Moldova Individual Tax Guide

Moldova

EY

Str. Alexandru cel Bun, 51 MD 2012 Chisinau Moldova

Executive contact

Alexander Milcev

+40 (21) 402-4000 (resident in Bucharest, Romania)

Immigration contact

Alexandru Sipitca

Fax: +40 (21) 410-7052

Email: alexander.milcev@ro.ey.com

+373 (22) 214-040

Fax: +373 (22) 214-044

Email: alexandru.sipitca@md.ey.com

A. Income tax

Who is liable. The following individuals are subject to income tax in Moldova:

• Moldovan residents on income earned in Moldova, as well as income earned from overseas financial and investment operations

• Any enterprise with the legal status of an individual, including sole ownerships, limited partnerships, general partnerships and farms

• Nonresidents on income earned in Moldova and on income earned overseas for their work in Moldova except for financial and investment income from sources outside Moldova

Moldova does not apply different tax rates based on territoriality.

Residents are individuals who meet either of the following conditions:

• They have a permanent domicile in Moldova (includes indi viduals studying or traveling abroad and Moldovan officials appointed for missions abroad).

• They stay 183 days or more during any fiscal year in Moldova.

Income subject to tax. Individuals are subject to tax on their gross income earned in Moldova and on income earned from overseas financial and investment operations, less applicable deductions and other allowances.

Gross income includes the following items:

• Income earned from entrepreneurial, professional and other similar activities

• Salaries and fees for services rendered by the individual

• Cash or in-kind compensation, other premiums and facilities paid by the employer

• Interest

• Capital gains

• Royalties and annuities

• Dividends

• Rental income

• Revenue earned by lawyers and other professionals, including commissions and other revenues

Gross income does not include the following items:

• Amounts received as compensation from the budget for illness

• Damages paid by a third party for accidents and/or permanent disability

• Alimony and allowances for children

• Inheritances and donations (with certain exceptions)

• Per diem allowances up to the limit set by the government

• Scholarships

• Welfare received from the government or charitable organizations

• Income earned from business patent activity

• Income earned from selling of secondary raw materials and agri cultural goods produced by individuals (an exception applies to income earned by farms and individual enterprises)

• Amounts obtained by individuals from the returning of recy clable packaging

• Compensation for moral damages

• Meal tickets granted to employees within the limits provided in the legislation

• Income obtained by resident individuals (citizens of Moldova and stateless persons) from the disposal of basic housing

• Payments made by the employer for testing employees to detect the presence of the SARS-CoV-2 virus

Employment income. Taxable compensation includes salaries, cash or in-kind compensation, bonuses, rewards, paid holidays, inflation ary allowances and royalties from patents and trademarks. Taxable compensation also includes salaries received by daily/temporary workers, fees and compensation paid to directors and managers of private commercial corporations and fees received by profes sionals (lawyers, doctors and experts).

The Moldovan tax law does not provide any special rules regard ing the taxation of education allowances provided by employers to their employees’ children under 18 years old. Such allowances are included in taxable income.

Self-employment and business income. Income earned by indi viduals authorized to carry out independent activities (traders, craftsmen and family associations) and income earned from selfemployment and business activities are subject to income tax.

Directors’ fees. Fees paid to directors or members of boards are taxed similarly to salaries at the standard income tax rate indicated in Rates.

Investment income. Interest earned by resident individuals on deposits with Moldovan banks is subject to a 3% withholding tax.

Taxation of employer-provided stock options. Moldovan tax laws do not specifically address the taxation of employer-provided stock options.

Capital gains and losses. Capital assets for tax purposes include the following:

• Shares, bonds and other titles of ownership in entrepreneurial activities

• Private property not used for business purposes

• Land

• Options on buying and selling of capital assets

The capital gains tax base for any fiscal year equals 50% of any amount of capital gains earned during that fiscal year.

Capital gains are deductible only against capital losses.

