I. GENERAL PROVISIONS

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A free economic zone represents a part of the territory of the Republic of Macedonia, which is detached, specifically marked and fenced around, as a totality in which commercial activities are conducted under conditions prescribed by this and other laws and in which customs and other tax incentives determined by this law are applicable (hereinafter: free zone).

Free zone is established as a trade company conducting economic, technical, administrative - expert and other activities in connection with performing of the activities within the free zone.

The free zone gains status of legal entity upon its in-listing in the Trade Registry.

II. CONDITIONS FOR ESTABLISHMENT OF FREE ZONE

Article 3

Conditions for Establishment of Free Zone

Free zone is established if:

1. spatial, energetic, technical and other conditions prescribed for conducting activities in free zone are provided;
2. the percentage of goods and services exported from the free zone is not smaller than the percentage determined by this law, except in cases of force major;
3. by performing the activities in the free zone, an increase of the employment in the country is provided;
4. production technological processes, goods that are manufactured and stored, and services that are performed do not endanger the living environment and nature;
5. the founder of the free zone provides the required start-up capital.

The founder of the free zone provides assets for establishment and commencement of activities in the free zone, as well as appropriate spatial, environmental, energetic, technical and other conditions for conducting activities in free zones and makes an Act for its establishment.

The founder and the users of the free zone, employ Macedonian citizens, purchase goods and services from Macedonian suppliers and sub-suppliers, whenever commercially viable.

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Article 4

Spatial Conditions for Establishment of Free Zone

Free zone is established in areas determined by spatial or physical plans for locality with buildings of public interest. A free zone may be established within or out of urban areas.

The construction of buildings and the performance of other activities in the free zone are of public interest.

The free zone may consist of a number of separate parts on the territory of the Republic of Macedonia, each of them should be fenced and detached from the other part.

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III.FREE ECONOMIC ZONE'S DIRECTORATE

Article 5

A Directorate of a Free Economic Zone (hereinafter: Directorate) is established in order to conduct activities regarding the development, establishment and supervision of activities in the free zones.

The functions of the Directorate is as follows:

1. planing and development of free zones and providing of conditions for utilisation of the area:
2. granting approval for establishment of free zone;
3. providing supervision and management, through its organisational units, of all free zones;
4. co-ordination of activities of the state administration bodies and public enterprises within the space in the free zone;
5. promotion and advertisement of free zones and fulfilment of public relations;
6. attracting the founders and the users of the free zones;
7. defining the required start-up capital;
8. keeps record of activities conducted within the free zone;
9. sets up a board for resolution of labour relation disputes between employers and employees;
10. submits annual reports on the activities in the free zone to the Government of the Republic of Macedonia
11. co-ordinates the providing of:

• consents, approvals or licences defined by the separate laws on establishment, commencement of activities and operation of free zone;
• supervision of functioning of the infrastructure in the free zone;
• product quality control and issuance of certificates of origin;
• export-import licences;
• performance of the commercial activities of public interest for the needs of the founders of the free zone within the area of the free zone;
• protection of public safety and security of individuals and their property within the area of the free zone;
• prevention of smuggling and;
• other activities regarding the operations of free zones by applying the "one stop shop" system.

12.issuing approvals pursuant to article 16 of this Law;
13.approving the Act from article 24 of this Law;
14.screening operations in the free zone and when necessary proposing measures to the Government of the Republic of Macedonia;
15.performing other activities related to the functioning of the free zone.

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Article 6

The Government of the Republic of Macedonia enacts an annual programme for the purposes of realisation of activities under Directorate’s competence.

The Directorate prepares a report on the activities in the free zone for the previous year by the end of May of the current year.

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Article 7

A Director who is appointed or dismissed by the Government of the Republic of Macedonia governs the Directorate.

The Director is appointed for a four years mandate.

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Article 8

The Directorate is managed by a Steering committee, consisting of seven members, and those are: the Ministry of Development, the Ministry of Finance, the Ministry of Economy, the Ministry of Urban Planning and Construction, the Ministry of Trade, the Ministry of Labour and Social Policy and the Ministry of Environment.

The government of the Republic of Macedonia appoints the members of the Steering committee.

A President appointed by the Government of the Republic of Macedonia, from the members of the committee manages the work of the committee.

The President and the members of the Steering committee are appointed on a four years period.

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Article 9

The Directorate makes a Statute, which provides more precise definition of its activities and organisational structure.

The Statute of the Directorate is adopted by the Steering committee within 30 (thirty) days from the day of its creation.

