background image

Moldova Consulting on Fiscal and Customs Policy 2023 Including New Transfer Pricing Regime — Orbitax Tax News & Alerts

Moldova's Ministry of Finance has launched a public consultation on a draft law for the fiscal (tax) and customs policy 2023. The main measures include:

  • A limit on cash payments to natural persons to MDL 10,000 per transaction and MDL 100,000 annually for specified income (income from rental, lease, dividends, royalties, payments for work performed, capital increase, interest, etc.);
  • New progressive individual income tax rates of 12% on annual income up to MDL 1 million and 18% on income exceeding MDL 1 million;
  • A 0% income tax rate on SMEs for a period of 3 years in respect of taxable income not distributed as dividends, with a 12% rate on income distributed as dividends;
  • Changes to allow for the deduction of other types of expenses according to the provisions of the Fiscal (Tax) Code, without the limit of demonstrating them as ordinary and necessary;
  • An increase in the value of fixed assets requiring depreciation from MLD 6,000 to MDL 12,000;
  • An accelerated depreciation method for large enterprises, allowing for the deduction of up to 50% of the acquisition (input) cost of fixed assets in the first year of use, with the balance of the cost depreciated over the remaining useful life;
  • Measures regarding Moldovan source income of non-resident taxpayers, including:
    • clarification that for non-residents that do not carry out an activity in Moldova through a permanent establishment, it is expressly specified that the income subject to withholding at the source of payment is the income whose source is Moldova, without taking into account the physical presence of the non-resident in the country; and
    • for non-residents that do carry out an activity in Moldova through a permanent establishment, the deduction of administrative expenses incurred in relation to the activity of the permanent establishment is limited to 10% of the salary of the employees;
  • Implementation of a VAT refund mechanism for registered taxpayers in general from 1 January 2023, which is currently limited to taxpayers with exporter status;
  • The cancelation of VAT exemptions for:
    • postal services, with the exception of services for the distribution of pensions, subsidies, and allowances;
    • electric motor scooters;
    • import and delivery of aircraft, helicopters, locomotives, and railcars for public passenger transport, as well as their parts;
    • operational or financial leasing services for aircraft, helicopters, locomotives, and railcars for public passenger transport; and
    • import and delivery of waste and residues of ferrous and non-ferrous metals and industrial residues containing metals or their alloys used directly in business activities;
  • Implementation of the VAT reverse charge regime related to the import of services, with persons not registered for VAT required to pay VAT directly on imported services;
  • The introduction of a new transfer pricing regime, including:
    • specific provisions establishing that transactions with related parties must be at arm's length;
    • conditions for the determination of related parties, including that
      • a legal person is related to another legal person if it directly or indirectly owns at least 25% of the other legal person's shares with voting rights or effectively controls that legal person; and
      • a legal person is related to another legal person if a third party directly or indirectly owns at least 25% of both legal persons' shares with voting rights or effectively controls both legal persons;
    • the allowed transfer pricing methods, which are the five standard OECD methods;
    • a requirement that taxpayers must submit transfer pricing information by the 25th day of the third month after the end of the fiscal year, with the mode and form to be established by the Ministry of Finance;
    • a requirement that taxpayers with annual related party transactions of MDL 20 million or more must prepare a transfer pricing file by the 25th day of the third month after the end of the fiscal year and submit the transfer pricing file upon request by the tax authority, with the specific content to be established by the Ministry of Finance (if the transaction threshold is not met, a taxpayer may still be requested to prepare a transfer pricing file).

Subject to approval, the measures of the draft law will generally apply from 1 January 2023, with certain measures applying from 1 July 2023.