North Macedonia WHT on IRS net settlements – am I cooked?
Gents,
Infrastructure SPV in North Macedonia (MKD), floating EUR debt, fully hedged with pay-fixed IRS to a Western European dealer. Rates move against us, net settlement goes out of country – does MKD tax authority hit that outflow with 10% WHT as “interest”?
Local counsel split 50/50. DTT may or may not cover it depending on which desk the counterparty books the trade from (London vs Frankfurt = different answer, because of course it is). Zero published guidance from Skopje. Tax advisor won’t give a clean opinion, just a “reasoned analysis” which is lawyer for “don’t quote me on this.”
Model currently grosses up the hedge payment and DSCR falls off a cliff.
Anyone actually closed a deal in North Macedonia where this came up or do I just put it in the risk matrix and pray?
Congrats, you’ve discovered that IRS withholding tax treatment is vibes-based jurisprudence. Gross it up, eat the DSCR, call it ‘regulatory risk premium’ in the IC deck, and move on. No one who actually solved this is posting about it on WSO
Man what does this even mean..?
Niche but genuinely fascinating. The booking desk DTT angle is something I have never seen addressed cleanly anywhere. Following this thread hard.
Short answer: yes, the Public Revenue Office (PRO) can and likely will call it interest.
Macedonian domestic law casts “interest” broadly with no carve-out for derivative settlements. 10% WHT applies on cross-border interest payments, and DTT relief requires advance PRO approval before payment. Retroactive claims are not permitted.  Your gross-up is the right base case.
The London vs Frankfurt booking is your only real lever. Get counsel to confirm which DTT jurisdiction gets you to 0% on interest paid to a financial institution, restructure the booking desk accordingly, and file for the advance ruling before execution.
Until that ruling is in hand, the DSCR cliff stays in the model and the gross-up clause goes in the ISDA schedule.
Where did you learn all this?
How many of you fuckers are doing deals in North Macedonia
Fair pushback, but look at what’s actually there.
Vitesco, Aptiv, Kemet already running manufacturing ops. Automotive wiring harnesses and electronics flowing duty-free into Germany. 10% corp tax. Wages under $900/month. $739M in renewable energy FDI between 2017 and 2022. NATO member. EU accession negotiations live. Highway infrastructure spend driving 3.5% GDP growth in 2025.
Mid-market manufacturing carveout, renewables platform, logistics roll-up, the unit economics work. The re-rating when EU membership lands will be real. Entry point is now.
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