VAT, GST and Sales Tax in Moldova

Summary

Name of the tax Value-added tax (VAT)
Local name Taxa pe valoarea adaugata (TVA)
Date introduced 1-Jul-98
Trading bloc membership None
Administered by Principal State Fiscal Inspectorate (www.fisc.md)
VAT rates
Standard 20%
Reduced 8%
Other Zero-rated and exempt
VAT number format 1234567
VAT return period Monthly
Thresholds
Mandatory registration MDL600,000
Voluntary registration None
Recovery of VAT by non-established businesses No

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services made in Moldova by a taxable person in the course of a business
  • Importation of services received in Moldova by a taxable per­son (using the “reverse-charge” mechanism)
  • Importation of goods

Who is liable

A taxable person is any person or legal entity that is registered for VAT in Moldova. An entity that has a fixed place of business or carries out commercial or professional operations on a regular basis in Moldova must register for VAT.

The mandatory VAT registration threshold is turnover or imported services of MDL600,000 in a period of 12 consecutive months.

Voluntary VAT registration is allowed for persons planning to provide taxable services, irrespective of their turnover value.

Group registration. VAT grouping is not permitted under Moldovan VAT law. Legal entities that are closely connected must register for VAT individually.

Non-established businesses. Foreign traders are not allowed to have a VAT registration number. If a foreign entity develops entrepreneurial activity in Moldova that results in a permanent establishment (PE), it must register for VAT locally. It is then treated in the same way as a resident entity.

Reverse charge. The reverse charge is a form of self-assessment for VAT, under which the recipient of a supply of goods or ser­vices accounts for the tax.

Services rendered by nonresidents to entities that carry on busi­ness in Moldova are regarded as imported if they are considered to be delivered in Moldova.

The recipient of the service is required to account for the VAT due in Moldova. The tax is due on the date of payment for the services. VAT paid for imported services is allowed for input tax recovery (see Section F).

The information relating to VAT on imported services is declared to the tax authorities in a separate box of the VAT return.

Registration procedures. In order to register as a VAT payer, the local entity should file a VAT registration application form before the last day of the month during which the VAT registration con­ditions are met. The application form shall be filed in a hard copy format only (i.e., no online registration is possible) together with a list of supporting documents required by the local tax authori­ties. A tax audit should be performed for VAT registration pur­poses, where additional documentation and information can be asked by the tax authorities.

The taxpayer is considered to be VAT registered starting the first day of the month following the month during which it filed the application form and with condition that the VAT registration requirements are met. Although the local legislation does not provide for a specific deadline during which the tax authorities should finalize the tax audit and confirm the VAT registration, in practice this process can take up to 30 days after filing of the registration application form.

Late-registration penalties. If the VAT on an imported service is not paid at the correct time, a penalty is imposed, effective from the date on which the VAT became due (that is, effective from the date of the payment for services).

Tax representatives. Not applicable.

Digital economy. Moldovan tax legislation does not provide for special VAT rules on taxation of the digital economy.

Deregistration. Deregistration as a VAT payer is subject to a tax audit to be performed by the tax authority. The date of deregistra­tion is considered the date of issuance of the tax audit report based on which the tax authority decided to perform the respec­tive deregistration.

In case of suspension of the VAT taxable supplies, the VAT payer is obliged to inform the tax authority. Deregistration is performed according to the procedure provided by the state fiscal inspectorate.

Additionally, the tax authority has the right to deregister the VAT taxpayer if:

  • VAT taxpayer has failed to file the VAT tax return for a certain amount of tax periods (arguable for at least 12 months)
  • VAT taxpayer has presented untruthful information with regard to its headquarter registration address

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are subject to VAT. Some supplies are classified as zero-rated, which means that no VAT is chargeable, but the sup­plier may recover related input tax. In general, zero-rated sup­plies include exports of goods and related services as well as other supplies.

The VAT rates are:

  • Standard rate: 20%
  • Reduced rate: 8%
  • Zero rate (0%)

The standard rate of VAT applies to all supplies of goods or ser­vices, unless a specific measure provides a reduced rate or an exemption.

Examples of goods and services taxable at 8%

  • Bakery products
  • Dairy products
  • Agricultural products
  • Drugs
  • Natural and liquefied gas produced and imported in Moldova
  • Phytotechnics and horticulture products in natural form, zoo­technical products in natural form, live and slaughtered pro­duced and/or delivered within the territory of Moldova
  • Beet sugar produced, imported and/or delivered within the ter­ritory of Moldova

Examples of goods and services taxable at 0%

  • Exports of goods and services
  • International transport of persons and freight
  • Electric and thermal power
  • Supplies of water to the public

The term “exempt supplies” refers to supplies of goods and ser­vices that are not subject to VAT. Exempt supplies do not give rise to a right of input tax deduction (see Section F).

Examples of exempt supplies of goods and services

  • Dwellings
  • Land
  • Cars
  • Long-term tangible assets contributed into share capital under the special rules approved by the government
  • Tractors and other agricultural machineries
  • Food for children
  • Financial services
  • Educational services
  • Insurance
  • Betting and gaming
  • Books and periodicals

Option to tax for exempt supplies. Not applicable.

Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.” In general, a VAT payer becomes liable to account for VAT at the time of the earliest of the following events:

  • The receipt of partial or total payment from the customer
  • The performance of the supply
  • The issuance of the VAT invoice

VAT payers must make payments for every tax period. The stan­dard tax period is a calendar month.

