Are you selling an apartment or a house? These 7 mistakes can cost you thousands of tax denars!

Capital gain is the positive difference between the sale price of real estate and its purchase (purchase) price. Simply put: if you bought an apartment for 2,600,000 denars and sold it for 3,500,000 denars, the capital gain is 900,000 denars. On this profit, under certain conditions, you have to pay personal income tax.

It is crucial to understand that not every sale of real estate automatically results in a tax liability. There are specific conditions under which you are completely exempt from tax, and understanding these conditions is the key to avoiding unnecessary expenses. But if you don't qualify for the exemption, the tax rate is 10% of the capital gain (or part of it, depending on the circumstances).

You, as a natural person - a citizen, are liable for the tax for the income you have earned on the basis of capital gains from the sale of real estate. It doesn't matter if it's an apartment, house, business space, land or another type of real estate - the rules are the same for all types of real estate.

An interesting point is that the agreed price between the buyer and the seller is considered as the selling price. However, the Public Revenue Authority has the right to assess this price. If the IRS assesses that the agreed price is lower than the market value, the market value of the real estate determined by the local self-government according to the Methodology for assessing the market value of real estate, without the real estate turnover tax, will be taken as the selling price. This means that you cannot simply negotiate a low selling price with the buyer to avoid tax - the IRS has control mechanisms.

The good news is that Macedonian tax legislation provides for several situations in which capital gains from the sale of real estate are completely exempt from tax. Understanding these exemptions can save you a significant amount of money. Here are all seven cases in which you do NOT pay tax:

1. You lived in the property for at least 1 year before the sale and you sell it after 3 years from the date of acquisition. This is the most common case of exemption. If you bought an apartment on January 15, 2020, lived in it, and sold it on January 20, 2025 (that means more than 3 years have passed), you do not pay capital gains tax. Two conditions are key: (a) that you have lived in the property for at least one year before the sale, and (b) that at least 3 years have passed since the day of acquisition. If you meet the residence requirement, but sell, for example, after 2 years and 6 months of acquisition, you will have to pay tax.

2. You sell the real estate after 5 years from the date of acquisition, regardless of whether you lived in it. This case is applicable to investment real estate or real estate that you did not use as a residence. If you bought an office space, apartment for rent, or any other real estate on March 1, 2015, and sell it on January 5, 2025, you pay no tax regardless of whether you ever lived there. The five-year period is an absolute release.

3. You are selling the real estate acquired through denationalization. Real estate returned on the basis of denationalization is completely exempt from capital gains tax on its sale, regardless of the time period or other conditions.

4. You are selling the real estate acquired on the basis of inheritance in the first line of succession. If you inherited the property from a parent, child or spouse (first line of inheritance), the capital gain from its sale is exempt from tax. This exemption does not apply to inheritance from the second or third line of succession (for example, from a cousin, uncle, etc.).

5. You lived at least 1 year in the real estate before the sale, which you acquired on the basis of a gift of the first order of inheritance, and you sell it after the expiration of 3 years from the date of acquisition by the legal predecessor (donor). This is a complex case: for example, your parent bought the apartment on January 1, 2020, and gave it to you on January 1, 2023. You started living in it. If you sell it on January 15, 2025 (more than 3 years have passed since January 1, 2020 when the parent bought it), and you lived in it for at least one year, you are exempt from tax. The period from when the original owner (donor) acquired the property is counted, not from when you received it as a gift.

6. You sell the real estate that you acquired on the basis of a gift of the first order of inheritance, after the expiration of 5 years from the date of acquisition by the legal predecessor (donor). Similar to the previous case, but without the residence requirement: if the parent bought the property on January 1, 2015, gave it to you on January 1, 2020, and you sell it on January 15, 2025, you are exempt from tax without regardless of whether you lived in it.

7. The income is realized from a sale made between the spouses, as well as by the spouses made to a third party in the case when the real estate sold is in direct connection with the divorce of the marriage. This exemption is provided so that the persons who are divorcing and have to divide the joint property are not further burdened.

If you are not exempt from tax, it is important to know how the tax liability is calculated. The basic formula is simple, but there are variations depending on whether you have lived in the property.