The Government of the Republic of Macedonia gives an approval to the Statute of the Directorate.

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Article 10

The Directorate’s operating assets are funded from the budget of the Republic of Macedonia.

The Directorate submits an activity report to the Government of the Republic of Macedonia at least once a year.

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Article 11

For the use of the free zone, the founder of the free zone pays quarterly a fee of 0.3 % of the value of invoices issued by the user of the free zone, within thirty (30) days after the expiry of the quarter.

The fee from paragraph 1 of this article is a part of the budget revenues of the Republic of Macedonia.

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IV. ARRANGEMENT AND ESTABLISHMENT OF THE FREE ZONE

Article 12

Separation and Arrangement of the Space of the Free Zones

The founder of the free zone is obliged to fence, arrange and mark the free zone area.

The free zone or its parts have to be arranged in a way so that the movement of goods within or out of the zone can only be possible through pre-determined entrances and exits.

The fence, the entrances and the exits should be properly arranged, secured and illuminated.

The Minister of Finance, in agreement with the Minister of Urban Planning and Construction, prescribes the specific criteria and the manner of arranging the free zone identified in paragraph 1, 2 and 3 of this article.

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Article 13

The Founder of the Free Zone

A free zone may be established by one or more domestic or foreign trade companies or by other legal entities (hereinafter: founder of the free zone).

When several founders establish a free zone, they sign an agreement for founding a free zone.

The founder of the free zone should:

1. have a written evidence of his financial status determining that he has the necessary funds in a bank and that they are not a subject of collateral as well as a report from an authorised auditing house, and
2. submit evidence of his previous commercial or free zone experience.

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Article 14

Act or Agreement for Establishment of a Free Zone

The act or agreement for establishment of a free zone contains:

1. the name of the founder or the founders of a free zone;
2. the name of the free zone;
3. the free zone area;
4. activities performed within the free zone; and
5. the period for which the free zone is established.

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Article 15

Request for Establishment of a Free Zone

The Founder submits a written request for establishment of a free zone to the Free Zone Directorate.

The Request should contain the following information:

1. name and address of the main office of the requesting party;
2. activities that are to be performed in the free zone;
3. period for which the free zone is established;
4. free zone construction terms with an excerpt of the spatial or urban planning documentation;
5. size of the free zone;
6. organisation and operational methods of the free zone;
7. technical - technological and other conditions for operating of the free zone; and
8. manner of providing working conditions for the free zone customs office.

In addition to the request, the founder of the free zone is obliged, besides the evidences of art. 13 of this Law, to attach to the request:

1. act/agreement for establishment of a free zone;
2. evidence that conditions defined in article 3 of this Law are met;
3. feasibility study or business plan;
4. marketing plan and
5. technical - technology feasibility study for the environment.

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Article 16

Approval for Establishment of a Free Zone

The Free Zone Directorate gives approval for establishment of a free zone (hereinafter: approval) based on the data contained in the request for establishment of a free zone and the evidences described in article 15 paragraph 3 of this Law.

In the approval from paragraph 1 of this article, the Directorate determines whether the conditions prescribed by this and other Law for establishment of a free zone have been met and whether the request is in compliance with the development documents of the Republic of Macedonia.

The Directorate submits the approval to the Government of the Republic of Macedonia along with the request and the evidences from article 15 paragraph 3 of this Law.

Based on the approval submitted by the Directorate, the Government of the Republic of Macedonia gives consent for the establishment of a free zone, if:

• conditions prescribed by this and other Law are fulfilled;
• there is a general economic interest for establishment of the free zone.

Consent given to the founder may be withdrawn at anytime under one or more of the following conditions:

1. a bankruptcy procedure is opened against the founder;
2. a founder of the free zone has submitted an inaccurate data in his request, and
3. the founder of the free zone fails to ensure commencement of activities pursuant to the provisions of this Law or fails to submit a report as required by article 22 of this Law.

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Article 17

Change of Free Zone

Any change of a free zone is made in the way and procedure for a free zone establishment.

A change in the sense of paragraph 1 this article, means:

1. enlargement of the approved free zone area;
2. change in the location of the free zone;
3. establishing of new activities that are to be conducted in the free zone;
4. any change of the founder’s side (admission of a new founder, change in the capital ownership structure, take-over of the free zone by another founder, change in the status and buy-out) and,
5. change of the duration for which the free zone is established.

