Moldova VAT, GST, and Sales Tax Guide

Moldova

Chisinau GMT +2

EY

Str. Alexandru cel Bun 51 MD2012 Chisinau Moldova

Indirect tax contacts

Alexander Milcev +40 (21) 402-4000 (resident in Bucharest, Romania) alexander.milcev@ro.ey.com

Alexandru Sipitca +373 (22) 214-040 alexandru.sipitca@md.ey.com

A. At a glance

Name of the tax

Value-added tax (VAT)

Local name Taxa pe valoarea adaugata (TVA)

Date introduced 1 July 1998

Trading bloc membership Moldova – European Union Association Agreement Administered by State Tax Service (www.sfs.md)

VAT rates

Standard 20% Reduced 8%, 12% Other Zero-rated (0%) and exempt

VAT number format 1234567

VAT return period Monthly Thresholds

Registration MDL1.2 million

Recovery of VAT by non-established businesses No

B. 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 busi ness

• Importation of services received in Moldova by a taxable person (using the “reverse-charge” mechanism)

• Importation of goods

• Services provided through electronic networks (i.e., digital services) by nonresidents to Moldovan resident individuals

• Procurement of property of taxable person, declared in the insolvency process (with some excep tions) by using the “reverse-charge” mechanism

• Procurement of pledged property, mortgaged property, forfeit property from the taxable persons by using the “reverse-charge” mechanism

C. 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 MDL1.2 million in a period of 12 consecutive months.

Exemption from registration. The VAT law in Moldova does not contain any provision for exemp tion from registration.

Voluntary registration and small businesses. Voluntary VAT registration is allowed for persons planning to perform taxable supplies of goods and services, irrespective of their turnover value.

Group registration. Group VAT registration is not allowed in Moldova.

Non-established businesses. Foreign traders are not allowed to have a VAT registration number in Moldova. If a foreign entity undertakes entrepreneurial activity in Moldova that results in a per manent establishment (PE), it must register for VAT locally. It is then treated in the same way as a resident entity. In addition, foreign entities that provide services through electronic networks (i.e., digital services) to Moldovan resident individuals, as well as foreign intermediaries who receive payments from Moldovan resident individuals for the services provided through elec tronic networks, must register for VAT in Moldova (see the Digital economy below).

Tax representatives. Tax representatives are not required in Moldova.

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 the place of supply is deemed to be Moldova.

The recipient of the service is required to account for the VAT due in Moldova. The tax is due by 25th of the month following the month in which the service was imported or paid, whichever is the earlier. VAT paid for imported services is eligible for input tax recovery.

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

Domestic reverse charge. The domestic reverse-charge mechanism was introduced in the local tax legislation as of 1 January 2020. It is applicable to business entities that procure on Moldovan territory the property of other business entities registered for VAT, declared in the insolvency process (according to the provisions of the Insolvency Law). In the case of goods sold by the insolvent business entity (seller) to another business entity (buyer), the latter calculates and pays the VAT amount to the budget, subsequently having the right to deduction. The taxable object constitutes the value of the acquired property of the insolvent entity. Additionally, the domestic reverse-charge mechanism is applicable to business entities that procure on Moldovan territory the pledged property, mortgaged property, forfeit property of other business entities registered for VAT.

Digital economy. The place of supply of digital services (i.e., electronic communication services, broadcasting and television services, services provided by radio-electronic means) is the place/ residence of the customer. This means that nonresident providers of electronically supplied ser vices for both business-to-business (B2B) and business-to-consumer (B2C) supplies are not required to register and account for VAT on supplies in Moldova. Instead, the customer is required to pay VAT on the imported services under the reverse-charge mechanism. For B2C supplies, the individual should pay the VAT simultaneously with the payment for the imported

digital services and declare the related VAT until the 25th of the month following the reporting month by filing a VAT return. However, in practice this is not commonly carried out.

There are no other specific e-commerce rules for imported goods in Moldova.