Tax rate: The rate is 10% of the capital gain. This is a fixed rate that applies to all natural persons.

Tax base - general rule: The capital gain realized from the sale of real estate is included in the tax base in the amount of the entire amount (100%). So, if the capital gain is 300,000 denars, the tax will be 30,000 denars (300,000 x 10%).

Tax base - relief for residence: However, if you lived in the real estate (apartment/house) for at least one year before the sale, and you sell it before the expiration of 3 years from the date of acquisition, only 90% of the realized capital gain is included in the tax base. This means that 10% normalized costs are automatically recognized. In this case, if the capital gain is 250,000 denars, the tax base will be 225,000 denars (250,000 x 90%), and the tax will be 22,500 denars (225,000 x 10%).

Recognition of actual costs: The law allows the debtor who realizes a capital gain from the sale of immovable property, at his request, to recognize the actual costs of investment investments instead of the normalized costs (10%), if he proves them documented. For example, if you bought an apartment for 2,000,000 denars, then invested 500,000 denars in renovation (with invoices and evidence), and sold it for 3,000,000 denars, the capital gain will not be 1,000,000 denars, but 500,000 denars (3,000,000 - 2,000,000 - 500,000). This can significantly reduce the tax.

Example 1 - Sale without living: A person bought an apartment on 13.05.2024 for 3,200,000 denars, did not live in it, and sold it on 30.01.2025 for 3,500,000 denars. Capital gain: 300,000 denars. Tax base: MKD 300,000 (100%). Tax: 30,000 denars.

Example 2 - Sale with residence: A person bought a house on 15.01.2023 for 5,000,000 denars, lived in it, and sold it on 15.01.2025 for 5,250,000 denars. Capital gain: 250,000 denars. Tax base: MKD 225,000 (90%). Tax: 22,500 denars.

Example 3 - Market value: A person reported a sales price of 3,200,000 denars, but the IRS determined that the market value according to the Decision of the City of Skopje is 3,850,000 denars. The purchase price was 2,600,000 denars. Capital gain: MKD 1,250,000 (3,850,000 - 2,600,000). If the person lived in the apartment, tax base: MKD 1,125,000 (90%). Tax: 112,500 MKD. This is a significant difference and shows why it is important to report the selling price realistically.

One of the most common reasons why citizens face fines and penalties is missing the deadlines for reporting income from the sale of real estate. These deadlines are strict and failure to meet them automatically results in sanctions.

Deadline for submission of e-PPD: If you have made a capital gain from the sale of real estate that is subject to taxation, you have the obligation to report the income to the Public Revenue Authority by the 10th of the month following the month in which the purchase and sale agreement was notarized. For example, if the contract was notarized on January 25, 2025, you must submit the calculation no later than February 10, 2025.

Deadline for paying the tax: You should pay the advance payment order for the income tax no later than the 15th of the month for the previous month. So, for income earned and reported in January, the tax should be paid by February 15.

Annual tax return: Based on all the data on the realized income during the year, the IRS will prepare and deliver to you a completed Annual tax return no later than April 30 of the following year. It is your responsibility to confirm or correct it by May 31 at the latest. For income earned in 2025, you will receive the annual return by April 30, 2026, and you will need to confirm it by May 31, 2026.

Penalty for non-reporting: The citizen who does not submit an Electronic Calculation (e-PPD) through the e-Tax Services system within the prescribed period, will be fined for an offense in the amount of 50 to 250 euros in denars. This is not a small amount, and is easily avoided by timely reporting.

Delay interest: If you do not pay the tax within the deadline, the unpaid amount is calculated with interest for delay. This interest is not symbolic - it can significantly increase the final amount you have to pay.

Reporting of the income from the sale of real estate is exclusively done electronically through the e-Tax Services system at e-ujp.ujp.gov.mk. There is no possibility of physically submitting the calculation - everything is done online. Here is the step-by-step process:

Step 1: Registration of e-Tax Services. Every citizen who realizes a capital gain from the sale of real estate is required to register for the e-Tax Services system. The only requirement for registration is to have a valid e-mail address, which will be your username for logging into the system. The registration procedure is simple and can be done in a few minutes.