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Article 18

Procedure for Fulfilling of the Conditions for Carrying out Customs Supervision

In order to determine whether the conditions for carrying out customs supervision in the free zone area are fulfilled, the customs office inspects the free zones buildings and premises, in the presence of the founder of the free zone, within thirty (30) days from the day of receipt of his request.

The customs office prepares a report containing the findings for fulfilment of the conditions for carrying out customs supervision within eight (8) days from the inspection day, from paragraph 1 of this article. If the customs office finds any shortcomings during the inspection, it determines in the report a rectification period.

The customs office is issuing a decision for fulfilment of the conditions for performing of customs supervision in the free zone or a decision denying the request.

An appeal against the decision form paragraph 3 of this article may be filed to the Minister of Finance, upon which a decision has to be made within 30 days.

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Article 19

Content of the Decision

The customs office’s decision contains data on:

1. The founder of a free zone;
2. consent of the Government of Macedonia;
3. activities to be conducted in the free zone;
4. responsibilities of the founder as regards the customs supervision in the free zone; and
5. conditions that the founder has to provide for the customs office operation in the free zone

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Article 20

Altering of the Decision

The Customs Office’s decision is altered if the founder of the free zone:

1. enlarges the approved free zone area;
2. changes the free zone locality;
3. determines new activities to be conducted in the approved free zone.

The Customs Office’s decision is altered ex officio or upon the founder’s request, when the Customs Office finds out that the conditions for carrying out customs supervision have been changed.

In the case from paragraph 2 of this article, the Customs Office makes a decision upon which the obligations related to the customs control are changed in the free zone or the conditions which must be provided for the customs office operations in the zone and the term within which the founder is obliged to submit the proves that the changed conditions have been met.

The decision of the Customs Office will be altered pursuant to the procedures from the articles 18 and 19 of this Law.

The founder of the free zone is obliged to attach to the request for altering the decision the data until then, on the activities conducted in the zone.

When the founder of the free zone is joined by a new partner, or when a free zone is taken over by another founder, The founder of a free zone is obliged to inform the Customs Office within fifteen (15) days from the day of concluding the agreement for admission of a new co-founder or for the take-over by a new founder. The data on the new co-founder or founder is attached to the statement. The Customs Office makes a decision on the alterations.

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Article 21

Commencement of Activities of a Free Zone

A free zone commences its activities after the Directorate has issued a decision for operations of the free zone, not later that twelve (12) months from the date of issuance of the decision (hereinafter: commencement period).

As an exemption from paragraph 1 of this article, commencement period may be extended if there are justified reasons.

If a free zone fails to commence the activities within the commencement’s term from paragraph 1 and 2 of this article, the decision ceases to be valid.

The decision for commencement of activities in the free zone is issued after previously obtained consents, approvals or licences prescribed by this or other law.

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Article 22

Free Zone Activity Report

The free zone is obliged to submit a report for its activity in the previous year to the Directorate not later than April 15 of the current year (hereinafter: annual report).

The annual report contains in particular data on:

• the volumes of the production or services realised in the zone, quantitative and value volume;
• external trade exchange performed, by volume and value and: by country, by product categories, country-product, types of activities, economic purpose, the processing level and by sectors and sub-sectors as defined by the international trade classification;
• the number of employment over the period reported, by qualification.
• The data in the annual report is listed in total and by individual users of the free zone.

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Article 23

User of a Free Zone

In addition to the founder, the users of the free zone also can be another domestic or foreign legal entity or natural person registered for performing activities in the free zone.

The user of the free zone conducts the activities in the zone based on an agreement made with the founder of the free zone.

The users of the free zone commences free zone activities after the Customs Office issues a decision confirming that conditions for keeping records pursuant to article 40 of this Law have been met.

The user of the free zone is obliged to allow customs or other supervision to the customs or other authorities.

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Article 24

Conditions for Utilisation of a Free Zone

The founder of the free zone enacts rules (hereinafter: founder’s rules) on conditions under which a free zone area may be used for conducting activities, the activities that are to be performed in the free zone, regulates the internal order and prescribes separate measures for environmental and nature protection.

The founder’s rules should not be inconsistent with the laws and other regulations of the Republic of Macedonia and with the international agreements ratified by the Republic of Macedonia.

The founder of the free zone is obliged to provide to each user equal terms for conducting activities in the free zone.

The founder’s rules have to be published in the "Official Gazette of the Republic of Macedonia" after the approval given by the Directorate.

