Moldova: Report On Taxation In The Republic Of Moldova

The legislation of the Republic of Moldova can be viewed from two sides: from the point of view of the relationship between resident-non-resident and resident-resident.

A resident is any person who is on the territory of the Republic of Moldova for at least 183 days during a tax year.

A resident of the Republic of Moldova can receive services from non-residents from any country without restrictions. The main criterion for accepting these services in the accounting is the need for these services in the entrepreneurial activity of a resident of the Republic of Moldova.

When paying to a non-resident for services rendered to a resident of the Republic of Moldova, the Tax Code of the Republic of Moldova provides for the accrual and transfer to the budget of 2 types of taxes, namely:

• Value added tax;
• Income tax at the source of payment.

1. Value Added Tax

Import of services - the provision of services by legal entities and individuals - non-residents of the Republic of Moldova to legal entities and individuals - residents or non-residents of the Republic of Moldova, for whom the place of delivery is considered to be the Republic of Moldova.

Thus, for the correct calculation and payment of VAT to the budget in transactions with a non-resident, it is necessary to determine the place of rendering these services.

According to paragraph f) of Article 111 of the Tax Code of the Republic of Moldova, the place of delivery of the service (for example, the legal one) is the location of the customer of the service, namely the Republic of Moldova. Consequently, this is an import of a service, and is taxed at a rate of 20%, in accordance with paragraph a) of Article 96 of the Tax Code of the Republic of Moldova.

Value added tax is charged and paid to the budget on the day of payment for this service.

2. Withholding tax at the source of payment

Withholding of income tax from the income of a non-resident is regulated by Article 91 of the Tax Code of the Republic of Moldova. This article provides for the withholding and payment to the budget of tax from payments aimed at payment to a non-resident, corresponding to the income received in the Republic of Moldova.

To determine the correctness of withholding income tax from a non-resident, it is necessary to determine the source of his income:

12% - from payments directed to payment to a non-resident, from income provided for in Article 71, except for dividends.

If the final consumer and payer of services is a resident of the Republic of Moldova, the source of income for a non-resident will be the Republic of Moldova.

The income of a non-resident received in the Republic of Moldova is defined in Article 71 of the Tax Code of the Republic of Moldova.

Regarding withholding income tax from a non-resident for the provision of legal services, it should be mentioned that when providing this service, a non-resident receives income in the Republic of Moldova and, therefore, it is necessary to withhold income tax at the source of payment. In this case, it is necessary to take into account the provisions of the convention concluded between the non-resident country and the Republic of Moldova.

Should also be mentioned the fact that when paying to a non-resident without withholding income tax, it is necessary to have a non-resident certificate issued by the relevant non-resident authority at the time of making the payment.

After a non-resident becomes a resident individual or opens an enterprise-legal entity on the territory of the Republic of Moldova, the following taxation norms apply to him.

1. Value Added Tax

According to Article 93 of the Tax Code of the Republic of Moldova: "Value Added Tax (VAT) is a national tax, which is a form of withdrawal to the budget of a part of the cost of goods supplied, services rendered subject to taxation on the territory of the Republic of Moldova, as well as a part of the cost of taxable goods, services, imported to the Republic of Moldova".

According to the same article, the delivery of goods is the transfer of ownership of goods through their sale, exchange, transfer without payment, transfer with partial payment. That is, the goods are considered dispatched only at the moment of transfer of ownership of it, by or without payment.

Article 108, clause 1 of the Tax Code of the Republic of Moldova indicates that the date of the tax liability for Value Added Tax is the date of delivery, while the date of delivery is the date of release of the goods, the provision of services. For goods, the date of delivery is considered the date of release (transfer) of goods to the consumer.

Likewise, a subject of taxation carrying out a taxable supply on the territory of the Republic of Moldova is obliged to submit to the buyer a tax invoice for this supply. The tax invoice is a document of strict reporting submitted to the buyer by the subject of taxation when making taxable supplies.

On the territory of the Republic of Moldova, the following VAT rates apply, in accordance with Article 96 of the Tax Code: basic 20% and reduced from 0 to 12%.

In certain conditions, a taxpayer can benefit of not only a reduced VAT rate, but also, according to Articles 1011-102 of the Tax Code, a VAT refund or deduction of VAT on purchased goods and services.

2. Income tax

Withholding of income tax from the income of a resident is regulated by Article 15 of the Tax Code of the Republic of Moldova. This article provides for withholding and paying to the budget tax from payments corresponding to income received in the Republic of Moldova in accordance with Article 18. Individuals and legal entities, payers of VAT, withhold 12% from taxable income. Peasant farms withhold 7% of taxable income.

For small and medium-sized businesses that are not registered as VAT payers, they are taxed according to other rules that are regulated by article 542. The income tax rate in this case will be 4%, according to article 543.

There are also different rules for the approach to taxation of IT parks, Free Enterprise Zones and some other categories of taxpayers.

3. Local taxes

In addition to national taxes, on the territory of the Republic of Moldova, there are local taxes. They are obligatory payments to local budgets. These local tax rates are the ad valorem rate as a percentage of the taxable base of the taxable object or the rate in an absolute amount established by the local public administration body when approving the budget of the corresponding administrative-territorial unit. Mandatory for all law firms - taxpayers is the collection for the improvement of territories. It is calculated depending on the average number of employees.

Summarizing the above, the conclusion can be made that, when starting an activity on the territory of the Republic of Moldova, it is necessary to study in more detail the imposition of all possible taxes, including Income Tax, Value Added Tax and other taxes and fees based on the activity that will be carried out.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.