

Thin capitalisation rules do not apply for newly established companies within the first three years of operation.

Interest on loans granted by direct shareholders who are non-residents holding at least 20% of a company’s share capital (qualifying shareholder) is considered non-deductible for profit tax purposes should the loan amount exceed threefold the amount of the equity attributable to that shareholder.

The same rule applies to loans granted by a third party, while guaranteed by a qualifying shareholder or granted in relation to a deposit provided by the qualifying shareholder to the third party.

The amount which is not recognised for tax purposes is the amount of interest on the part of a loan which exceeds threefold the amount of the equity attributable to the qualifying shareholder.

The thin capitalisation rules do not apply to loan facilities granted by direct shareholders which are banks or other financial institutions, as well as loan facilities granted by direct shareholders to newly established entities in the course of the first three years of their establishment.

Transfer pricing rules are applicable in North Macedonia.

The unrecognised expense and less reported income for tax purposes shall be the positive difference between the performed business or financial transaction between related entities (transfer price) and market price such as:

  • the amount of the positive difference between the expenses emerging from the transaction after the transfer price and the expenses emerging from that transaction for price determined in accordance with the “arm’s-length principle”; or
  • the amount of the positive difference between the incomes emerging from the transaction for price determined in accordance with the “arm’s-length principle” and the incomes emerging from that transaction after the transfer price.

The “arm’s-length” principle implies that the business and financial transactions between the related entities (tangible and intangible assets, business and financial services, internal grouping services, copyright compensations, derivatives, other securities, other financial instruments and any other transactions that can impact the gaining or loss of the related entities) are effected for prices and according to conditions in which those transactions do not differ from the ones between unrelated entities in comparable circumstances.

Notwithstanding the above, the taxpayer shall submit a report in short form, if the total value of transactions with the related entities during the year does not exceed MKD10 million.

The above shall not refer to transactions between related entities – residents of North Macedonia, as well as the taxpayers who during the year acquired a total income of up to MKD300 million.

According to the Law on Tax Procedure (LTP) the Public Revenue Office (PRO) shall perform the assignments referring to administration of the first instance tax procedure, keeping the register of taxpayers and tax acts and records, discovering punishable tax acts and their perpetrators, administration of first instance misdemeanour procedure as well as other affairs stipulated by the present law.

The PRO is responsible for resolving the problem of tax evasion and fraud, as well as other violations of tax regulations, through tax inspectors who conduct tax audits.

In the fight against tax evasion, a financial police unit was established which is responsible for detecting crimes such as tax evasion and fraud, money laundering, smuggling, illicit trafficking and other crimes that cause significant income from criminal offences.

At the same time, the financial police unit is also involved in joint inspections with the PRO and the State Market Inspectorate in order to detect and punish offences and misdemeanours within their competences.

In addition, in the fight against tax evasion North Macedonia has signed the Convention on Mutual Administrative Assistance in Tax Matters for boosting transparency and combating cross-border tax evasion.

Also, tax evasion is stipulated as a criminal offence under the Criminal Code.

Concentration as a concept is related to the status changes of a company.

It occurs when two or more companies merge to form a new company, and the entire property and liabilities of the merging companies are transferred to the new company.

Pursuant to the Law on Protection of Competition in the Republic of North Macedonia a concentration shall be notified to the Commission for Protection of Competition (CPC) if any of the following thresholds are met:

  • the aggregate turnover of all participants, generated by sale of goods and/or services on the worldwide market, amounts to at least EUR10 million in the business year preceding the concentration and provided that at least one participant must be registered in North Macedonia; or
  • the aggregate turnover of at least one of the participants generated by sale of goods and/or services in North Macedonia, amounts to at least EUR2.5 million realised in the business year preceding the concentration; and/or
  • the market share of at least one of the participants amounts to more than 40% or the total market share of all the participants in the concentration amounts to more than 60% in the year preceding the concentration.

Local legislation provides for pre-merger notification principle and it applies to foreign-to-foreign transactions as well as if they may have effect on the local market.

The acquirer, undertakings that would acquire joint control or participants in a joint venture are obliged to submit a notification to the CPC prior to its implementation and following the merger agreement or similar legal deed, or the announcement of a public bid for the purchase or the acquisition of the controlling interest in the nominal capital of an undertaking.

The CPC may obtain any missing document from public registries by itself.

The clock starts to run from the day of submission of a complete merger notification.

The CPC is obliged to make its decision within 25 working days as of the day of receipt of the complete notification.

If the CPC finds that the potential merger would be in conflict with the law, it will open a procedure for further examination of the merger within the period of 25 business days.