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Article 25

Conditions and Procedure for Accomplishing Tax Exemptions and Incentives

The user of the free zone accomplishes tax exemptions and incentives if:

1.exports a minimum of :

• 51 % of the value of the goods manufactured and services provided in the free zone in the first year of operation;
• 62 % of the value of the goods manufactured and services provided in the free zone in the second year of operation;
• 70 % of the value of the goods manufactured and services provided in the free zone thereafter;

2.conducts a new activity and does not transfer the activity from the other part of the territory of the Republic of Macedonia in the free zone;
3.has no unsettled tax and customs obligations;
4.no criminal or misdemeanour procedure is initiated against him, regarding performance of commercial activity;
5.no bankruptcy procedure is opened.

The value of goods and services produced or performed in the free zone is determined on the basis of invoices issued by the user of the free zone.

The value of goods and services exported is determined on the basis of the foreign currency income or by other payment instruments.

For accomplishing of tax exemptions and incentives, the user of the free zone submits a tax request to the Directorate.

The user of the free zone is obliged to attach to the tax request:

1. Agreement with the founder of the free zone;
2. Customs office decision;
3. Balance sheet statement for the previous year;
4. Act or agreement for establishment of a free zone and an excerpt from the Trade Registry.
5. Confirmation issued by competent authority that there are no tax or customs obligations of the user of the free zone;
6. Confirmation issued by competent authority that the user of the free zone is not subject to any misdemeanour or criminal proceedings related to performance of commercial activities, and
7. Confirmation issued by competent authority that no bankruptcy procedure is opened against the user of a free zone.

The evidences listed in item (1), (2), (4), and (6) of paragraph 5 of this article are to be submitted within fifteen (15) days from the day of commencement of activities of the user of the free zone.

The evidences listed in item (1), (2), (3), (5), (6) and (7) of paragraph 5 of this article are to be submitted every year of the free zone operation, not later than March 31 in the current year.

The Public Revenue Office issues a decision to the user within 30 (thirty) days of the submission of the tax request, if the conditions from this article are met.

Depending on the type of the tax and the tax year, the Public Revenue Office states in the decision whether the tax incentives have been granted on a temporary or permanent basis.

If necessary, the Minister of Finance defines more specifically the procedure for issuing the decision from paragraph 8 of this article.

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Article 26

Tax Exemptions and Incentives

If the user of a free zone meets the terms from article 25 of this Law, the same will be exempted from:

1. sales tax on products for the turnover within the free zone, except for the turnover intended for final consumption.
2. sales tax on products imported in the free zone for production intended for export and for performing other approved activities in the free zone;
3. sales tax on services provided in the free zone directly linked with export of goods and services;
4. profit tax for a period of ten (10) years from the day of commencement of activities in the free zone;
5. property tax for a period of ten (10) years from the day of commencement of activities in the free zone.
6. any taxes regarding the transfer of ownership and rights between founders and users in the free zone.

The user of a free zone who re-invests the profits in the capital assets in the free zone region is entitled to reduced profit tax base for the amounts invested in proportion to the amount invested after the expiration of a period of ten (10) years and one (1) day after the commencement of the activities.

If The user of a free zone withdraws capital assets from the free zone before the expiration of the period of five (5) years and one (1) day from the year in which he was using the tax incentive from in paragraph 2 of this article, the amount of the used tax incentive becomes liable for the taxation in the year of withdrawal of capital assets from the free zone.

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Article 27

Other Incentives

The user of a free zone is exempted from paying contributions, taxes and other duties regarding the utilisation of construction land, connection to water, sewerage, heating, gas and power supply networks.

Pursuant to the Law, the free zone land may be leased to foreign investors for a period of fifty (50) years, with a possibility of extension of the term for another twenty-five (25) years.

The founder of a free zone has the right to lease or sub-lease immovable within the free zone and to transfer rights to the user of a free zones.

The Directorate keeps records of all leasing or sub-leasing agreements between founders and users on the basis of applications made by the founder and the user in the free zone.

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Article 28

Movement in Free Zone

The Minister of Finance prescribes the conditions for entry and exit of natural persons and means of transportation in the free zone areas.

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V. ACTIVITIES THAT MAY BE CONDUCTED IN THE FREE ZONE AND SPECIAL OPERATING CONDITIONS

Article 29

Activities Conducted in Free Zone

In the free zone goods and services intended for export are manufactured, foreign trade exchange activities, banking and other financial activities, property and individuals insurance and reinsurance activities, and other commercial activities are performed, except textile industry activities.

