In the world of real estate, the concept of capital gain on the sale of real estate plays a significant role in the financial planning and tax obligations of property owners. Capital gain tax on sale of real estate in North Macedonia is the financial profit that is realized when the owner sells real estate for a price that is higher than its purchase price. In this blog, we will look at the concept of capital gains in the context of the real estate market in the Republic of North Macedonia and how it affects the tax obligations of taxpayers.

What is a capital gain on the sale of real estate?

Capital gain represents the income that is realized from the sale of real estate, that is, the difference between the sale and purchase price of the property. If the sale price exceeds the purchase price, you realize a capital gain. In the tax law in the Republic of North Macedonia, the sale price refers to the agreed-upon sale price, while the purchase price is the price at which the owner purchased the property.

Thus, it follows that capital gain is the income (positive difference between the sale price of the real estate and its purchase price), which the obligor realizes from the real estate. If the difference is negative, a capital loss is realized.

How is capital gain calculated when selling real estate?

To calculate the capital gain, subtract the purchase price from the sale price of the real estate. In the case of inheritance or gift, the purchase price is the price at which the property was acquired by the previous owner. If the property is built by you, the purchase price refers to the costs of its construction.

Tax treatment of capital gains on the sale of real estate

The capital gain tax on sale of real estate in North Macedonia is 10%. However, there are certain conditions under which you can be exempt from paying capital gains tax. For example, if you lived in the property for at least one year before the sale and you are selling it after three years of acquisition.

Registration and payment of the tax

Owners who realize a capital gain from the sale of real estate are obliged to report this gain to the Public Revenue Administration. Registration is done through the electronic system and by submitting the necessary evidence through the e-Tax Services system. The deadline for submitting the application and evidence is until the 10th of the month following the month in which the purchase and sale agreement was notarized.

Taxation of different scenarios

Taxation scenarios can vary depending on the duration of ownership of the property and its use. If the owner of the property lives in it and sells it after five years of acquisition, the capital gain is not taxable. Also, if the income is realized from the sale of real estate acquired through denationalization or inheritance from the first line of succession, no capital gains tax is paid.

Exceptions and Exemptions

There are certain exceptions where owners can be exempt from paying capital gains tax. For example, the sale of property that is directly related to a divorce, and sales made between spouses, may be exempt from taxation.

A capital gain from the sale of real estate is a significant financial item that requires careful planning and an understanding of the tax implications. In Macedonia, a 10% capital gains tax rate applies, but with many conditions and exceptions that can significantly affect your tax burden. It is important to inform yourself and submit appropriate tax returns within the deadlines to avoid possible penalties and to take advantage of the legally provided reliefs.

Capital gains are a key element in real estate financial management, and with proper planning and tax advice, can bring significant financial benefits and savings.

Read more about the taxation of capital gains on the sale of real estate at the following link