Moldova

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. As of 15 August 2024, the income obtained by taxpayers carrying out entrepreneurial activity from economic transactions with individual founders or other interdependent individuals who do not carry out entrepreneurial activity, obtained at a price lower than the market price, is adjusted for tax purposes to the market price.
• As of 01 January 2025, losses obtained following the sale or exchange of property, the performance of works and the provision of services, carried out directly or mediated between affiliated parties, will be allowed for deduction if the arm’s length principle has been applied in determining the price for these transactions. 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 Organisation for Economic Co-operation and Development’s (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. Further, on 09 February 2024, the Moldovan Authorities  approved the secondary legislation, containing 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 (limited only to transactions between resident taxpayers, where one or both taxpayers are residents of free economic zones / information technology parks or they apply different rates and/or have different taxable bases for corporate income tax) 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.

Documentation requirements

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 within 6 months after the end of the tax period).

Penalties

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 60,000 to MDL 90,000 (applicable for tax inspections initiated by the Moldovan Tax Authorities for the tax periods starting with 2028).
• Failure to present the information on related-party transactions is sanctioned with a fine of MDL 100,000 to MDL 150,000.
• 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 60,000 to MDL 90,000 (applicable for tax inspections initiated by the Moldovan Tax Authorities for the tax periods starting with 2028).
• Failure to present the transfer pricing file is sanctioned with a fine of MDL 100,000 to MDL 150,000.

As of 1 January 2025, the concept of ‘advance price agreement’ will come into force. A decision issued by the Moldovan Tax Authorities will establish and justify the conditions and the methods of formation of transfer prices during a determined period related to a controlled transaction or transactions carried out between related parties.

Thin capitalisation

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.