1. a.The user of a free zone conducting manufacturing or refinement of goods may, based on contract, may entrust these activities to legal entities or natural persons (sub-manufacturers) with headquartered within or out of the free zone. The user of a free zone is liable to products and services sales tax on these goods.

The activities from paragraph 1 of this article may be conducted under the following conditions:

1. business ventures should be based on new investment and modern technologies;
2. origin and quality of raw materials, semifinished products and finished products should be ascertainable and controllable;
3. operations must not endanger public security and health of people in the free zones;
4. The user of a free zone should insure the capital assets and employees against any types of risks, arising out of the operations.

In the free zone must not be conducted activities related to:

1.trading in decaying, rotten, expired or infected goods or waste materials polluting the environment or not suitable for human or animal consumption;
2.radioactive materials, except those required for industrial, medical and scientific research approved by the relevant authorities in the Republic of Macedonia;
3.Drugs, chemicals and biological materials, chemical and bio-chemical derivatives, with the exception of those used for industrial, manufacturing, medical and pharmaceutical purposes, in accordance with the certificates issued by the Ministry of Health;
4.Weapons, ammunition and explosives, except for commercial explosives;
5.Products or services originating from countries or companies under embargo and sanctions imposed by national and international authorities;
6.Products and services that are endangering the public moral, national defence and security;
7.Products and services non-compliant with the laws of the Republic of Macedonia and international agreements pertaining to protection of intellectual and industrial rights, ratified in the Republic of Macedonia., and
8.Malpractice and abuse of approvals, decisions, court orders, licences, licence rights and concessions issued by competent authorities.

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Article 30

The user of a free zone may conduct goods warehousing activities in the free zone for his/her own needs.

In the free zone, the user of a free zone may conduct goods wholesale activities.

The user of a free zone may conduct retail activities within the free zone only for other users, for their own needs and for servicing the transportation means of the international traffic and of their crews in the free zone.

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Article 31

Warehousing Agreement

If warehousing capacities of the users in the free zone are under - utilised, with consent given by the Customs Office, domestic goods not intended for export may be warehoused in the free zone, but they should be kept apart from the free zone goods.

The Customs Office will not permit warehousing of goods, from paragraph 1 of this article, if that will obstruct supervisory activities of the free zone operations.

Domestic goods found on the free zone area based on the consent from paragraph 1 of this article are recorded pursuant to the regulation from article 40 paragraph 4 of this Law.

Tax exemptions and incentives from article 26 of this Law do not refer to goods from paragraph 1 of this article.

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Article 32

Taking Goods In and Out of Free Zone

Sale and exchange of goods and services between free zones shall be customs and sales tax exempted.

The user of a free zone may take in goods from abroad or from other territory of the Republic of Macedonia in the free zone freely and without any customs or other duties, may export free zone goods abroad, may provide services in the free zone as well as services regarding transport means in international traffic and their crews in the free zone.

Goods brought in the free zone may not stay in the free zone for a period longer than five (5) years.

The user of a free zone may take goods out of the free zone on other territory of the Republic of Macedonia pursuant to the regulations governing export and import of goods.

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Article 33

Temporary Withdrawal of Goods from Free Zone

Goods may be temporarily taken out of the free zone on the other territory of the Republic of Macedonia, or brought in the free zone area for refinement (finishing, additional and repair work) and marketing presentations pursuant to the customs regulations governing temporary import and export of goods

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Article 34

Standards, Regulations, Quality and Price Norms

Standards, technical and quality norms, apart from those defined by the regulations pertaining to the protection of living conditions and environment, are not applicable to goods which are brought in the free zone for warehousing or refinement (finishing, additional and repair work) purposes and which are not to be sold within the zone, nor to goods which, for the purposes of refinement (finishing, additional and repair work) pursuant to the customs regulations, are temporarily withdrawn from the free zone on the remainder of the territory of the Republic of Macedonia.

The user of a free zone may apply standards, technical and quality norms of the destination country of the goods, when manufacturing goods in the free zone intended for export.

Laws and regulations pertaining to prices will not be applicable to prices of goods and services sold in the free zones.

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Article 35

Application of Laws, Agreement for Overcoming of Differences and Labour Relations

All the laws of the Republic of Macedonia will be applicable in the free zones, unless otherwise provided for in this Law.

Any disputes between the founder and the users in the free zone will be under the jurisdiction of a competent court in the Republic of Macedonia.

Any disputes between the founder and the Directorate or between the users and the Directorate will be under the jurisdiction of a competent court in the Republic of Macedonia.

Employers will conclude collective agreements with the employees in the free zone.

