Taxes in Moldova, Taxation in Moldova, Taxes system in Moldova
IThe Moldovan tax system is an aggregate of taxes, duties and levies, principles, forms and methods of their establishment, modification and abolition as well as measures to ensure their payment.
A tax (duty) is a mandatory payment, which is gratuitous in nature and is not related to undertaking by an empowered authority or its official(s) of specific action(s) in favour of or with respect to the payer of a respective tax (duty). A fee is a mandatory payment, which is gratuitous in nature and is not a tax (duty).
The Moldovan tax legislation comprises the Tax Code and other regulations passed on the basis of its provisions. The taxation in the country is exercised on the basis of the Tax Code and other officially published effective tax regulations. The tax-related regulations passed by the Government, Finance Ministry, Principal State Tax Service, Customs Department, other central and local public authorities may not contradict the Tax Code or exceed its limits. In case of any contradictions, the provisions of the Tax Code prevail.
Taxes and duties are levied at the national and local levels in Moldova.
The system of state taxes, duties and levies comprises income tax, VAT, excises, privatisation tax, customs duty and levies collected to the Road Fund.
The system of local taxes includes land tax, real estate tax, tax on use of natural resources, area development levy, local auction and lottery levy, hotel levy, advertising levy, levy on use of local symbols, levy on placement of commercial objects, market levy, parking levy, health resort levy, dog owner's levy, levy on TV and film productions, levy on crossing state border, customs area sale levy and passenger transportation levy.
The taxes, duties and levies stipulated by the Tax Code and other tax regulations are considered to be the sources of revenue collectible to the consolidated national budget. Income tax and road levies are considered to be the regulatory sources of revenue of the budgetary system, while the real estate tax is a regulatory source of revenue of local budgets. For local autonomies with a special legal status the regulatory sources of revenue include also VAT and excises for goods and services manufactured or provided on the territory of the autonomy.
Some of the important taxes are briefly described below.
Article 13 of the Tax Code defines taxpayers as natural and legal persons, other than partnerships, who derive income in the fiscal year from Moldovan sources as well as legal persons gaining income from any foreign sources and individuals who derive investment or financial income from sources located outside of Moldova.
The taxable base is generally the gross income (including tax benefits) derived by the taxpayer from all sources, reduced by deductions and excluding income exempt for tax purposes.
Individuals, including peasant (farm) enterprises and sole proprietorships, are subject to income tax at the following rates:
10 percent of gross yearly taxable income between MDL 12,180 and MDL 16,200;
15 percent of gross yearly taxable income between MDL 16,201 and MDL 21,000; and
22 percent of gross taxable income that exceeds MDL 21,000
Legal persons pay income tax at the rate of 20 percent.
The VAT is a state tax and a form of collection to the budget of part of the value of delivered goods and provided services that are subject to taxation in Moldova, as well as part of taxable goods and services imported to Moldova.
Pursuant to the Tax Code, the following persons shall be subject to VAT:
- legal entities and individuals, which are registered or are subject to registration as a VAT payer;
- legal entities and individuals importing goods, except for individuals, who import goods for personal use or consumption, the value of which does not exceed the limits established by the current legislation;
- legal entities and individuals importing services considered as taxable deliveries carried out by such persons.
The taxable objects include:
- supply of goods and services by taxable persons as a result of their business activity in Moldova;
- import to Moldova of goods and services, except for goods imported by individuals for personal use or consumption, the value of which does not exceed the limits established by the current legislation.
Article 96 of the Tax Code provides for the following VAT rates:
(a) standard rate in the amount of 20% of the taxable value of imported goods and services as well as supplies made in Moldova;
(b) reduced rates in the following amounts:
- 8% for bread and bakery products, milk and dairy products delivered in Moldova, except for food products destined for children and not subject to VAT;
- 5% for natural and liquefied gas, both imported to and delivered in Moldova;
(?) zero rate for certain eligible supplies of goods (services).
An excise is a state tax established for certain types of consumer goods and gambling activity.
Pursuant to the Tax Code, the following persons shall be subject to excise taxes:
- legal entities and individuals processing and/or manufacturing excisable goods in Moldova;
- legal entities and individuals importing excisable goods, except for excise-exempt goods stipulated by the Tax Code;
- legal persons practising gambling activity.