Deductions

Deductible expenses. Individuals may deduct the following ex penses:

• Expenses related to entrepreneurial activities (business deductions)

• Capital losses to the extent of capital gains

Personal deductions and allowances. The amount of income from all sources is reduced by personal deductions and allowances. Each taxpayer whose annual taxable income does not exceed MDL360,000 is granted a personal deduction of MDL25,200 per year against taxable income. Certain listed individuals are entitled to a personal deduction amounting to MDL30,000 per year. These individuals include disabled veterans, parents and spouses of war veterans, and individuals disabled in childhood.

An individual may also benefit from an additional deduction of MDL18,900 per year if the spouse is a disabled war veteran, has a certain disability due to war or has a disability since childhood and if the individual’s spouse does not benefit from the individu al’s personal deduction. A deduction of MDL4,500 per year is granted for each dependent, and a deduction of MDL18,900 per year is granted to support individuals with a permanent disability.

Business deductions. Expenses incurred in business activities may be deducted from revenue earned, excluding personal and family related expenses.

Rates. The standard personal income tax rate in Moldova is 12%.

For farms, the income tax rate is 7%.

Relief for losses. Income received for substitution of property for similar property lost under a force majeure event is not taxable.

Tax losses may be carried forward for five years.

B. Other taxes

Wealth tax. A wealth tax of 0.8% is imposed on residential immovable property located in Moldova (except for land) that is owned by individuals if both of the following conditions are met:

• The total estimated value of the property is equal to or greater than MDL1,500,000.

• The total size of the surface of the property is equal to or greater than 120 square meters.

This wealth tax must be paid by 25 December of the reporting year.

Property tax. Tax is imposed on property, including land, build ings, apartments and other real estate. The rate of property tax on buildings, apartments, constructions and other types of premises ranges from 0.05% to 0.4% of the tax base, depending on the type and location of the real estate.

Inheritance and gift taxes. Moldova does not impose taxes on gifts or inheritances.

C. Social security

The rate of social contributions payable by employers is 24% of the gross payroll of individuals.

For employers whose principal activity is software development and that fulfill certain requirements stated in the Moldovan Tax Code, the social contribution is 18% of two average monthly salaries per employee (for 2021, the average monthly salary per employee is MDL8,716).

In addition, employees are liable to pay a mandatory medical insur ance contribution on salary and other labor remuneration at a rate of 9%.

Salary provided to employees of companies that are residents of information technology parks is subject to a unique 7% tax (that includes income tax, social security contributions and medical insurance contributions due from the employer and employees).

D. Tax filing and payment procedures

The tax year in Moldova is the calendar year. Annual tax returns must be filed by individuals whose total annual income tax exceeds the amount of income tax withheld during that year. The annual tax return must be filed with the tax authorities by 30 April of the year following the reporting year. Entities must withhold income tax on a monthly basis.

E. Double tax relief and tax treaties

Moldova has entered into double tax treaties with the jurisdic tions listed below. The treaties generally provide for a residency test of 183 days in a fiscal year.

Albania Germany Poland Armenia Greece Portugal

Austria Hungary Romania Azerbaijan Ireland Russian Belarus Israel Federation Belgium Italy Serbia

Bosnia and Japan Slovak Republic

Herzegovina Kazakhstan Slovenia Bulgaria Kuwait Spain

Canada Kyrgyzstan Switzerland

China Mainland Latvia Tajikistan

Croatia Lithuania Turkey Cyprus Luxembourg Turkmenistan

Czech Republic Malta Ukraine Estonia Montenegro United Arab Finland Netherlands Emirates

France* North Macedonia United Kingdom

Georgia Oman Uzbekistan

* This treaty has been signed, but it is not yet in force.

F. Temporary visas

Moldovan embassies and consulates issue visas. Nationals of the following jurisdictions do not require visas to visit Moldova.