Collective agreements will provide for solving of the labour disputes between employers and employees through arbitration or mediation.

The Directorate establishes a labour relation’s board, which will provide both the employers and employees arbitration or mediation services.

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VI. MAINTAINANCE OF GOODS, CUSTOMS SUPERVISION AND CONTROL IN FREE ZONE

Article 36

Carrying out Customs Supervision and Control in Free Zone

The founder of a free zone is obliged to provide premises necessary for the activities of the Customs organ in free zone.

The access, entries and exits in the free zone are under customs control.

Natural persons and transportation means entering and leaving free zone are subject to customs inspection.

If necessary for conducting customs supervision, the Customs Office may temporary restrict or a prohibit the conducting of any of the activities from article 29 and the sale from article 30 of this Law, if at the same time a misdemeanour procedure is initiated against The user of a free zone or founder, pursuant to this Law, or may file charges for existence of a reasonable doubt for committed criminal act in connection with the free zone activities.

The Customs Office may prohibit the user of a free zone to conduct activities in the free zone if he fails to bring the activities in compliance with this Law within the term set by the final decision on the compliance.

If the Customs Office has undertaken measures from paragraph 4 and 5 of this article or if a misdemeanour or criminal procedure has been initiated against the user of a free zone or founder, it may prohibit or limit the access to the free zone to certain individuals.

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Article 37

Declaring and placing at Sight of Customs Goods, Customs Value and Calculation of Customs Duties

Goods brought in the free zone are to be declared to the Customs organ.

Goods brought in the free zone are not to be placed at sight by the Customs organ, nor for them a customs declaration has to be filed, except in the cases from article 33 of this Law.

As an exemption from paragraph 2 of this article, goods are placed at sight to the Customs organ and corresponding customs procedure is carried out if:

1. domestic goods intended for export is brought in;
2. with bringing the goods in the free zone, any other customs procedure is completed, unless if customs regulations governing such procedures provide that goods should not be placed at sight to the customs organ;
3. with bringing the goods in the free zone, the goods are fulfilling the conditions for rebate or exemption from paying import and export customs duties.

Goods that are to be taken out of the free zone to other part of territory of the Republic of Macedonia are obligatory registered and placed at sight to the customs organ, and approval for customs use of those goods is requested pursuant to the customs regulations.

As an exemption from paragraphs 3 and 4 of this article, goods from article 31 of this Law, as well as the domestic goods which are brought into the free zone by the user of the free zone for his/her own purposes and for performance of the approved activities in the free zone, the user of the free zone is taking them in and out of the free zone by placing them at sight to the customs organ, based on the inventory list of goods certified by the customs organ.

If a customs duty is created when goods are taken out of the free zone to other part of the territory of the Republic of Macedonia, the customs value of such goods is determined on the basis of Incoterm CIF, i.e. the price also includes the costs for the goods by invoices and receipts.

If the goods, from paragraph 5 of this article, in the free zone has been subject to regular procedures and actions performed for the purposes of warehousing, maintenance, preparation to market (sale), or quality preservation, when determining the amount of the customs duty account must be taken of the nature and quantity of goods and their customs value which would be calculated for those goods at the time of creation of the customs duty, unless they were not subject to regular procedures and actions. This procedure may be applied only upon a proposal by the customs declarant, and if the customs organ has approved such actions with the goods in advance.

If the goods processed in the free zone are taken out of the free zone to other part of the territory of the Republic of Macedonia and if, pursuant to the customs regulations, for them a customs duty is created, the customs duty is calculated on the basis of the data which at the time of reception of the customs declaration with which goods are taken out of the free zone, is relevant for the customs goods used in the processing. The quantity of the customs goods used in the processing are determined on the basis of the consumption norms pursuant to the records from article 40 of this Law.

If the users of free zones wants to take the goods from paragraph 8 of this article out of the free zone to the other part of the territory of the Republic of Macedonia, he/she is obliged, upon the request of the customs organ, to place at sight the records containing the consumption norms, while the customs organ has the right to ascertain the accuracy of data from the records.

Provisions contained in paragraphs 5, 6 and 7 of this article shall be applied only when the user of the free zone provides export in a percentage determined in article 25, paragraph 1, item 1 of this Law.

Fulfilment of the condition from paragraph 10 of this article is confirmed by the customs organ on the basis of the data contained in the records from article 40 of this Law.

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Article 38

Inspection of Goods

The customs organ may inspect the goods that are taken in, taken out or kept in the free zone.

