Macedonia: Overview

RENTAL YIELDS

Yields are generally high in Skopje

Apartments in central Skopje have yields ranging from 7% to 10.5%, while houses have slightly better yields, ranging from 8.4% to 11.25%.

Apartment prices range from €800 to €1,500 per sq. m.. Monthly rents, on the other hand, are around €250 for a small unit (35 sq. m.), and €1,600 for a big unit (180 sq. m.).

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TAXES AND COSTS

Income taxes in Macedonia are moderate

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	9.2%	9.2%	9.2%
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Source: Disclaimer

Rental Income: Rental income is taxed at a flat rate, and the applicable rate depends on the category of the rental property. Unstudied business space is taxed at 8.11% and accommodated business space is taxed at 7.52%.

Capital Gains: Capital gains are taxed as ordinary income at 12%, levied on 70% of computed gains after expenses are deducted.

Inheritance: Inheritance tax is levied on the market value of the inheritance at 3% for second degree relatives.

Residents: Residents are taxed on their worldwide income.

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BUYING GUIDE

Buying costs are very low in Macedonia

Roundtrip transaction costs, i.e., the total cost of buying and selling a property, are around 5% - 6.6% of the property value. The 3% sales tax is the greatest cost, and is usually paid by the buyer. The seller pays for the agent’s commission of 2%. However, the first turnover of buildings and apartments is subject to 18% VAT, dramatically increasing the transaction cost.

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LANDLORD AND TENANT

Macedonian tenancy laws are pro-landlord

Rent: Rent and rent increases can be freely negotiated. The lease contract must clearly state the rent, type of rental payment, and the payment schedule.

Tenant Security: Lease agreements automatically terminate at expiration of the lease contract.

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ECONOMIC GROWTH

Choice of name and ethnic clashes hamper growth

The Former Yugoslav Republic of Macedonia (pop 2.1 million) is one of the countries that emerged from the disintegration of Yugoslavia.

Macedonia experience no economic growth until 1996 because of poor infrastructure and a Greek economic embargo over a dispute about the country's name and flag (the name “Macedonia” is seen by Athens as implying territorial ambitions over Greece’s northern region of Macedonia, which is contiguous).

Inter ethnic tension between Macedonians (Orthodox Christians) and ethnic Albanians (Sunni Muslims) came to a head in 2001, when Albanian rebels demanded greater rights. The tension caused a 4.5% GDP decline that year. The subsequent Ohrid agreement increased Albanian minority rights through constitutional revisions. Albans make up about a quarter of the population.

Macedonia's GDP grew by 1.4% per annum from 2001 to 2005, and 4% growth is forecast for 2006. Despite macroeconomic stability with low inflation, Macedonia has lagged in attracting foreign investment.

Elections in 2006 saw the return of the centre-right Internal Macedonian Revolutionary Organization (VMRO-DPMNE) which was last in power in 2001, when the ethnic Albans revolted. The election campaign was marred by violence.

EU candidate status was granted in December 2005. Most Macedonians hope that their contentious relationship with Greece will not affect their EU membership chances.