Moldovan tax law does not provide for group taxation.
Transfer pricing (TP)
General rules on transactions with related parties
With reference to the transactions carried out by Moldovan companies with related parties, Moldovan tax law provides the following specific provisions:
- The income obtained from economic transactions performed with shareholders or other related parties at a price lower than market value will be adjusted for tax purposes to the market value.
- No deduction is allowed for losses incurred on the sale or exchange of property, performance of work or supply of services between related parties carried out either directly or through intermediaries (regardless of whether the transaction price corresponds to the market value).
- No deduction is allowed for expenses incurred in relation to related parties if no justification is available for the payments and if such expenses do not represent necessary and ordinary business expenses.
In accordance with Moldovan tax law, a company is considered the taxpayer’s related party if one of the following conditions exists:
- The company controls the taxpayer.
- The company is controlled by the taxpayer.
- Both the company and the taxpayer are under common control of a third party.
From a tax perspective, control is the ownership (either directly or through one or more related parties) of 50% or more in value of the capital or voting power of one of the companies. For this purpose, an individual will be treated as owning all equity interest that is directly or indirectly owned by members of their family.
Transfer pricing rules
The Republic of Moldova recently formally introduced its first transfer pricing regulations, which follow the OECD’s Transfer Pricing Guidelines.
Law no. 356, dated 29 December 2022, introduced the transfer pricing concept into the Moldovan Tax Code along with general rules related to transfer pricing reporting and documentation requirements.
The legislation enters into force on 1 January 2024. In the months following the approval of the legislation, the government intends to provide further guidance on the contents of the transfer pricing documentation and details regarding the application of the law.
Multinational enterprises operating in Moldova and Moldova-headquartered groups should review their related-party transactions and documentation in view of compliance with the arm’s length principle and further transfer pricing documentation requirements. Where appropriate, such groups should consider adjusting their operational and pricing models in seeking to avoid potential transfer pricing disputes with the Moldovan tax authorities and related sanctions due to non-compliance with the new regulations.
Materiality thresholds and other legal requirements
The Moldovan government has set two materiality thresholds to be considered with regard to taxpayers that fall under transfer pricing requirements:
- Taxpayers carrying out transactions with related parties, where the total annual value of related-party transactions is equal to or exceeds MDL 20 million, must prepare and present both the information on related-party transactions and the transfer pricing file only at the request of the tax authorities.
Taxpayers carrying out transactions with related parties, where the total annual value of related-party transactions is equal to or exceeds MDL 50 million, must prepare and present the information on related-party transactions and the transfer pricing file on a contemporaneous basis.
A Moldovan taxpayer must prepare two types of documents for transfer pricing purposes:
- A transfer pricing form, generically named “information on related-party transactions”, due by the 25th day of the third month following the end of the tax period.
- A transfer pricing file (due dates depend on the type of taxpayer, as further established by the secondary legislation).
According to the new legislation, the following penalties will apply:
- Late presentation of the information on related-party transactions is sanctioned with a fine of MDL 30,000 to MDL 50,000.
- Presentation of incorrect information on related-party transactions (similar to a tax return) that led to the reduction or avoidance of tax obligations is sanctioned with a fine of MDL 150,000 to MDL 200,000.
- Failure to present the information on related-party transactions is sanctioned with a fine of MDL 300,000 to MDL 500,000.
- Late presentation of the transfer pricing file is sanctioned with a fine of MDL 30,000 to MDL 50,000.
- Presentation of the transfer pricing file with incorrect information is sanctioned with a fine of MDL 150,000 to MDL 200,000.
- Failure to present the transfer pricing file is sanctioned with a fine of MDL 300,000 to MDL 500,000.
Moldovan tax law does not provide for a specific thin capitalisation regime.
The deductibility of interest expenses follows the deductibility regime as described under Interest expenses in the Deductions section.
Controlled foreign companies (CFCs)
Moldovan tax law does not contain CFC provisions.