In order to enable the inspection from paragraph 1 of this article, the user of the free zone is obliged to submit to the customs office a copy of the transportation document of the goods at every time the goods are brought in or taken out of the free zone.

If the customs organ carries out an inspection pursuant to paragraph 1 of this article, the user of the free zone is obliged to allow access to goods and documentation for the goods that is subject to inspection to the customs organ.

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Article 39

Custom Goods Used as Equipment in Free Zone

The user of the free zone is obliged to recommended the equipment, which is customs goods and is intended for performing approved activity in the free zone, for a procedure for admission for free sale or for a procedure for temporary import, but the customs duty on such equipment is not payable for as long as it remains within the free zone (hereinafter: equipment).

Only the equipment necessary for conducting approved production or service activities within the free zone can be considered as equipment and if the user in compliance with the accounting standards has entered this equipment in his/her accounting books as equipment.

If the equipment is taken out of the free zone to other part of the territory of the Republic of Macedonia, the user of the free zone is obliged to report it to the customs organ for the purposes of paying the customs duty.

Equipment taken out of the free zone to other part of the territory of the Republic of Macedonia shall be exempted from customs duty and from tax on sales of goods and services, if it has been in continuos use in the free zone for a period not less than five (5) years and one (1) day.

Passenger vehicles which were under temporary import regime in the free zone, will be exempted from customs duty if taken out of the free zone to other part of the territory of the Republic of Macedonia after five (5) years and one (1) day of continuous use.

When selling, exchanging and transferring of the equipment between the free zones on the territory of the Republic of Macedonia and when transferring equipment out of the free zone for the purposes of maintenance or servicing, the five years continuos period shall not be considered as interrupted, if the equipment remains outside of the free zone for longer than six (6) months.

The equipment that is taken out on other part of the territory of the Republic of Macedonia before the expiry of the period of five (5) years and one (1) day is a subject to customs duty. Customs duty that is payable upon taking the equipment out of the free zone on other part of the territory of the Republic of Macedonia is payable pursuant to the data for the value of the equipment valid at the time of entry of the equipment in the free zone. No interest rate is calculated on the customs duty for the period starting from the entry of the equipment in the free zone until its withdrawal to other part of the territory of the Republic of Macedonia.

The provisions from this article are to be appropriately applied to spare parts of the equipment from paragraph 1 of this article and tools and accessories for that equipment, too.

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Article 40

Records

For the purposes of customs supervision, the user of the free zone is obliged to keep records on:

1. goods entering the free zone;
2. goods taken out from the free zone;
3. goods used in the free zone;
4. goods warehoused in the free zone;
5. goods changed in the free zone.

The user of the free zone is keeping the records of the goods, listed in paragraph 1 of this article, in a chronological order on the basis of the data contained in the documentation adjoining the entry and the departure of goods in and out of the free zone and on the basis of goods production standards.

The user of the free zone is obliged to keep the records on goods described in paragraph 1 of this article for a period of five years.

The Minister of Finance defines more specifically the form, the content and the way of keeping records form paragraph 1 of this article.

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VII.TERMINATION OF FREE ZONE OPERATIONS AND OF THE USER OF A FREE ZONES ACTIVITIES

Free zone stops its operations when dissolved by the founder, or when upon expiration of the term from article 18 paragraph 2 of this Law, the Customs Office finds that conditions for carrying out customs supervision are no longer met.

Free zone stops its operations after the expiry of founder’s lease agreement or after the expiry of the period for which the free zone is established by the approval from the Directorate, whichever condition arises first.

Taxes, customs and other duties are calculated for the goods in stock in the free zone at the day of termination for each the user of a free zone pursuant to the tax and customs regulations.

Termination of the user’s activities in the free zones

If during the free zone operations, the founder of the free zone or a competent court terminates the agreement between the user of the free zone and the founder, the user of the free zone is obliged to inform the customs and the tax organs for the occurred termination of the agreement, to submit the records and the calculations for the activities in the free zone and to allow them to determine whether tax or customs duties have been made during his/her operations in the free zone, calculated pursuant to the tax and customs regulations.

