Key Changes of Tax and Customs Policy in Moldova

On August 12, 2024, the Official Gazette of Moldova released Law No. 214, introducing notable updates to various legislative acts, including the 2025 Fiscal and Customs Policy. These amendments, effective from January 1, 2025, will affect several critical areas:

I. Income Tax

1. Expanded Non-Taxable Income Categories:
• Gains from capital investments or interest earned on government bonds and securities issued by local public authorities.
• Revenue from the sale of renewable energy by local producers.
• Income from the receipt of electrical lines, stations, natural gas installations, thermal networks, and equipment by system operators or thermal power units under specific legislation.
• Rights associated with stock option plans.
2. Exemption Limits for Employee Training and Corporate Culture Expenses:
• The annual tax exemption for employee training and activities promoting corporate culture and team cohesion is capped at 5% of the difference between the total wage fund for the company (either from the current or previous year) and the wage fund for employees listed in minor groups 112 and 121 of Moldova’s occupational classifier.
3. Tax Deductions for Education Expenses:
• Taxpayers can deduct education expenses paid for their dependents at institutions specified in Article 15 of the Education Code, up to the amount of an average monthly salary as forecasted and approved by the Government.
4. Increased Personal Tax Allowances:

5. Introduction of Stock Option Plans:

• A new long-term incentive program allows employees and administrators of legal entities to purchase up to 25% of the company's share capital through stock option plans.

6. Provision Deduction for Non-Banking Credit Organizations:

• Non-banking credit organizations can now deduct provisions for asset losses and conditional commitments calculated according to IFRS.

7. Accelerated Depreciation:

• All businesses, except those involved in financial, insurance, or reinsurance activities under Section K of the activity classifier, can apply accelerated depreciation in the first year of putting fixed assets into operation.

8. Raised Threshold for Compromised Debt Deductions:

• The threshold for writing off compromised debts with expired statutes of limitation has been increased from 1,000 MDL to 2,000 MDL.

9. Deductibility of Losses in Related-Party Transactions:

• Losses incurred from sales, exchanges, or services between related parties can be deducted, provided that transactions were conducted at arm's length basis.

 

II. VAT and Excise Tax Adjustments

1. Removal of VAT Deduction Restriction:
• Effective January 1, 2026, the restriction on VAT deduction for purchases from suppliers required to issue e-invoices (but failed to do so) will be eliminated.
2. Mandatory E-Invoicing:
• E-invoices will be required for goods and services supplied to businesses outside Moldova's fiscal system or for technical assistance and investment projects, excluding energy, natural gas, and electronic communication services.
3. Excise Duty Adjustments:
• Excise rates for certain tobacco products will be revised and set for a three-year period.

III. Transfer Pricing Reforms

1. Revised Definition of Local Transactions:
• Transactions between residents that follow the same tax regime are excluded from the definition of local transactions.
2. Clarified Definition of Transactions:
• Advances, licenses, and contributions are no longer considered transactions under transfer pricing rules.
3. Reduced Penalties for Non-Compliance:
• Penalties for submitting incorrect or incomplete transfer pricing documentation that reduces or evades tax liabilities, as well as for failing to submit such documentation, have been reduced.
4. Introduction of Advance Pricing Agreements (APAs):
• Moldova introduces APAs, allowing the State Tax Service to set transfer pricing conditions for controlled transactions between affiliated entities for a predetermined period. APAs can cover ongoing or future transactions for up to five fiscal years, with fees ranging between 30,000 and 50,000 MDL.

IV. Additional Key Amendments

1. Property Tax Adjustments:
• Property tax liability is now determined based on a threshold set at 200 times the average monthly salary forecasted by the government for the applicable period.
2. New Deadlines for Local Tax Payments:
• Local taxes must be paid biannually by the 25th day of the month following the end of each semester.
3. Employer Debt Reporting Obligations:
• Businesses (excluding patent holders and independent individuals) must report non-wage-related employee debts to the State Tax Service annually.
4. Mandate Relationship Taxation:
• Mandate relationships between legal entities and administrators will now be recognized for tax purposes and taxed similarly to salaries.

These updates reflect Moldova's continuous effort to modernize its tax system and align with international practices. To understand the specific impact on your business, Crowe Moldova’s tax professionals are available to provide expert guidance.