Moldova Tax & Business Guide - Deloitte

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Basic facts
Population 4.3m Inflation 12% (2005)*
Main languages Moldovan, Russian GDP per head US$850*
Currency Moldovan leu (MDL) GDP growth 6% (2005)*
Economic communities Commonwealth of Independent States, WTO
GDP sources 20.7% agriculture, 23.5% industry, 53.8% services
*Economist Intelligence Unit.
Political environment

Moldova is a parliamentary democracy with a unicameral parliament and a president who is directly elected by the parliament. The leader of the Communist Party of Moldova (CPM), Vladimir Voronin, was re-elected to a second four-year term in April 2005. The government, headed by the prime minister, currently Vasile Tarlev, is dominated by CPM members.

The next legislative and presidential elections are due in 2009.
Foreign trade and investment
Exports US$1.1bn (2005)* Imports US$2.2bn (2005)*
*Economist Intelligence Unit.

Leading export markets: Russia, Italy and Romania.

Major exports: Wine, canned fruit, vegetables, information technology (IT) services and products.

Moldova has established an open trade regime by the standards of other former Soviet republics, and was admitted to the World Trade Organisation in May 2001.

Government policy envisages the creation of a favourable environment to promote and attract foreign investment in the production sector, particularly in scientific and high-tech areas.
Business and financing
Business forms Joint stock company, limited liability company, joint venture

Joint stock companies and limited liability companies are the most common forms of business organisation for investors in Moldova. Shareholders have limited liability and Moldovan legislation with regard to these types of entities is well developed.
Labour environment
Unemployment rate 8% (2004) Minimum wage MDL 700 (monthly)

The social contribution rate of employers is 26% on the total payroll of workers in Moldova. Employers are not required to contribute social tax for expatriate workers. Employees resident in Moldova make a social contribution of 3% of their gross salary.
Taxation
Corporate tax
Main rate 15%

Resident companies are taxed on their worldwide income; non-resident companies are taxed only on their Moldovan-source income. An entity is treated as resident if it is established or managed in Moldova. The corporate tax rate is 15%. Dividends paid to resident entities are subject to a final withholding tax of 15%. Profits of partnership are allocated to the partners for tax purposes.
Individual tax
Progressive rates to 20%

Resident individuals are taxed on their worldwide income; non-residents are taxed only on their Moldovan-source income. An individual is resident in Moldova if that individual permanently resides there or is present for 183 days in a calendar year. Income is taxed at progressive rates up to a top rate of 20% on annual income exceeding MDL 21,000. Resident individuals are exempt from tax on interest from bank deposits and on dividends from Moldovan companies.
Capital gains
Taxed as income

Capital gains of companies are taxed as ordinary income, but only 50% of the gain is taken into account for tax purposes. Capital gains derived by individuals are treated as income, but a deduction (equal to MDL 10,000 for each year after 1997) is available on the disposition of a private residence provided the individual lived in the dwelling for at least three years before the alienation.
Indirect tax
VAT standard rate 20%

Value-added tax (VAT) applies to most transactions at a standard rate of 20%. A lower rate of 8% applies to certain basic food products, and a 5% rate applies to supplies of natural and liquefied gas. The zero rate applies to exports, electricity for private consumption and construction of housing financed by a mortgage. Exemptions include dwellings, educational services, certain financial services, services in relation to intellectual property, books and periodicals.

Registration is compulsory for entities with a taxable turnover exceeding MDL 200,000.
Tax administration and compliance
Tax year Companies: accounting year; Individuals: calendar year

Companies with tax liabilities above a minimum level must pay tax in four quarterly instalments during the year, with each instalment calculated as 25% of the liability for the current year or previous year. A self-assessment return is due by March 31st following the end of the tax year. Employment income of individuals is taxed by withholding. Individuals with other types of income must submit a self-assessment tax return by March 31st following the year-end. A final tax payment is due with the return.
Additional tax information
Withholding taxes Dividends and Interest 10%, Royalties 15%. Rates may be reduced by an applicable tax treaty.
Tax treaties Moldova has concluded more than 28 tax treaties.
Dividends Dividends paid to resident legal entities are subject to a withholding tax of 15%.
Revenue protection There are thin-capitalisation rules.
Groups There is no provision for group taxation.
Incentives Small businesses; farm enterprises; free-trade zones; investors.
Other taxes Area development levy, Customs duties, Excise duty, Land tax, Levy on border crossing (as from January 1st 2006), Natural resources tax, Private tax, Tax on buildings.