VIII. PENAL PROVISIONS

Article 43

The legal entity - founder of free zone, will be fined from 50.000 to 300 000 denars for a misdemeanour if it:

• conducts or makes possible conducting of commercial activities in the free zone that are not contained in the act / agreement for establishment of the free zone from article 14 and the decision of the Customs office from article 18 or conduct activities that are not in compliance with the activities allowed for performance in the free economic zones - article 29, 30 of this Law or if there is no approval from the Customs office pursuant to article 31, paragraph 1;
• commences the free zone activities prior to obtaining approval from the Government of the Republic of Macedonia, according to article 16 or prior obtaining decision for starting of the activities of the free zone according to article 21 from this Law;
• fails to request an alternation in the free zone in the cases prescribed in items (1), (2), (3), (4) and (5) of the article 17 of this Law;
• fails to request an alternation of the decision from the Customs office in cases prescribed in article 20, paragraph 1 for this Law;
• fails to submit proofs, i.e., does not retain to the term for submission of the proofs for fulfilment of the changed responsibilities pursuant to article 20 paragraph 3 from of Law;
• fails to inform, or misses the prescribed term for informing, the Customs office regarding the concluded agreement by which a co-founder will adjoin the founder of the free zone, or the free zone will be taken over by another founder pursuant to article 20, paragraph 6 of this Law, and
• enables conducting of commercial activities in the free zone contrary to the general conditions and creates unequal conditions for the users pursuant to article 24, paragraph 3 from this Law.

Also, the responsible person of the legal entity will be fined from 10.000 to 50 000 denars for misdemeanour from paragraph 1 of this article.

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Article 44

A legal entity – user of the free zone will be fined from 50 000 to 300.000 denars for a misdemeanour if it:

• conducts commercial activity in the free zone, which is not foreseen in the act / agreement for establishment of the free zone according article14 of this Law;
• commences activities in the free zone prior to obtaining the decision from the Customs office for fulfilment of conditions for keeping records pursuant to article 23, paragraph 3 of this Law;
• fails to enable customs or other organ to supervise the free zone operations pursuant to article 23, paragraph 4 of this Law;
• conducts activities in the free zone contrary to the provisions of article 29, 30 or fails to obtain the approval by the Customs office for its conduction pursuant to article 31, paragraph 1 of this Law;
• keeps the goods brought into the free zone longer then the term prescribed in article 32 paragraph 3 of this Law;
• transfers goods from the free zone to other part of the territory of the Republic of Macedonia contrary to article 32 paragraph 4 of this Law;
• ignores the prohibition of the customs organ from article 36, paragraphs 4, 6 of this Law;
• fails to place at sight the records of goods upon a request made by the customs organ pursuant to article 37 paragraph 9 of this Law;
• obstructs the activities of the customs organ pursuant to article 38 paragraph 2 and 3 of this Law;
• fails to declare to the customs organ the equipment and spare parts when they are taken out to other part of the territory of the Republic of Macedonia, pursuant to article 39 paragraph 3 or fails to fulfil the conditions from article 39, paragraph 4, 5, 6 and 7 of this Law;
• fails to keep records and documentation in accordance with article 40 of this Law;

The responsible person of the legal entity will be fined of 10 000 to 50 000 denars for a misdemeanour from paragraph 1 of this article.

A natural person – user of the free zone will be fined from 10 000 to 50 000 denars for a misdemeanour from paragraph 1 of this article.

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IX.TRANSITIONAL AND FINAL PROVISIONS

Article 45

The free zone established on the basis of the Law on Free Customs Zones (Official Gazette of SFRY, no. 3/90 and Official Gazette of the Republic of Macedonia, no. 4/93) continues to operate as free economic zone pursuant to the provision of this Law.

The founder of a free zone from paragraph 1 of this Article is obliged to harmonise the free zone operations with the provisions of this Law within one (1) year starting from the day this law comes into force and files the evidences for that harmonisation to the Directorate.

Free zone, which fails to harmonise the operations with the provisions of this Law, will cease to operate as a free zone, for which the Directorate will issue a decision.

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Article 46

The by-laws foreseen in this Law will be enacted not later than three (3) months from the day of coming into force of this Law.

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Article 47

Until the day of starting the Directorate’s operations, the Ministry of Development will carry out the operations of its competence.

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Article 48

On the day of coming into force of this Law, the provisions from article 135 to 149 and the provisions from article 204, paragraph 1, items 21, 22 and 23 and article 205, paragraph 1, items 19 and 20 of the Customs Law, in the part referring to free zones ("Official Gazette of the Republic of Macedonia, no 21/98 and 63/98) and provisions referring to Free zones in the Law on Free and Customs Zones (Official Gazette of SFRY, no. 3/90 and Official Gazette of the Republic of Macedonia, no. 4/93) cease to be valid.

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Article 49

This law comes into force on the eight day from its publishing in the "Official Gazette" of the Republic of Macedonia.