Objects of Taxation
The objects of excise taxation are excisable goods and licenses to practice gambling activity stipulated in an Annex to Section IV (Excise Taxes) of the Tax Code. Particularly, the following goods are subject to excise taxation: coffee, black and red caviar, spirits and alcoholic beverages, gasoline and diesel fuel, tobacco products, fur clothing, perfumes, jewellery, certain devices and vehicles.
Article 122 of the Tax Code provides that the excise tax rates are established:
(a) in an absolute amount per measuring unit of a good;
(b) ad valorem as a percentage from the value of a good free from excises and VAT or from the customs value of an imported good, including import taxes and duties due, and free from excises and VAT;
(c) ad valorem as a percentage from the price of a license to practice gambling activity.
Specific excise rates are stipulated in an Annex to Section IV of the Tax Code.
Goods moved through the Moldovan customs border shall be subject to customs duties imposed and collected in the established procedure. A customs duty is considered to be a mandatory payment collectible by the customs authorities for imports or exports of goods to/from the Moldovan customs territory.
The following types of the customs duties apply in Moldova:
(1) ad valorem duties – calculated as a percentage of the customs value of a good;
(2) specific duties – calculated at the established rate per unit of a good;
(3) combination duties – comprising both aforementioned types of the customs duty;
(4) special duties divided into the following subcategories:
i) special duty – applicable for protection of domestic goods in case of imports of foreign goods in quantities and on conditions which cause or are susceptible of causing substantial material damage to local manufacturers;
ii) antidumping duties – applicable in case of imports to the customs territory of goods at prices below their value in the exporting country as of the time of imports, provided that these imports prejudice the interests or there is an actual threat of causing material damage to local manufacturers of identical or similar goods or impediments for organisation or diversification of production of identical or similar goods in the country arise;
iii) countervailing duties – applicable in case of imports to the customs territory of goods, whose production or importation was subsidised, provided that these imports prejudice the interests or there is a threat of causing material damage to local manufacturers of identical or similar goods or impediments for organisation or diversification of production of identical or similar goods in the country arise.
Specific customs duty rates and the list of goods, to which such duties shall apply, are provided in an Annex to the Law on Customs Tariff.
The movement of goods through the customs border is also subject to payment of the customs formalities fees. Customs procedures are considered to be all customs-related types of services provided by the customs authorities.
The customs procedures fees are established as a percentage from the customs value of goods or as fixed flat rates. The list of applicable customs procedures fees is provided in an Annex to the Law on Customs Tariff
Privatization tax is a one-time payment collectible in case of purchase of public property, including stocks, irrespective of the method of payment.
Payers of Privatisation Tax
The payers of the privatisation tax are considered to be resident individuals and non-resident legal entities and individuals entitled to purchase public property.
The taxable subject matter comprises public property allowed for privatisation.
The privatisation tax shall be collected at the rate of 1 percent of the value of the purchased public property.
Real Estate Tax
The real estate tax is a local tax considered to be a mandatory payment to the budget based on the value of the real estate. For tax purposes the term “real estate” means land plots and/or improvements thereon – buildings, structures, apartments and other isolated premises that could not be moved without causing direct damage to their destination.
The payers of the real estate tax are considered to be the following resident and non-resident legal entities and individuals:
- owners of real estate located in Moldova;
- holders of property rights to public real property located in Moldova, lessees leasing out private real estate, unless the respective lease contracts provide otherwise.
Subject Matter and Tax Base
The subject matter of the real estate tax comprises real estate, including land plots and/or improvements thereon – buildings, structures, apartments and other isolated premises, including improvements, whose construction is finished by 80 or more percent, provided that the construction has not been finished in the course of 5 years since the date of its initiation.
The tax base of the real estate tax constitutes 50 percent of assessed evaluation of the real estate.
Real estate is evaluated by regional cadastral authorities through the use of a uniform methodology and specific methods in the procedure and terms stipulated by applicable legislation.
The maximum real estate tax rate constitutes 0.5 percent of the tax base. Specific real estate tax rates are established each year by local public authorities and may not be less than 50 percent of the maximum real estate tax rate stipulated above.