This period may be extended up to 35 working days if the participants in the concentration offer commitments (structural or behavioural remedies) vis-a-vis the CPC in order to make the merger compliant with the law.

In any case, the decision has to be adopted within 90 working days as of the day of the initiation of the procedure.

The parties may offer commitments at any stage of the procedure within the general deadline for the CPC to make its decision.

Also, the parties may ask for extension of deadlines, but the total duration of each extension may not exceed 20 working days.

If the CPC has not adopted a decision within the provided deadlines, the concentration shall be considered to be compliant with the provisions of the law.

The CPC may issue fines in case of failure to notify or late notification in the amount of up to 10% of the value of the total annual worldwide turnover earned in the business year preceding the merger.

In general, local competition law and regulations are in line with EU rules.

Cartels are defined as agreements and decisions and/or concerted practices between two or more undertakings aimed at coordinating their competitive behaviour on the market and/or influencing the relevant parameters of competition, especially through fixing of purchase or selling prices or other trading conditions, the allocation of production or sales quotas, the sharing of markets, bid-rigging, restrictions of imports or exports and/or anti-competitive actions against other undertakings-competitors to the cartel participants.

North Macedonian law applies to cartels outside its territory if such actions produce effect on the territory of North Macedonia.

The law provides for leniency and in principle is in line with EU regulation in this regard, as is the whole concept of the competition law in North Macedonia.

The CPC may issue fines in case of abuse of a dominant position in the amount of up to 10% of the value of the total annual worldwide turnover realised in the business year preceding the merger.

In addition, the Criminal Code provides for criminal liability in case of cartels as well.

Any abuse by one or more undertakings of a dominant position on the relevant market or a substantial part of it is prohibited. The abuse, in particular, is defined as:

  • directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
  • limiting production, markets or technical development to the prejudice of consumers;
  • applying different conditions to equivalent or similar legal transactions with other trading partners, thereby placing them in a position of competitive disadvantage;
  • making the procedural order of agreements subject to acceptance by the other parties of supplementary obligations, which, by their nature or according to commercial usage, have no connection with the subject of such agreements;
  • unjustified refusal to deal or encouraging and requesting from other undertakings or association of undertakings not to purchase or sell goods and/or services to a certain undertaking, with an intention to harm that undertaking in a dishonest manner;
  • unjustified refusal to allow another undertaking access to its own network or other infrastructure facilities for adequate remuneration, if without such access, as a result of legal or factual reasons, the other undertaking becomes unable to operate as a competitor on the relevant market. This shall not apply if the dominant undertaking proves that such concurrent usage of its network or its infrastructure facilities is not possible due to certain operational or other reasons, or that it should not be allowed due to certain justified reasons.

It is assumed by virtue of law that an undertaking has a dominant position if it has at least 40% market share.

The CPC may issue fines in case of abuse of a dominant position in the amount of up to 10% of the value of the total annual worldwide turnover realised in the business year preceding the merger.

Pursuant to the Law on Industrial Property (LIP), a patent is an industrial property right protecting the invention in the relevant procedure provided by the law.

An invention in all fields of technology can be protected as a patent, if it is new, if it contains an inventive step, and if it is susceptible to industrial application.

If these requirements are met, a patent shall also protect an invention that refers to: (i) a product comprising of or containing biological material and (ii) a method for obtaining biological material, for processing ior using it.

An invention shall not be subject to patent protection if it is:

  • a discovery, scientific theory or a mathematical method;
  • an aesthetic creation;
  • a plan, rule and a procedure for carrying out intellectual activities, for games, or for carrying out a business activity, as well as a computer program;
  • presentation of information; and
  • the human body in different stages of its formation and development or the simple discovery of one of its elements, including a sequence or a partial sequence of a gene.

The procedure is initiated with filing a patent application to the State Office of Industrial Property (SOIP) of the Republic of North Macedonia.

Patent applications in North Macedonia undergo both formal and substantive examination. Substantive examination of a patent application should be requested within two years from the filing date.

The fee for granting a patent is to be paid within 30 calendar days as of the notification by the SOIP.

Patent rights granted following a substantive examination by the SOIP are valid for 20 years from the day the application is filed.

Patents obtained without conducting a substantive examination are valid for ten years from the day the application is filed.

Annual fees should be paid each year starting from the third year.

A surcharge of 25% applies if maintenance fees are paid within a three-month grace period and 50% surcharge within a further grace period of six months.

In case of a smooth registration procedure, it usually takes about six months as of the filing date to get a patent granted in North Macedonia by SOIP.

The State Market Inspectorate (SMI) performs trade inspections regarding the use of patents.