Important note: If you or the chosen proxy are not registered as a taxpayer in the Register of Taxpayers of the IRS, you should first register as a taxpayer, by submitting an Application for Registration IRS-RDO and submitting an identification document to a tax office of the IRS.

Step 2: Preparation of necessary documents. Before you start filling out the electronic calculation, prepare the following documents that you will need to attach as attachments: (1) A copy of an identity card or a copy of the decision with which you are liable for property tax in the case of the sale of a property in which you lived for at least one year before the sale; (2) Proof of the sale of the property (sales contract certified by a notary), which shows the date of sale and the sale price; (3) Proof of the purchase of the property showing the date of purchase, the purchase price and the paid real estate sales tax (copy of PP50 or extract); (4) Proof of the investment venture, if you require recognition of actual expenses; (5) Proof of the cost of the real estate, if you built the property yourself.

Step 3: Filling out the e-PPD. Log in to the e-Tax Services system and fill in the Electronic calculation of income and tax advance (e-PPD). Enter all the necessary data: sale price, purchase price, dates, and attach the prepared documents.

Step 4: Approval and payment. After submission, the IRS approves the e-PPD calculation. After approval, the IRS electronically assigns a Folio number and issues a Recapitulation for the determination of advance income tax with the status "Approved" and an Order for the payment of income tax. You should pay this order no later than the 15th of the month for the previous month.

There are several specific situations that require special attention when calculating the capital gain and determining the tax liability.

Real estate acquired by inheritance or gift: If the real estate was acquired by inheritance or gift, the purchase price is considered the price at which the real estate was acquired by the legal predecessor (donor or testator). For example, if your parent bought the apartment for 2,000,000 denars, then gave it to you, and you sell it for 3,000,000 denars, the capital gain is calculated as 1,000,000 denars (3,000,000 - 2,000,000), not as 3,000,000 denars. This provision is important because it prevents double taxation.

Real estate that you built yourself: When selling real estate that the debtor built himself, the purchase price is considered the cost price of the real estate, which the debtor will document, based on the costs incurred for the construction of the real estate. This includes the cost of materials, labor, permits, and anything else related to construction. If it cannot be proven, the purchase price will be considered the cost price (construction price) of the same or similar real estate during the construction period of the area where the real estate is located. If there is no such real estate in that area, the average price for the territory of the Republic of North Macedonia is used.

Sale between spouses: As mentioned above, the income generated from a sale between spouses, as well as by spouses to a third party in the event that the real estate sold is in direct connection with the divorce of the marriage, is completely exempt from tax. This exemption is intended so as not to create an additional financial burden in the already difficult situation of divorce and division of property.

Question 1: Do I have to report the sale of real estate even if I did not make a profit? No. If the selling price is lower than or equal to the purchase price, there is no capital gain, but a capital loss. In that case, you have no tax liability and you do not need to submit e-PPD. Be careful, though - the IRS can check the market value, and if it's higher than your reported sales price, it can assess your tax liability.

Question 2: Do I need to report a sale if I am tax exempt? No. If you meet the conditions for the exemption (for example, you sell after 5 years of acquisition), you are not required to file an e-PPD. Release is automatic.

Question 3: What happens if I miss the reporting deadline? You will be fined 50 to 250 euros in denars for not reporting income. In addition, late payment interest will be calculated on the unpaid tax. The recommendation is that even if you missed the deadline, you should immediately report the income and pay the tax to minimize the financial burden.

Mistake 1: "If I lived in the apartment, I don't pay tax." This is not true. Living in the flat gives relief (taxation of 90% instead of 100% of the gain), but not a full exemption, unless 3 years have passed since the acquisition. Many people believe that the mere fact that they have lived in the property exempts them from tax, which is wrong.

Mistake 2: “I can negotiate a low price with the buyer to avoid tax.” This is a risky strategy. The IRS has the right to check the market value and use it instead of the agreed price. Additionally, reducing the price in the contract can create problems for the buyer as well (higher real estate sales tax) and can be considered as an attempt at tax fraud.