Online marketplaces and platforms. From 1 April 2020, nonresidents that provide services through electronic networks (i.e., digital services through online marketplaces and platforms) to Moldovan resident individuals, as well as nonresident intermediaries who receive payments from Moldovan resident individuals for the services provided through electronic networks, for which the place of supply is considered in Moldova, are subject to VAT and should register for VAT in Moldova under a specific procedure (see the Special schemes, Digital services subsection below, under Section I. Records and payment). The respective mechanism applies to B2C supplies only. In case of B2B supply of digital services, no VAT registration is required for the nonresident, since the customer should pay VAT on the imported services under the reverse-charge mecha nism.

Registration procedures. To register as a taxable person, the local entity should file a VAT regis tration 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 or electronically by online registration, together with a list of supporting documents (including the list of sales invoices and invoices for acquired goods and services, contracts concluded with the suppliers and clients, bank statements, breakdowns from the statutory books of payables and receivable accounts, expenses and income accounts, as well as other additional information) required by the local tax authorities to establish the correctness of the data submitted by the applicant. A tax audit is usually performed for VAT registration purposes, where additional documentation and infor mation can be asked by the tax authorities.

The taxable person is considered to be VAT registered starting the first day of the month follow ing the month during which it filed the application form and with the 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 reg istration, in practice this process can take up to 30 days after filing of the registration application form.

Referring to the nonresidents that provide services through electronic networks (i.e., digital ser vices) to Moldovan resident individuals, as well as to the nonresident intermediaries who receive payments from Moldovan resident individuals for the services provided through electronic net works, for which the place of supply is considered Moldova, they are not required to register for VAT in Moldova under the general registration procedure. They are subject to a simplified reg istration scheme to be performed via an online platform provided by the tax authorities.

Deregistration. Deregistration as a taxable person 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 taxable person 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 taxable person if:

• The taxable person has failed to file the VAT tax return for a certain amount of tax periods (arguably for at least 12 months).

• The taxable person has presented untruthful information with regard to its headquarter registra tion address.

Changes to VAT registration details. There is no specific procedure in relation to notifying the tax authorities for changes in a taxable persons’ VAT registration details. In case any changes occur (such as the company name, address, administrator, etc.), this is done automatically through the Trade Register, which exchanges information with the tax authorities, so VAT records are also updated.

D. Rates

The term “taxable supplies” refers to supplies of goods and services that are liable to a VAT rate.

The VAT rates are:

• Standard rate: 20%

• Reduced rates: 8%, 12%

• Zero-rate: 0%

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

Some supplies are classified as exempt from VAT with the right to deduction, known as exempt with credit (i.e., zero-rated), which means that no VAT is chargeable, but the supplier may recover the related input tax.

Examples of goods and services taxable at 0% (i.e., exempt with credit)

• Exports of goods and related services

• International transport of persons and freight

• Electric and thermal power

• Supplies of water to the public

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 12%

• HORECA industry supplies (hotel, restaurants and café services): Such supplies were reduced from 20% to 12% with effect from 1 January 2021. With effect from 1 October 2021, such sup plies were reduced from 12% to 6% during the state of emergency period declared on the entire territory of Moldova by the Parliament or by the National Extraordinary Public Health Commission. This reduced VAT rate applies to food and/or beverages (excluding the alcoholic products), prepared or unprepared, for human consumption, together with the related services allowing their immediate consumption, provided as part of activities included in Section I of the Moldovan Classifier of Economic Activities, as well as to accommodation services, regardless of the level of comfort (e.g., hotel, apartment-hotel, motel, tourist villa, bungalow, tourist board ing house, rural boarding house, camping, holiday village or holiday camp) that are included in Section I of the Moldovan Classifier of Economic Activities.

The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.

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. The option to tax exempt supplies is not available in Moldova.

E. Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.” In general, a tax able person 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 fiscal invoice

Taxable persons must make payments for every tax period. The standard tax period is a calendar month.