Albania

Andorra

Antigua and Barbuda Argentina Australia Bahamas Barbados

Bosnia and Herzegovina

Brazil

Brunei Darussalam Canada Chile Colombia Commonwealth of Independent States Costa Rica Cuba Dominican Republic Ecuador El Salvador European Union Georgia

Grenada

Guatemala Honduras

Hong Kong SAR Iceland Israel Japan

Kiribati Korea (South)

Liechtenstein

Macau SAR Malaysia Marshall Islands Mauritius Mexico Micronesia Monaco Montenegro New Zealand Nicaragua North Macedonia Norway Palau Panama Paraguay Peru

St. Kitts and Nevis

St. Lucia

St. Vincent and the Grenadines Samoa

San Marino

Serbia Seychelles Singapore Solomon Islands

Switzerland

Timor Leste

Tonga Trinidad and Tobago

Turkey

Tuvalu Ukraine United Arab Emirates United Kingdom United States Uruguay Vanuatu

Vatican City Venezuela

Nationals of other jurisdictions with an invitation from a Moldovan company, organization or individual must either obtain a visa from a Moldovan consulate or embassy before their depar ture for Moldova, or obtain a visa on arrival at Chisinau International Airport.

A foreign person intending to stay in Moldova for a period longer than 90 days must submit a request for the issuance of an immigration certificate to the local competent authorities at least 1 month before the expiration of the 90-day period.

G. Work permits

Foreign nationals may work in Moldova based on a special deci sion issued by the Moldovan immigration authorities with respect to such matter.

H. Residence permits

A residence permit may be permanent or temporary. In general, temporary residence permit is issued for a one-year period and can be extended for consecutive one-year periods.

Notwithstanding the above, a residence permit may be issued or extended for a longer period if the foreign citizen is holding a managerial position within a Moldovan company and if the for eign citizen has created the following workplaces or made any of the following investments in the company:

• Made investments exceeding 4,000 average monthly forecasted salaries (MDL34,864,000) or created at least 50 workplaces: the residence permit may be issued or extended for up to eight years.

• Made investments from 2,000 to 4,000 average monthly fore casted salaries (MDL17,432,000 to MDL34,864,000) or created at least 25 workplaces: the residence permit may be issued or extended for up to five years.

• Made investments from 600 to 2,000 average monthly fore casted salaries (MDL5,229,600 to MDL17,432,000) or created at least 15 workplaces: the residence permit may be issued or extended for up to four years.

• Made investments from 200 to 600 average monthly forecasted salaries (MDL1,743,200 to MDL5,229,600) or created at least eight workplaces: the residence permit may be issued or extended for up to three years.

• Made investments from 60 to 200 average monthly forecasted salaries (MDL522,960 to MDL1,743,200) or created at least four workplaces: the residence permit may be issued or extend ed for up to two years.

I. Family and personal considerations

Family members. Priority for migration is given to minors who are joining their parents, as well as to the elderly or parents who need assistance if they have no children or guardian abroad.

Children and parents under the immigrant individual’s care may also apply for migration to Moldova.

Marital property regime. All assets acquired by spouses during a marriage are subject to the marital regime of joint ownership. The legal regime of the assets of spouses may be modified by a mar riage settlement, which may be concluded before the marriage is registered or anytime during the marriage. In this case, the regime will apply only to the extent it does not contradict the marriage settlement.

Forced heirship. There are five categories of legal heirs to whom the property left by deceased persons can be allocated based on some complex and specific rules provided by the Moldovan Civil Code.

Driver’s permits. Foreign nationals may drive international vehi cles in Moldova only if they hold national and international driver’s licenses that adhere to the requirements of the United Nations (UN) Convention on Road Traffic.

Foreign individuals entering Moldova for a six-month stay may use their home countries’ driver’s licenses in Moldova. Foreign individuals who live in Moldova or stay in the country for more than six months should exchange their home countries’ driver’s licenses for a Moldovan license.

National and international driver’s licenses from countries that are signatories to the UN convention may be exchanged. In such circumstances, the drivers are exempt from statutory exams. Driver’s licenses issued by other countries may be exchanged for a Moldovan license after passing the required exams.