The right-holder of a patent right can file a lawsuit before the competent court in case of an infringement of patent right within three years from the date when the plaintiff becomes aware of the infringement and the perpetrator, but not later than five years from the date of the infringement.

The holder of the right can also claim compensation of damages based on the general rules of the Law on Obligations.

Pursuant to the LIP, trade mark protects a trade sign that may be presented graphically, and which is capable of distinguishing goods or services of one participant from those of other participants on the market.

The signs can be words, letters, numerals, pictures, drawings, combinations of colours, three-dimensional forms, including shapes of goods or their packaging, as well as combinations of all the above-mentioned signs. The words and letters may be written in any language and alphabet.

The procedure is initiated with filing the trade mark application to the SOIP by an individual or legal entity. Multi-class applications are allowed in North Macedonia.

North Macedonia has signed the Nice Agreement on the International Classification of Products and Services when registering trade marks.

Trade mark applications in North Macedonia undergo formal examination by SOIP and if all the formal conditions are fulfilled it is published in the Official Gazette of SOIP. The opposition period starts from the publication date and lasts for 90 calendar days.

If no opposition is filed, the grant fee is to be paid within 30 calendar days of the notification by the SOIP and a decision for granting a trade mark right is issued.

Trade mark right is valid for ten years from the date of filing before SOIP and can be renewed unlimited times for an additional ten years.

In case of a smooth registration procedure, it usually takes about six months as of the filing date to get a trade mark protection in North Macedonia.

The procedure for international registration of a trade mark is initiated by submitting an application for international registration to SOIP, in accordance with the Madrid Agreement (ie, the Madrid Protocol).

Upon receipt of the application for international registration, SOIP examines whether the application has been submitted in accordance with the provisions of the rule book.

If that is the case, SOIP shall submit the application to the International Bureau of the World Intellectual Property Organization in accordance with the provisions of the Madrid Agreement and the Madrid Protocol and the Rules of Procedure of the Madrid Agreement and the Madrid Protocol.

SMI performs trade inspections regarding the use of trade marks.

The right holder of trade mark right can file a lawsuit before the competent court in case of infringement of a trade mark right within three years from the date when the plaintiff becomes aware of the infringement and the perpetrator, but not later than five years from the date of the infringement.

The holder of the right can also claim compensation of damages based on the general rules of the Law on Obligations.

Customs-related measures for protection of IP rights can also be initiated before the Customs Authority. This procedure is applicable when there is reasonable doubt that the goods are counterfeited and declared for import, export or are transiting the territory of North Macedonia.

The procedure at the Customs Office and potentially at the court can be initiated by the holder of the right who is responsible for compensation of damage and all the costs in the procedure if the goods are not infringing the IP right.

An industrial design is the outer appearance of a product as a whole or its part which is determined by its characteristics, in particular the lines, contours, colours, shape, texture and the materials the product is made of or ornamented with, and/or its decorations.

The design should be new and should have individual character.

A design shall be considered as new if an identical design has not become available to the public prior to the date of filing of the application for acknowledgement of that particular design or if there has been a claim for a priority right prior to the date of the claimed priority right, or if there is no earlier application filed for acknowledgement of an identical design.

A design shall be considered to have an individual character if the total impression it makes to the informed user differs from the total impression that any other design makes to such user, and which has become available to the public prior to the date of filing the application for an industrial design, or if a priority right has been claimed prior to the date of the acknowledged priority right.

The procedure is initiated with filing the industrial design application to the SOIP by the author or its legal successor.

Industrial design applications undergo formal examination by SOIP and if all the formal conditions are fulfilled it is published in the Official Gazette of SOIP. The opposition period starts from the publication date and lasts for 90 calendar days.

If no opposition is filed, the grant fee is to be paid within 30 calendar days of the notification by the SOIP and the decision for granting an industrial design is issued.

Industrial design right is valid for five years from the date of filing before SOIP and can be renewed for an additional five years up to a maximum of 25 years.

In case of a smooth registration procedure, it usually takes about six months as of the filing date to get an industrial design protection in North Macedonia.

SMI performs trade inspections regarding the use of protected industrial designs.

The right-holder of industrial design right can file a lawsuit before the competent court in case of infringement of industrial design right within three years from the date when the plaintiff become aware of the infringement and the perpetrator, but not later than five years from the date of the infringement.

The holder of the right can also claim compensation of damages based on the general rules of the Law on Obligations.

Customs-related measures for protection of IP rights can also be initiated under the same principles as for the trade marks.

The Law on Copyright and Related Rights regulates the right of authors in their copyright works, the rights of performers, phonogram producers, video producers (film producers), broadcasting organisations, publishers and database makers in their subject matter of related rights, the administration and the protection of copyright and related rights.

