Corporate tax in Moldova

Summary

Corporate Income Tax Rate (%) 12 (a)
Capital Gains Tax Rate (%) 6 (a)
Branch Tax Rate (%) 12 (a)
Withholding Tax (%)
Dividends 6 / 15 (b)
Interest
Payments to Resident Individuals 0 / 15 (c)
Payments to Nonresidents 12 (c)
Royalties 12 (d)
Services 7 / 10 / 12 (e)
Goods Acquired from Resident Individuals 2 / 7 (f)
Insurance Premiums 12 (g)
Winnings from Gambling, Advertising Campaigns and Lotteries 12 / 18 / 25 (h)
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback 0
Carryforward 3 (.i)

a) See Section B.

b) In general, a 6% withholding tax applies to dividends paid to nonresidents and residents. A 15% rate applies to dividends related to the 2008 through 2011 fiscal years.

c) Interest on deposits and securities of individuals is not taxable until 2020. Interest on state securities is not taxable.

d) A 12% withholding tax rate applies to royalties paid to nonresidents and to resident individuals.

e) The 12% rate applies to services rendered by nonresidents. The 10% rate applies to rent paid to individuals, except for rent paid for agricultural land. The 7% rate applies to certain payments made to resident individuals.

f) The 2% rate applies to a list of agricultural products. The 7% rate applies to other types of goods acquired from resident individuals (with certain excep­tions).

g) This withholding tax applies to insurance premiums paid to nonresidents.

h) The 12% rate applies to winnings from gambling and from advertising cam­paigns paid to nonresidents. The 18% rate applies to winnings from gambling paid to residents. The winnings from advertising campaigns and lotteries paid to residents are subject to the following withholding tax rates:

  • 18% if the value of the winnings exceeds MDL1,012.8 but does not exceed MDL50,000
  • 25% if the value of the winnings exceeds MDL50,000

(i)   See Section C.

Taxes on corporate income and gains

Corporate income tax. Resident companies are subject to tax on their worldwide income. Resident companies are companies with activities managed or organized in Moldova (an activity is orga­nized in Moldova if it is carried out by a company that is regis­tered in Moldova as a legal entity) and companies that carry out their business activities primarily in Moldova.

Permanent establishments of nonresident companies in Moldova are subject to tax on their income from Moldovan sources. For tax purposes, permanent establishments are considered to be resident entities.

Rate of corporate income tax. The rates of corporate income tax in Moldova are described below.

Standard corporate income tax rate. The standard corporate in­come tax rate in Moldova is 12%.

Small and medium-sized companies (except for farmers and indi­vidual entrepreneurs) that are not registered as value-added tax­payers. The following are the tax rates applicable to small and medium-sized companies (except for farmers and individual en­trepreneurs):

  • If the company is not registered as a value-added tax (VAT) payer, it must apply a 3% tax rate to the operational activity income obtained in the current reporting period.
  • If, for the previous fiscal reporting period (ending 31 December), the company obtains income from operational activities in an amount up to MDL600,000, it can choose to be taxed at a 3% tax rate applied to operational activity income obtained in the current reporting period or at the standard corporate income tax rate of 12%.
  • If the company becomes a VAT payer, it must apply the stan­dard corporate income tax rate of 12%.

Farmers. The income tax rate for farmers is 7%.

Individual entrepreneurs. For individual entrepreneurs, the income tax rates are 7% of annual taxable income that does not exceed MDL29,640 and 18% of annual taxable income that exceeds MDL29,640.

Tax incentives. The main tax incentives available in Moldova are described below.

Free-economic zones. Residents of free-economic zones benefit from the following incentives:

  • A 50% reduction of the standard corporate profits tax rate on income derived from the exportation outside Moldova of goods originating in the free-economic zone
  • A 25% reduction of the standard corporate profits tax rate on income other than the income indicated in the preceding bullet
  • A three-year exemption from corporate profits tax on income derived from the exportation of goods originating in a free-economic zone, beginning with the quarter following the quar­ter in which investments made in fixed assets or in the develop­ment of the free-economic zone infrastructure are at least of USD1 million
  • A five-year exemption from corporate profits tax on income derived from the exportation of goods originating in a free-economic zone, beginning with the quarter following the quar­ter in which investments made in fixed assets or in the develop­ment of the free-economic zone infrastructure are at least of USD5 million

Business entities that create new jobs. Business entities can ben­efit from a reduction of taxable income if they increase annually the number of employees. The amount of taxable income subject to reduction is determined by multiplying the prior-year average national annual salary with the increase in the average number of employees on payroll compared with the prior year.

Capital gains. Capital gains and losses on sales, exchanges or other transfers of capital assets are equal to the difference between amounts received and the cost bases of the assets. The amount of capital gains subject to income tax in a tax year equals 50% of the excess of capital gains over capital losses. Net capital losses may be carried forward to offset capital gains in the following three years.

