Resident legal entities are taxed on their worldwide income, while non-resident entities are taxed on their Moldovan-sourced income. Taxable income is computed as accounting profit adjusted in accordance with tax legislation.
Under the National Accounting Standards, the following inventory valuation methods are mandatory: specific identification, first in first out (FIFO), and weighted average cost. Starting with 1 January 2020, last in first out (LIFO) inventory method of valuation has been introduced.
Assets are generally valued at their acquisition cost, production cost, or market value.
Starting with 1 January 2020, transactions with capital assets performed by the companies shall not be subject to capital gain rules, general taxation rules being applicable.
Until 31 December 2019, capital gain has been generally calculated as the difference between the sale price and the fiscal value of the capital assets (i.e. all costs related to the acquisition of capital assets).
During the period from 1 January 2018 to 30 September 2018, taxable gain basis represented 50% from the capital gain. Starting with 1 October 2018, taxable gain basis represented 20% from the capital gain. The respective taxable portion has been taxed at the standard tax rate applicable for each respective period.
Also, prior to 2020, the capital gain was included in the total gross amount of income for the year in which the capital assets were sold (alienated). Capital gains were decreased by capital losses registered in the current or previous year. Some examples of capital assets include shares, plots of land, options to purchase or sell capital assets, etc.
Specific exemptions were applied in relation of certain transactions with capital assets.
A 6% final withholding tax (WHT) shall be applied on dividends paid by Moldovan legal entities to other Moldovan legal entities from profit earned since 2012. Distribution of dividends from profit earned during the period between 2008 and 2011 are subject to final WHT of 15%.
Dividends received by Moldovan legal entities from foreign legal entities are included in taxable income and taxed according to general established rules. According to Moldovan legislation, the beneficiary of such dividends is entitled to a credit for the tax paid in the foreign country, within certain limits.
In general, the interest income derived by legal entities is included in the total taxable amount and taxed at the applicable 12% CIT rate unless a specific exemption is provided (e.g. interest from state bonds).
Royalties are defined as payments of any kind received in consideration for the use of, or the right to use, any copyright and/or ancillary right of a literary, artistic, or scientific work, including moving pictures, patent, trademark, design or model, plan, software, secret formula or process, or for information concerning industrial, commercial, or scientific expertise.
The following specific types of payments are not considered royalty under the Moldovan tax law:
- Payments for software purchase, intended solely for the operation of that software, including its installation, deployment, storage, customisation, or updating.
- Payments for the full acquisition of a software copyright or a limited right to copy it solely for the purpose of its use by the user or for the purpose of selling it under a distribution contract.
- Payments for obtaining the rights to distribute a product or service without giving the right to reproduction.
- Payments for access to satellites through the hiring of transponders or the use of cables or pipelines for the transport of energy, gas, or oil, where the customer is not in possession of transponders, cables, pipes, fibre optics, or similar technologies.
- Payments for the use of electronic communications services in roaming agreements, radio frequencies, and electronic communications between operators.
In general, royalties derived by legal entities are included in the total taxable amount and taxed at the applicable 12% CIT rate.
Exchange gains and losses
Revenues obtained from foreign exchange differences are included in taxable income. Foreign exchange losses are CIT deductible in the period they are incurred.
Moldovan tax law provides for the following main types of non-taxable revenues:
- Contributions to the capital of an entity.
- Income earned while benefiting from income tax incentives.
- Money received from special funds in the form of grants from government-approved programmes.
- Income from reversing impairment losses on depreciation of fixed and other assets.
- Income from reversal of accruals that have not been previously deducted for tax purposes.
- Income obtained under international projects and grants that contribute to the long-term development of education and research.
Resident legal entities are taxed on their worldwide income. The legal entities, under certain conditions, can benefit from tax credits provided under a double tax treaty (DTT) or can apply for unilateral tax credits against income tax paid in any foreign country if this income is subject to taxation in Moldova. Such tax credit shall not exceed the amount that would have been estimated at the CIT rate applicable in the given tax period. Otherwise, there is no specific tax deferral regime.