Reverse charge. Tax is payable on reverse-charge services on the date of payment for the services.

Imported goods. The time of supply for imported goods is either the date of importation or the date on which the goods leave a duty suspension regime.

Recovery of VAT by taxable persons

A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. A taxable person generally recovers input tax by deducting it from output tax, which is VAT charged on supplies made.

Input tax includes VAT charged on goods and services supplied in Moldova, VAT paid on imports of goods and VAT self-assessed on reverse-charge services.

A valid tax invoice or customs document must generally accom­pany a claim for input tax. The right of deduction may be exer­cised in the tax period in which the purchase documents are entered into the recipient’s books of account.

Nondeductible input tax. Input tax may not be recovered on pur­chases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered for some items of business expenditure.

The following lists provide some examples of items of expendi­ture for which input tax is not deductible and examples of items for which input tax is deductible if the expenditure is related to a taxable business use.

Examples of items for which input tax is nondeductible

  • Private expenditure
  • Cost of goods that are lost, stolen or destroyed
  • Expenditure that is not allowable for income and corporate tax purposes
  • Business gifts
  • Bad debts (a purchaser acquired goods and services but never paid the supplier)
  • Goods and services purchased based on fiscal invoices that are not registered in the state general electronic fiscal invoices register (if the supplier has the obligation to register the fiscal invoices and if the buyer does not inform the tax authorities about this registration infringement)
  • Repair, maintenance and operating expenses of cars used by company management above the specific limits provided by the legislation

Examples of items for which input tax is deductible (if related to a taxable business use)

  • Hire, lease, maintenance and fuel for cars used by the company management, subject to certain limits
  • Purchase, hire, lease, maintenance and fuel for vans and trucks
  • Parking
  • Books
  • Attendance at conferences, seminars and training courses
  • Mobile phones
  • Advertising
  • Transport
  • Hotel accommodation

Partial exemption. Input tax deduction is not granted for exempt supplies. If a taxable person makes both taxable and exempt sup­plies, it may recover only input tax related to supplies that are taxable. Zero-rated supplies are treated as taxable supplies for these purposes. Taxpayers who make taxable and exempt supplies may deduct VAT paid on purchases if they satisfy the following conditions:

  • The taxpayer maintains separate records of payments made for goods and services used for both VAT-taxable and exempt sup­plies.
  • The recoverable amount of VAT is determined on a monthly basis by the application of the pro rata method to the amount of VAT related both to VAT-taxable supplies and to VAT-exempt supplies.

Refunds. If the amount of input tax recoverable in a monthly period exceeds the amount of output tax payable in that period, the taxable person may request a refund of VAT if the excess VAT results from any of the following:

  • Zero-rated taxable supplies
  • Supplies made by companies that produce and sell bread and dairy products
  • Capital investments by business entities registered as VAT payers except for investments made in certain types of buildings and means of transport
  • Capital investments in motor vehicles for passenger transporta­tion
  • Overpaid tax

The following special procedure applies if a taxpayer requests a VAT refund:

  • The taxable person must submit a request to the tax authorities.
  • Before the repayment is made, the tax authorities perform a special tax audit to ensure that the amount claimed is accurate.

In practice, it may be difficult to receive a refund in these circum­stances and substantial delays may be experienced.

Preregistration costs. Generally the input VAT related to pre­registration costs (purchases) is not allowed for recoverability, except if this VAT is related to fixed assets bought for some specific needs of agricultural companies.

Recovery of VAT by non-established businesses

Moldova does not refund VAT incurred by businesses that are neither established nor registered for VAT there.

Invoicing

Fiscal invoices and credit notes. In general, a taxable person must provide a fiscal invoice for all taxable supplies except in several circumstances provided for by the Moldovan law. A fiscal invoice is necessary to support a claim for an input VAT deduction. No laws exist with respect to credit notes.

Proof of exports. VAT is not chargeable on supplies of exported goods. However, to qualify as VAT-free, export supplies must be supported by evidence confirming that the goods have left Moldova. The law provides for a specific list of supporting docu­ments proving the exportation, which vary according to the type of exported goods or services.

Foreign-currency invoices. A fiscal invoice must be issued in leu (MDL), which is the currency of Moldova.

Invoice register. A state general electronic fiscal invoice register (the register) has been introduced in Moldova. VAT taxpayers must register all fiscal invoices with a total value of VAT taxable supply in excess of MDL100,000 within 10 working days after the issuance date.

Failure to register fiscal invoices correctly and on time in the register may result in significant penalties imposed by the tax authorities.

VAT returns and payment

VAT returns. VAT return periods are generally monthly.

Returns must be filed by the 25th day of the month following the end of the return period. Payment in full must be made by the same date. However, VAT with respect to reverse-charge services must be paid to the tax authorities when the recipient pays for the services.

Special schemes. Not applicable.

Electronic filing and archiving. VAT payers are obliged to file the VAT returns by using a specific online electronic program pro­vided by the local tax authority. For archiving purposes, VAT returns as well as other related registers and supporting docu­mentation, should be printed and kept in hard copy by the VAT payers.

Annual returns. Not applicable.

Penalties

Penalties are levied for several VAT offenses, including failure to register for VAT, failure to apply the reverse charge, late submis­sion of a VAT return and late payment of VAT.