Administration. The tax year is the calendar year. A company may not elect a different tax year.

The corporate income tax return must be filed by 25 March of the year following the tax year.

An amended tax return can be filed to correct errors contained in the original tax return if no tax audit was announced or performed by the tax authorities for the respective fiscal period.

Under the Moldovan Tax Code, companies may either obtain a refund of an overpayment of tax or offset the overpayment against existing or future tax liabilities.

All taxes in Moldova must be paid in Moldovan lei (MDL). To cal­culate the tax on income realized in foreign currency, the income must be converted into lei using the official exchange rate on the payment date.

Dividends. In general, a 6% withholding tax is imposed on divi­dends paid to nonresidents and residents. A 15% withholding tax continues to be imposed on dividends related to the 2008 through 2011 fiscal years.

Foreign tax relief. Companies may claim a credit against corpo­rate income tax for foreign tax paid on income that is subject to tax in Moldova. The foreign tax credit is granted for the year in which the relevant income is subject to tax in Moldova.

Determination of trading income

General. Taxable income includes income earned from all sources, less deductible expenses and allowances provided for by the tax law. In general, companies may deduct ordinary and necessary expenses accrued during the tax year with respect to its business activities. However, they may not deduct the following items:

  • Personal and family expenses of the company founders and employees
  • Amounts paid for the acquisition of depreciable property
  • Losses resulting from sales or exchanges of property, perfor­mance of works and provisions of services between related parties
  • Unjustified expenses paid to related parties, including compen­sation, interest and rent
  • Amounts paid to the holders of business patents
  • Expenses related to exempt income
  • Provisions for bad debts

Inventories. Assets valuation income is non-taxable. Assets valu­ation losses are nondeductible.

Provisions. If a court decision confirms that a debt owed to a company will not be recovered, the company may deduct for tax purposes the amount of the debt. Provisions for bad debts are not deductible for tax purposes.

Tax depreciation. Fixed assets used in business activities may be depreciated using the declining-balance method. To calculate de – preciation, fixed assets are classified into five categories. The fol lowing are the categories and the applicable depreciation rates.

Category Rate (%)
1 5
2 8
3 12.5
4 20
5 30

The allocation of the fixed assets to the above categories is based on the Catalogue of Fixed Assets approved by the government of Moldova.

The assets in Category 1 (real estate) are depreciated individu­ally. The assets in the other categories are depreciated as groups.

Relief for losses. Companies incurring a tax loss may deduct one-third of the loss in each of the three subsequent tax years. Losses may not be carried back.

Groups of companies. The Moldovan tax law does not contain any measures regarding groups of companies in Moldova. Conse­quently, the filing of consolidated returns or the granting of relief for losses on a group basis is not permitted.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Value-added tax, on goods and services delivered in or imported into Moldova
Standard rate 20
Bread and bread products, milk and dairy
products, medicines, natural and liquefied
gases, beet sugar and agricultural products
8
Exports of goods and services, international
cargo and passenger transport, certain
distributions of electric power, thermic
energy and hot water, and other specified
goods and services relating to diplomatic
missions and international organizations
0
Excise taxes, on certain consumption goods;
tax is imposed at a fixed amount per unit of
the good or by applying an ad valorem rate
to the market value of the good
Various
Social security contributions, on remuneration;
paid by
Employer 23
Employee 6
Medical insurance contributions, on remuneration; paid by
Employer 4.5
Employee 4.5
Customs duties; rates set by Customs Tariff Law Various
Local taxes on real estate (other than real estate
used for agricultural or dwelling purposes)
0.1

Foreign-exchange controls

The Moldovan leu (MDL) is the only currency that may be used to make payments in Moldova. The National Bank of Moldova (NBM) establishes the official exchange rate for the leu in relation to other foreign currencies. Both resident and nonresident com­panies may open leu or foreign currency accounts in authorized banks of Moldova.

Resident companies are not required to convert proceeds received in foreign currency into lei (plural of leu). However, they may not transfer foreign currency from their accounts to the accounts of other residents of Moldova, except for authorized banks.

Nonresidents may transfer abroad currency if the currency was registered in their account or if the funds were previously held in a leu deposit account with a Moldovan authorized bank.

Payments in currency by resident companies to nonresidents may be made only from foreign-currency accounts at authorized Mol-dovan banks (or at foreign banks that are authorized by NBM), and these payments may be made by bank transfer only.

For a distribution of profits during the year, a company should be ready to present to interested bodies the statutory act of the com­pany that indicates the amount of the distribution. For a distribu­tion of profits at the end of the fiscal year, the company should have ready for inspection a copy of the filed annual tax return and the statutory act of the company that indicates the amount of the distribution.

