Chisinau

Taxation in Chisinau, Moldova

What are the tax rates in Chisinau, Moldova? How are corporations taxed? Here’s Teleports overview of personal, corporate and other taxation topics in Chisinau, Moldova.

Personal taxation in Chisinau

Effective personal income tax rate

Annual income$25,000$40,000$80,000$125,000$200,000
Rate19%20%20%20%20%

Teleport city rankings for personal income tax

Personal taxation puts Chisinau in position 37 of all Teleport Cities.
WORSTBEST

Basis

Resident individuals, both Moldovan citizens and foreigners, are taxed on their income related to the activities performed in Moldova. Moldovan citizens also are taxed on the financial income and investment income obtained from sources outside Moldova. Nonresidents are taxed only on their Moldovan-source income.

Residence

An individual is resident if he/she is domiciled in Moldova or present in Moldova for more than 183 days during the tax year.

Filing status

Each individual must file a return; joint returns are not permitted. Individuals working for only one employer, and those who do not derive income other than salary income, are not obliged to file a return.

Rates

Tax rates of 7% and 18% are imposed.

Deductions and allowances

Personal allowances are available to the taxpayer and his/her spouse, children and dependents. Deductions are granted for medical insurance and individual social security contributions.

Taxable income

Taxable income represents the gross income obtained from all sources during the tax period, reduced by the deductions and allowances permitted by law. Gross income comprises, but is not limited to salary/wages, benefits, rents, capital gains, royalties and annuities.

Capital gains

Capital gains of individuals are treated as ordinary income, but only 50% of the gain is considered for tax purposes. A deduction is granted on the disposal of a private residence where the taxpayer has lived for at least three years before the disposal. The deduction is equal to MDL 10,000 for each year of ownership.

Other taxes on individuals

Real property tax

Residents and nonresidents that own immovable property in Moldova must pay real property tax at rates set annually by the local public administration authority. The rate may not be less than 50% of the maximum rate stipulated by the law.

Inheritance/estate tax

Moldovan residents are not taxed on the inheritances they receive.

Net wealth/net worth tax

A wealth tax was introduced in 2016. The tax is applied to individuals who own real estate in Moldova (except for land), the estimated value of which is equal to or greater than MDL 1.5 million and the area of which is equal to or greater than 120 square meters. The wealth tax rate is set at 0.8% of the value of the real estate and the tax must be paid by 25 December of the current tax period.

Social security

Employees must contribute to the social security fund an amount equal to 6% of their gross salary (but no more than five monthly average forecasted salaries multiplied by 12 months for the year (the 2016 monthly average forecasted salary is MDL 5,050)). Employees also must make health insurance contributions at 4.5% of gross salary. The contributions are deductible for income tax purposes.

Compliance for individuals

Penalties

Penalties apply for late filing, failure to file and/or tax avoidance/evasion.

Filing and payment

The deadline for filing and payment of the personal income tax is 25 March of the subsequent fiscal year. For salary income, the employer withholds tax on behalf of the employee and files monthly tax reports.

Corporate taxation in Chisinau

Teleport city rankings for corporate income tax

Corporate taxation puts Chisinau in position 93 of all Teleport Cities.
WORSTBEST

Basis

Residents are taxed on their worldwide income; nonresidents are taxed only on income derived from certain Moldovan sources.

Taxation of dividends

Dividends received by a Moldovan resident company from another Moldovan company are not taxed at the level of the recipient.

Residence

A corporation is resident if it is established or managed in Moldova.

Losses

Corporate tax losses may be carried forward for five years following the year the losses were incurred. The carryback of losses is not permitted.

Incentives

Tax incentives are available for farmers, business entities engaged in software development, business entities that increase the number of employees and those operating in free- economic zones.

Rate

12%. However, business entities not registered as VAT payers, except farmers and individual entrepreneurs, may calculate income tax by applying a 3% rate to their operating income.

Foreign tax credit

Resident taxpayers are entitled to a tax credit for the tax paid on foreign income; the credit is limited to the amount of Moldovan tax that would have been imposed on the foreign profits.

