TAXATION IN MOLDOVA

Learn about taxes to deal with tax authorities

How much and what taxes are paid in Moldova? Here is a detailed overview of the main taxes in the Country.

THE MOLDOVAN TAX AUTHORITY

If you are thinking of moving to, starting a business in, or simply investing in Moldova, you absolutely must know its tax system.


First of all, let us distinguish between whether you represent a natural person (1) or a legal person. (2)

1 – The tax on income from the activities of Moldovan or foreign PHYSICAL PERSONS (for income obtained in Moldova) is a fixed 12% with exemptions up to 2000 MDL (approximately 100 EUR) calculated on a monthly basis.


In the specific case of income of a non-working nature (e.g. rents or leases) for both Moldovan and Foreign Resident citizens, taxation is 10%; for Non-Residents it remains at 12%.


Interest or financial investment annuities are taxed 0% (zero).
Dividend annuities from corporate participations are taxed at 6% of the approved and distributed amounts.

2 – The Moldovan company may opt for:


A) Simplified Tax Regime

Taxation is set at 4% of the turnover. Every quarter this percentage is calculated and paid on the basis of the actual turnover.
This tax regime does not provide for the allocation of a VAT number, and can only be used if the company does not exceed a turnover of MDL 1,200,000 (approximately EUR 60,000) calculated over the last 12 calendar months.

B) Standard Tax Regime

Taxation is a single flat rate at 12% of profits.
A series of costs and depreciation are deductible as specified in the current tax code.


Value Added Tax (TVA) has different rates:

  • 20% (standard rate) of the taxable amount for goods or services rendered
  • Reductions are available for certain products. Some foodstuffs such as bread and milk have rates of 8%, while products such as cars even have a zero rate.
  • The TVA regime allows for recoveries, refunds and compensations between tax credits and tax debits.
    In the calculation of wages, quotas for the National and Public Social System have to be calculated.

By way of illustration, we can summarize the total of income tax, medicine, pension fund and social fund (in short, the so-called tax wedge) in the sum of 50 % of the net payroll.

There are, however, EXCEPTIONS to the tax regimes just described, relating to certain types of activities:

  1. in the IT – Information Tecnology Sector
  2. in certain LOCATIONS (Free Zone)

MOLDOVA PARK IT

For companies in the IT sector, the Moldovan IT Park has been in force since 2016, a scheme with strong tax benefits for both companies and employees.


Corporate taxation (of those who opt for this scheme) is 7% on turnover, with no additional taxes such as payroll taxes or anything else.


The tax wedge is therefore zero, and the net payroll is therefore also gross.


Companies that can register for this IT park are those offering services such as:

  • Software development and editing;
  • Technical consultancy; planning and design of IT systems
  • Hardware production
  • Data processing
  • Web page administration
  • Development and research in the field of bacteriology.

FREE ZONE (ZEL)

Several Economic Free Zones (ZEL) are currently located on Moldovan territory.


They benefit from a number of tax breaks such as:

  • 50% tax relief on profit generated for goods and services within the ZEL
  • 25% tax relief on profit for all other goods and services produced in MD
  • 3 years tax-free for business investments of at least $1 million
  • 5 years tax-free for business investments of at least $5 million
  • TVA exemption for import/export from and to ZEL
  • Excise and customs tax exemption

THE FOREIGN INVESTOR

Beyond this brief overview of Moldovan taxation, the tax implications for the foreign investor must be combined with the obligations arising from the tax regime to which the investor belongs.


– In fact, for the foreigner with no tax residence in Moldova, first of all the Moldovan taxation criteria apply (for income obtained in Moldova) and then those arising from the state of tax residence to which the investor belongs; all in accordance with any bilateral agreements between Moldova and the state of tax residence of the investor.


– For the foreigner resident in Moldova who has obtained Tax Residence from the Moldovan state, this obtainment does not necessarily entail recognition by the Tax Authority of his state of belonging.


It should be borne in mind that each State determines specific criteria for recognizing a foreign tax residence for one of its citizens and that these same criteria may not match those established by the Moldovan tax system.


For all these reasons, each situation must be studied in depth and tailor-made in order to choose the most suitable legal form to protect the foreign investor by optimising resources and objectives.


ONE EXAMPLE


in the specific case of an Italian citizen investing in Moldova, but who, even if only for sentimental reasons, cannot have his fiscal residence in Moldova recognized by the Italian tax authorities (even if it is granted by the Moldovan tax authorities), Moldova offers extremely interesting peculiarities for the Italian investor.


With a tax burden of 12%, Moldova is in fact on the minimum threshold for not being, in the eyes of the Italian tax authorities, a black-listed state (according to the old wording) or a privileged tax state (according to the new wording), with all the advantages that this entails in dealing with the tax authorities.


As a white-list state, the principle of “Presumption of Innocence” remains for the foreign investor in dealings with the Italian tax authorities, and this has a number of positive implications in the event of audits/investigations/litigation.


Although Moldova does not yet belong to the list of CRS (Common Reporting Standard) states, i.e. those states that automatically exchange the financial data of foreign companies and citizens, it is considered a Cooperating State, as it provides the information at the request of the tax status of the citizen or company under observation.


Also for this reason it is included in the White-list countries

MOLDOVAN BANKING SYSTEM

The NATIONAL BANK OF MOLDOVA is based in Chisinau, and performs the functions of the Central Bank.


The various banking institutions in the territory are mainly foreign capitalized.


As Moldova is a non-EU country, it is not part of the SEPA circuit.


However, the compulsory introduction of IBAN and SWIFT for all current account transactions enables very fast international (money) transfer times.


For European companies, there is the EIB (European Investment Bank).

REGULATION OF CUSTOMS TRADE

Customs clearance is carried out by the Customs Authorities (internal and border) near the place of destination of the goods or presence of the shipper.


The required documentation (goods transport document/certificate of origin/invoice and packing list) must be provided through a certified customs broker, who clears the goods within the maximum legal time limit (72 hours).


He can also finalize temporary imports with total or partial exemption from the payment of import duties

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