Deposits and prepayments. There are no special time of supply rules in Moldova for deposits and prepayments (refundable or nonrefundable). As such, the general time of supply rules apply (as outlined above).

Generally, a taxable person becomes liable to account for VAT if it receives (or received) a partial or total prepayment from the customer in relation to a supply of goods or a supply of services. If no supply is performed and the prepayment is returned to the customer, the taxable person should be able to adjust/claim back VAT it accounted before on the received prepayment.

Continuous supplies of services. If the goods and services are supplied regularly (continuously) during a certain period of time stipulated in the contract, the time of supply is considered the date of the performance of the supply or the receipt date of each regular payment, whichever is the earlier.

Goods sent on approval for sale or return. There are no special time of supply rules in Moldova for supplies of goods sent on approval for sale or return. As such, general time of supply rules apply (as outlined above).

Reverse-charge services. For B2B services supplied by nonresidents, the tax is payable on reversecharge services by 25th of the month following the month in which the service was imported or paid, whichever is the earlier.

Leased assets. If the assets are supplied under a leasing contract (financial or operational), the time of supply is considered the date of the lease payment specified in the contract. In cases of receiving the lease payment in advance, the time of supply is considered the date of this advance payment.

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.

F. 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.

There is no set time limit for a taxable person to reclaim input tax in Moldova. This mean that, effectively, the input tax may be carried forward indefinitely until its complete recovery. However, a six-year time limit applies for certain cases of VAT refunds.

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)

• 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 available when it relates to supplies that are exempt from VAT without the right to deduction. If a taxable person makes supplies that are both taxable and exempt from VAT without the right to deduction, it may recover only input tax related to supplies that are taxable. Supplies that are exempt from VAT with the right to deduction are treated as taxable supplies for these purposes.

Taxable persons who make supplies that are taxable and exempt from VAT without the right to deduction may deduct VAT on purchases by the application of the pro rata method to the amount of VAT related both to supplies that are taxable and exempt without the right to deduction.

Approval from the tax authorities is not required to use the partial exemption standard method in Moldova. Special methods are not allowed in Moldova.

Capital goods. Capital goods are items of capital expenditure related to fixed tangible and intan gible assets subject to depreciation. Input tax incurred on capital goods used wholly for taxable supplies can be recovered in line with normal input tax recovery rules. Input tax is deducted in the month in which the goods are acquired.

If the capital goods are used for both taxable and exempt supplies, the partial exemption rules described above shall apply. Where the use of the capital good changes from taxable to exempt, the input tax related to the net book value of the capital good is not allowed for deduction and is reported to costs or expenses.

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:

• Supplies that are exempt from VAT with the right to deduction

• Supplies made by companies that produce and sell bread and dairy products

• Capital investments by business entities registered as taxable persons, 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 taxable person 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.

Pre-registration costs. Input tax incurred on pre-registration costs in Moldova is not recoverable.

Bad debts. If the output tax related to a supply in the VAT return is all or part of it considered, according to the legislation, as a bad debt, the taxable person has the right to adjust the amount of VAT calculated starting with the fiscal period in which the bad debt was detected.

The tax code allows the recovery of VAT on bad debts, subject to the following conditions:

• The liquidated entity has no successor of rights

• The business entity declared insolvent does not have any goods

• The individual who does not perform any business activity, and the farmer or individual entre preneur does not have, within two years from the day of the appearance of the debt, goods or is insufficient of goods that could be collected in order to extinguish this debt

• The individual has died and there are no more persons obliged by law to honor its obligations

• The individual, including the farmer’s household members or the individual entrepreneur who left its residence, cannot be found during the limitation period established by the civil legisla tion

• There is a respective act of the court or of the executor (e.g., decision, conclusion or other document provided by the legislation in force) according to which debt collection is not pos sible

• The debt is up to MDL1,000 with an expired limitation period

Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Moldova.

G. Recovery of VAT by non-established businesses

Input tax incurred by non-established businesses in Moldova is not recoverable.