Taxable income

The accounting income for the year is the basis for calculating the taxpayer’s annual taxable income. The accounting income is adjusted for tax purposes for items specifically provided by the Tax Code.

Capital gains

Capital gains of companies are taxed as ordinary income, but only 50% of the gain is considered for tax purposes.

Other taxes on corporations

Stamp duty

Stamp duty may be applied for claims submitted to the court of justice, registration of mortgages, notary acts, etc.

Social security

Contributions borne by the employer are calculated as a percentage of the employee’s gross salary for social security (23%) and health insurance (4.5%).

Payroll tax

The employer is responsible for calculating, withholding and paying the personal income tax (progressive scale of 7% and 18%), the employee’s pension fund contribution (6%) and the employee’s health insurance contribution (4.5%).

Transfer tax

Transfer taxes are charged upon notary authentication of transactions related to the transfer of property. The tax ranges from 0.1% to 1.3%, applied to the value of the authenticated transaction.

Real property tax

Residents and nonresidents that own immovable property in Moldova must pay real property tax at rates set annually by the local public administration authority. The rate may not be less than 50% of the maximum rate stipulated by the law.

Compliance for corporations

Consolidated returns

Consolidated returns are not permitted; each company must file its own return.

Penalties

Penalties apply for late filing, failure to file and/or tax avoidance/evasion.

Rulings

The taxpayer may request “comfort letters” from the tax authorities. Comfort letters are submitted to taxpayers free of charge. No binding ruling or advance pricing agreement regime is in place.

Tax year

Calendar year. For a new company, the tax year is the period from the date of registration until the end of the calendar year.

Filing requirements

Moldova operates a self-assessment regime. The tax return must be submitted by 25 March of the year following the reporting year.

Other taxation in Chisinau

Value added tax

Filing and payment

VAT payers must prepare and submit VAT returns on a monthly basis. The filing and payment of VAT must be carried out no later than the 25th day of the following month. Notwithstanding the above, VAT related to imported services must be

Rates

The standard rate is 20%. A reduced rate of 8% is applied certain food products; drugs; and specific phytotechnical, horticultural and zootechnical products. International transportation and exports are taxed at a 0% rate. Certain items (financial services, post services, cars, land and dwellings, etc.) are VAT exempt.

Taxable transactions

VAT is levied on the supply of goods, the provision of services and the import of goods and services into Moldova.

Registration

Registration for VAT purposes is mandatory when a business entity carries out taxable supplies and imports VAT-taxable services during a consecutive 12-month period in an amount that exceeds MDL 600,000. A business entity may apply for voluntary registration if it plans to carry out VAT-taxable supplies.

Anti-avoidance rules

Thin capitalization

The deduction of interest on borrowings received from individuals and legal entities, other than financial institutions, micro-financing organizations and leasing companies is allowed only within the limit of the average weighted rate set by the National Bank of Moldova for loans granted by the banking sector to legal entities.

Investment basics

Foreign exchange control

Resident and nonresident legal entities are obliged to receive and/or make payments and transfers involving foreign currency operations through their bank accounts. There are certain limitations on when such entities may use cash or payment instruments to perform foreign currency operations.

Accounting principles/financial statements

IFRS is mandatory for entities of public interest (i.e. financial institutions, investment funds, insurance companies, private pension funds and societies whose securities are traded on the stock exchange). Other companies may apply IFRS or National Accounting Standards (NAS).

Principal business entities

These are the limited liability company, joint stock company, partnership, sole proprietorship, branch and representative office of a foreign corporation.

Withholding tax

Dividends

Dividends paid by Moldovan resident companies to both residents and nonresidents are subject to a 6% tax, unless the rate is reduced under an applicable tax treaty.

Technical service fees

Service fees paid to nonresidents are subject to a 12% withholding tax, unless the rate is reduced under a tax treaty.

Interest

Interest paid to a nonresident is subject to a 12% withholding tax, unless the rate is reduced under a tax treaty.

Royalties

Royalties paid to resident individuals and nonresidents are subject to a 12% withholding tax, unless the rate is reduced under a tax treaty.