Treaty withholding tax rates

The following table shows the applicable withholding rates under Moldova’s bilateral tax treaties.

Dividends
A (%) B (%) Interest (%) Royalties (%)
Albania 10                5 5 10
Armenia 15                5 10 10
Austria 15                5 5 5
Azerbaijan 15               8 (a) 10 10
Belarus 15           15 10 15
Belgium 15           15 15 0
Bosnia and
Herzegovina 10                5 10 10
Bulgaria 15              5 10 10
Canada 15             5 (b) 10 10
China 10              5 10 10
Croatia 10            5 5 10
Cyprus 10                5 5 5
Czech Republic 15                5 5 10
Estonia 10           10 10 10
Finland 15               5 5 3/7 (c)
France (o) 15               5 (d) 5 2
Georgia (o) 15                5 (e) 10 10
Germany 15           15 5 0
Greece 15                5 10 8
Hungary 15              5 10 0
Ireland 10               5 5 (g) 5
Israel 10             5 5 5
Italy 15                5 5 5
Japan 15            15 10 0/10 (f)
Kazakhstan 15            10 10 10
Kuwait 5                       5 2 10
Kyrgyzstan 15                5 10 10
Latvia 10            10 10 10
Lithuania 10           10 10 10
Luxembourg 10                5 5 (g) 5
Macedonia 10                5 5 10
Malta 5                       5 5 5
Montenegro 15                5 10 10
Netherlands 15            0/5 (h) 5 2
Oman 5                       5 5 10
Poland 15                5 10 10
Portugal 10                5 10 8
Romania 10            10 10 10/15 (i)
Russian Federation 10            10 0 10
Serbia 15                5 10 10
Slovak Republic 15                5 10 10
Slovenia 10                5 5 5
Spain 10              5 (j) 5 8
Switzerland 15               5 10 (k) 0
Tajikistan 10                5 5 10
Turkey 15            10 10 10
Turkmenistan 10            10 10 10
Ukraine 15                5 10 10
United Kingdom 10               5 (l) 5 5
Uzbekistan 15                5 10 15
Non-treaty
countries
6/15 (m)  6/15 (m) 12 (n) 12

A  These are the general dividend withholding tax rates.

B    In general, the rates apply if the beneficiary of the dividends is a company that holds directly at least 25% of the share capital of the payer.

a) This rate applies if the effective beneficiary of the dividends is a company that has invested foreign capital of at least USD250,000 in the payer of the dividends.

b) This rate applies if the beneficiary of the dividends is a company holding directly at least 10% of the capital of the payer.

c) The 3% rate applies to royalties paid for the use of, or the right to use, patents, computer software, designs or models, plans, and secret formulas or pro­cesses, or for information concerning industrial, commercial or scientific experience. The 7% rate applies to other royalties.

d) This rate applies if the beneficiary of the dividends is a company holding directly at least 10% of the payer of the dividends.

e) This rate applies if the effective beneficiary of the dividends is a company (other than a society) that has invested more than USD300,000 in the capital of the payer of the dividends

f) Royalties received for the use of, or the right to use, copyrights of literary, artistic or scientific works, including cinematographic films and films or tapes for radio or television broadcasting, are exempt from tax.

g) No tax is withheld if the effective beneficiary of the interest is a financial institution.

h) No tax is withheld if the effective beneficiary of the dividends is a company that directly holds at least 50% of the capital of the payer of the dividends and that has invested USD300,000 or an equivalent amount of national currency of a European Union (EU) member state in the capital of the payer of the dividends.

i) The 10% rate applies to royalties paid for the use of patents, trademarks, drawings or patterns, plans, secret formulas or manufacturing procedures as well as for industrial, commercial or scientific information. The 15% rate applies to other royalties.

j) No tax is withheld if the beneficial owner of the dividends is a company (other than a partnership) that holds directly at least 50% of the capital of the payer of the dividends.

k) No withholding tax is imposed on interest paid on bank loans or on interest paid with respect to the following:

  • Sales on credit of industrial, commercial or scientific equipment
  • Sales of goods between enterprises

(l)  No tax is withheld if either of the following conditions is satisfied:

  • The beneficial owner of the dividends is a company that holds directly or indirectly at least 50% of the capital of the company paying the dividends and that has invested at least GBP1 million (or the equivalent amount in another currency) in the capital of the company paying the dividends at the date of payment of the dividends.
  • The beneficial owner of the dividends is a pension scheme.

m) In general, the withholding tax rate for dividends is 6%. For dividends related to the 2008 through 2011 fiscal years, the withholding tax rate is 15%.

n) Interest on deposits and securities of resident individuals is not taxable until 2020. Interest on state securities is not taxable.

o) This treaty has been signed, but it is not yet in effect.