H. Invoicing

VAT invoices. 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 tax deduction.

Credit notes. No laws exist with respect to credit notes. The taxable amount of the taxable supply of goods and services, after their supply or payment, can be adjusted if there are supporting documents providing the following conditions are met:

• The amount of the taxable supply, agreed initially, has changed as a result of changing prices

• The taxable supply was returned to the seller, either partially or in the full amount

• The taxable amount of the taxable supply was reduced due to a discount provided

Electronic invoicing. Electronic invoicing is mandatory in Moldova for certain taxable persons. It is mandatory for taxable persons that perform supplies under public procurements (except for electricity, heat, natural gas, electronic communications services and communal services sup plies), as well as for the taxable persons who are included by the authorities in the mandatory list of taxable persons required to use e-invoicing. Other taxable persons can use electronic invoicing voluntarily. Taxable persons who use electronic invoicing should be registered as users of electronic tax services and have digital or electronic signatures issued in accordance with local leg islation.

Simplified VAT invoices. Simplified VAT invoicing is not allowed in Moldova. As such, full VAT invoices are required.

Self-billing. Self-billing is not allowed in Moldova.

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 (e.g., customs declarations, invoices, sales agreements).

Foreign currency invoices. Invoices cannot be issued in a foreign currency in Moldova. All invoices must be issued in the domestic currency, which is the Moldovan leu (MDL).

Supplies to nontaxable persons. Generally, in case of retail supplies made by taxable persons to private consumers, no fiscal invoice is required to be issued, unless it is requested by the pur chaser.

Records. Each taxable person is obliged to keep track of the entire volume of goods and services delivered, as well as all the goods and services purchased. The fiscal invoices related to purchases/deliveries are recorded in the respective ledgers in the order of their receipt/release. Damaged or canceled fiscal invoices shall be also kept by the business entity. The purchases and sales ledgers shall be prepared and filled within one month from the end of the reporting month. The accounting documents are kept by the entity on paper or in electronic form.

For each reporting month, a generalized record must be kept that includes the following:

• Input tax amount on acquired goods and services

• Output tax amount on delivered goods and services

• Adjustments that impact the VAT amount

• The VAT amount to be paid to the budget or the input tax amount to be carried forward

• VAT amount paid to the budget

• The VAT amount to be carried forward to the next fiscal period

• VAT amount subject to be refunded from the budget

In Moldova, VAT books and records must be held within the country. Generally, the taxable person should hold the records at their registered office.

Record retention period. According to the local legislation, the fiscal invoices, as well as the accounting ledgers must be kept for six years.

Electronic archiving. Electronic archiving is not allowed in Moldova. Archiving must be made in paper form only. VAT returns, as well as other related registers and supporting documentation, should be printed and kept in hard copy by the taxable persons.

I. Returns and payment

Periodic returns. VAT return periods are generally monthly. The VAT return periods for the provi sion of digital services by nonresidents to Moldovan individuals are quarterly.

Returns must be filed by the 25th day of the month following the end of the return period.

Periodic payments. Payment in full must be made by the same date as the VAT return deadline, i.e., by the 25th of the month following the end of the return period. The VAT must be paid to the tax authority through bank transfer.

Electronic filing. Electronic filing is mandatory in Moldova for all taxable persons. Taxable per sons are obliged to file VAT returns by using a specific online electronic program provided by the local tax authority. The service “Declaraţie electronică” is the tool for creating, verifying and filing tax returns by taxable persons online (via servicii.fisc.md platform). The tool can only be used with electronic signatures issued by accredited centers. The tool also offers the option to upload pre-prepared returns into taxable persons’ accounting programs.

Payments on account. Payments on account are not required in Moldova.