The land tax shall be assessed by way of multiplication of the specific land tax rate by the number of point - hectares, hectares or areas of the land plot owned by the taxpayer and shall be calculated and paid in the procedure stipulated by article 4 of the Law on Entry into Force of Section VI of the Tax Code. Specific land tax rates are established on a yearly basis by local public authorities upon approval of respective local budgets within the limits (maximum rates) stipulated in Annexes 1 and 2 to the Law on Entry into Force of Section VI of the Tax Code. Beginning January 1, 2006, the land tax will not be collected separately and will be merged with the real estate tax.
Establishment, Modification and Abolition of Taxes, Duties and Levies
State and local taxes, duties and levies may be established, modified or abolished exclusively by Parliament's introducing of respective modifications and supplements to the Tax Code. It should also be mentioned that new taxes, duties and levies may be established or existing taxes, duties and levies may be abolished or modified during a tax (calendar) year in respect to the taxpayers, taxable subject matter, tax rates and tax benefits, provided that the state budget law is simultaneously modified accordingly.
Rights and Obligations of the Taxpayer
Definition of the Taxpayer
Article 5 of the Tax Code defines taxpayer as a person, who in accordance with the tax legislation is obliged to calculate and/or pay to the budget any tax, duty or levy, respective penalty or fine, or a person, who in accordance with the tax legislation is obliged to withhold or collect from another person and pay to the budget any tax, duty or levy.
Rights of the Taxpayer
Pursuant to the Tax Code, the taxpayer is entitled to:
- obtain from the tax authorities free of charge any information on existing taxes, duties and levies and regulations governing the procedure and terms of their payment;
- proper treatment by the tax authorities;
- represent its interests in the tax authorities in person or via an authorised representative;
- receive and use established tax benefits;
- obtain deferrals, instalment payment plans, tax offsets in the procedure and terms stipulated by applicable regulations;
- provide the tax authorities with explanations regarding the calculation and payment of taxes, duties and levies;
- appeal in the established procedure the decisions and actions of the tax authorities;
- other rights established by the tax and other legislation.
Obligations of the Taxpayer
The taxpayer is obliged to:
- comply with the procedure of state registration and rules of practising business activity;
- register as a taxpayer with the regional tax authorities and obtain a certificate on attribution of the fiscal code, provide information about the location of its headquarters and structural subdivisions, branches and representative offices (establishments);
- maintain bookkeeping in the forms and in the procedure stipulated by the current legislation, prepare and file with tax authorities respective bookkeeping documents;
- declare its income derived from practising any business activity and other taxable sources;
- pay taxes, duties and levies due in full and in a timely manner;
- provide the tax and other competent authorities on their request at the time of conducting tax controls with any documents and information related to the business activity of the taxpayer, calculation and payment of taxes, duties and levies;
- ensure free access of the authorised personnel of the tax and other competent authorities to taxpayer's premises at the time of conducting control of the taxpayer;
- be present at the time of conducting tax controls, sign acts of control and provide competent authorities with oral and written explanations;
- provide respective documentary evidence in case of erroneous calculation of any tax, penalty, fine or interest due;
- comply with the decisions of the tax and other competent authorities made as a result of the control, provided that these decisions do not contradict the current legislation;
- comply with other obligations stipulated by the tax legislation.
Assignment of Fiscal Codes
Pursuant to Article 161 of the Tax Code, the tax authorities exercise state registration of the taxpayer by way of assignment of fiscal code and maintenance of the tax registry.
A fiscal code is uniform number used for tax purposes. It is assigned only once, irrespective of the provisions of the tax regulations concerning the establishment and discharge of tax obligations. A person, who was not assigned a fiscal code, may not be registered as a taxpayer. The fiscal code of a resident or non-resident natural person is considered to be the personal code indicated in its respective personal identification document.
State Tax Registry
The State Tax Registry is a public registry, which is created and maintained by the tax authorities and contains information on fiscal codes assigned in accordance with tax regulations.
The State Tax Registry is updated by means of assignment and/or cancellation of fiscal codes as well as modification of the data about the taxpayers registered in the Registry.
The recording of the taxpayer's fiscal code in the State Tax Registry confirms the tax registration of the taxpayer.