A copyright work is an intellectual and individual creation in the field of literature, science and art, expressed in any manner and form.

When the copyright work has been created by a number of authors (co-authors), the term of duration of protection shall be calculated from the death of the last surviving author.

Copyright of anonymous and pseudonymous copyright works shall run for 70 years after the lawful disclosure of the work.

There are no formalities prescribed by the law regarding the protection of a copyright. In order to secure evidence, the author may deposit originals or samples of its works with a copyright agency or legal representative.

There is neither an obligation nor a condition to receive copyright protection. It is obtained with the creation of the copyright work, but only a possibility for the author to secure an evidence of its copyright. 

Copyright and related rights enjoy criminal, civil and misdemeanour protection. Customs-related measures for protection of IP rights can also be initiated.

The Ministry of Culture supervises the implementation of the Copyright Law.

Other IP rights that are protected in North Macedonia are:

  • appellation of origin and geographical indication that are used for protection of geographical name;
  • topography of integrated circuits;
  • software (computer program) is considered as copyright and it relates to a program in any electronic form of expression, including the preparatory design material, provided that it is an individual and intellectual creation;
  • databases are considered as copyright and these relate to a collection of data, arranged in systematic or methodical way, and individually accessible by electronic or other means.

Regarding the legal framework for protection of trade secrets in North Macedonia, there is no specific law, but provisions which regulate the concept of trade secret are found in the Law on Trade Companies, the Law on Obligations and others. Also, the provision from the TRIPS agreement are applicable.

A new Law on Personal Data Protection was adopted in North Macedonia in February 2020. The law was implemented in order to harmonise the existing national legislation with the provisions of the EU Regulation (EU) 2016/679, the General Data Protection Regulation (GDPR) on the protection of individuals in connection with the processing of personal data, and the free movement of data.

The provisions of the Law on Personal Data Protection apply to the processing of personal data by a controller that is not established on the territory of North Macedonia, but is established on a territory where the laws of North Macedonia are applied according to international agreements ratified according to the Constitution of the Republic of North Macedonia.

The legislature sets out two main criteria for determining the territorial applicability of the law, as detailed below.

  • The law applies to all data controllers established on the territory of North Macedonia, regardless of whether or not the processing is carried out on the territory of the country and regardless of whether the subject whose personal data being processed is located on the territory of the country. The legal and organisational form of the controller does not play a role.
  • The personal data protection regime applies in all cases where the controller or processor does not have an authorised representative based in North Macedonia, but the personal data subjects are from North Macedonia.

To apply this measure, processing activities relating to personal data subjects located in North Macedonia should refer to offering goods or services, to personal data subjects in North Macedonia regardless of whether compensation is required or observing the behaviour of personal data subjects, if that behaviour takes place in North Macedonia.

Factors that may help determine whether the controller or processor offers goods or services may be the following: the use of one of the official languages in the country and/or the ability to order goods or services using those languages, the use of Macedonian currency, or mentioning the customers or consumers who are in North Macedonia. The access of the controller or processor to the intermediary's website, e-mail address or other contact information alone is not sufficient to determine the intention to offer goods or services.

It is also necessary to determine whether individuals are being tracked online following the potential use of personal data processing techniques by profiling a natural person, in particular in order to make a decision about that person, to analyse or predict what his or her personal affinities, behaviours, or attitudes are.

The Agency of Data Protection is in charge of enforcing data protection rules as an independent state body for supervision over the processing of personal data on the territory of North Macedonia.

The Agency also gives opinions to the Assembly, the government of North Macedonia and other institutions.

The Agency is also responsible for issuance of warnings and, in certain cases, imposing misdemeanour sanctions ranging between 2% and 4% of the total annual income of the legal entity – data controller or processor generated in the business year preceding the year of misdemeanour.

Popovski & Partners

Nikola Vapcarov 2-4
1000 Skopje
Republic of North Macedonia

+389 2 32 32 243

info@pp-lf.com www.pp-lf.com
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Law and Practice

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Popovski & Partners is a modern, full-service law firm in the Republic of North Macedonia with offices located in the capital city Skopje. The team consists of seven attorneys at law, all well-respected, experienced and known for their legal expertise. Popovski & Partners provide clients with assistance in all legal aspects of corporate and commercial relations and business dealings. The team is also highly experienced in representing clients in all types of disputes arising from all types of commercial activities. The team assists clients in a wide variety of industries, among which are: energy and natural resources, food production, retail and consumer goods, healthcare and pharmaceuticals, information and communication technologies, infrastructure, financial services, etc.

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