Special schemes. Digital services. From 1 April 2020, a special scheme applies to nonresidents who provide services through electronic networks (i.e., digital services through online marketplaces and platforms) to Moldovan resident individuals, as well as nonresident intermediaries who receive payments from Moldovan resident individuals for the services provided through electronic networks, for which the place of supply is considered Moldova. The respective mech anism applies to B2C supplies only. The nonresident should register in its own name with the local tax authority, under a simplified online procedure, within the first fiscal period (i.e., quarter) in which the obligation to calculate and pay the VAT arises, before the return filing. The VAT due for digital services should be declared and paid quarterly by the respective nonresidents.

Annual returns. Annual returns are not available nor required in Moldova.

Supplementary filings. No supplementary filings are required in Moldova.

Correcting errors in previous returns. Where a voluntary disclosure is required to be submitted to the tax authority for the underpayment of VAT, the taxable person should file an amended VAT return for the respective period. In case the taxable person finds that the previously filed tax return contains an error or omission, it has the right to submit a corrected tax return, according to the form and completion method in force for the tax return to be corrected. The corrected tax returns are filed by using the same specific online electronic platform of the tax authorities that is used for filing the regular VAT returns.

Digital tax administration. Electronic invoicing. From 1 January 2021, a taxable supply performed under the public procurements should be documented with an electronic invoice (e-invoice) by

using a specific online platform provided by the tax authorities. Also, there is a list of taxable persons approved by the tax authorities for which the use of electronic invoice is mandatory.

J. Penalties

Penalties for late registration. Failure to register or late registration for VAT is penalized with a fine from 7% to 10% of the amount of taxable supplies, excluding supplies exempted from VAT with the right to deduction.

Penalties for late payment and filings. Failure to comply with the tax reports preparation and filing rules (including non-filing, late filing or filing of untruthful information) will be penalized with a fine, from MDL500 to MDL1,000 for each tax report, but no more than MDL10,000 for all tax reports subject of tax infringement, applied to business entities.

Interest for delay in payment of the understated taxes is calculated for the period starting with the due date until the day (including) of effective transfer to the budget (the rate varies from year to year based on the refinancing basic rate, provided by the National Bank of Moldova plus five points). For example, the annual interest rate for 2022 year is equal to 11%.

Penalties for errors. The understatement of VAT by submitting to the tax authorities a VAT return with invalid information or data is sanctioned with a fine from 20% to 30% of the understated VAT amount.

Failure to issue in time the tax invoice, as well as failure to register the tax invoice in the gen eral electronic register of the fiscal invoices, will be penalized with a fine from MDL3,000 to MDL3,600 per each fiscal invoice but not more than MDL72,000.

No penalty applies for the failure to notify or late notification to the tax authorities for changes to a taxable person’s VAT registration details. For further details, see the subsection above Changes to VAT registration details.

Penalties for fraud. Evasion from calculation and payment of VAT will be penalized with a fine from 80% to 100% of the respective VAT amount.

If the infringement is qualified as a tax evasion and the income tax exceeds in total 50 average forecasted salaries (approximately MDL495,000), criminal investigations could be initiated (both for the company and its responsible person), subject to a list of financial and other type of sanctions to be imposed based on the decision taken by the court.

Personal liability for company officers. Company officers can be held personally liable for errors and omissions in VAT declarations and reporting in Moldova. Filing of tax returns with untruth ful and/or incomplete information will be penalized with a fine from MDL450 to MDL1,500 applied to responsible person. Failure to file the tax return within the term established by the legislation will be penalized with a fine from MDL300 to MDL600 applied to responsible per son. In case of infringements qualified as a tax evasion, there can be initiated criminal investiga tions with regard to company responsible person.

Statute of limitations. The statute of limitations in Moldova is four years. Generally, under the current law, the tax authorities may normally audit tax-related matters retroactively for four years. However, no statute of limitation is applied if the filed tax return contains misleading data or if it reflects facts representing tax infringements or if the tax return is not filed to the tax authority.

An amended tax return can be filed to voluntarily correct errors contained in the original tax return if no tax audit was announced or performed by the tax authorities for the respective fiscal period.