APRIL 2016

MoldovaExpected Tax Law Changes for 2016

Due to recent political turmoil in Moldova, the tax andbudgetary policy for 2016, which should have enteredinto force on January 1, has not been approved yet.The draft law, prepared by the new Moldovan Govern-ment (in office since January 2016) and passed by theParliament at the first reading, does not aim at sub-stantially reforming the tax system, but is rather anupdate of the Tax Code. The following article summa-rizes the key changes, expected to be included in to theMoldovan Tax Code as of May 1, 2016.

Introduction of a New Wealth Tax

The principal new feature of the 2016 tax policy inMoldova is the introduction of a ‘‘wealth tax’’. This taxshould apply to individuals who own real estate inMoldova (except for land) the area of which exceeds120 square metres and the estimated value of whichexceeds 1.5 million Moldovan lei (around 70,000euros). The wealth tax rate will be 0.8% of the value ofthe real estate, as estimated by the Real Estate Regis-try.

The Government intends the tax to enhance the fair-ness of the Moldovan tax system and impose a largerburden on rich individuals, while also combating taxavoidance (e.g. cases when the income used forbuying property was not subject to taxation). Accord-ing to preliminary data from the Moldovan tax au-thorities, around 3,000 individuals will be subject towealth tax in 2016. The Ministry of Finance estimatesadditional tax revenues of approximately 50 millionMoldovan lei (2.3 million euros) to be collected aswealth tax. The taxable base for wealth tax is expectedto be widened in the future.

Other Key Changes

The draft law also includes amendments aimed at im-proving the current legal framework, and clarifica-tions to the existing law. Thus, the deadline allowedfor reporting tax losses will be increased from three toseven years, while the currently applicable cap on taxloss deductions in equal installments will be removed.This amendment will undoubtedly have a positiveimpact on the overall financial results of the compa-nies.

The draft law also provides for an increase of exciserates for a number of excisable goods. The bill pro-poses that the majority of excise duties (mainly thoseestablished as a fixed amount) be linked to the infla-tion forecast, and excise duty tax rates on cigarettes(overall excise duties) be gradually adjusted to reachthe level of countries in the region. Such measuresshould yield additional revenue to the budget whilealso reducing the consumption of tobacco products.

Another measure aimed at boosting tax revenue isthe substantial increase of road tolls for vehicles notregistered in Moldova. However, in light of recentpushback from owners of such cars, the decree of in-crease may be reconsidered by the Parliament at thesecond reading.

The draft law contains a number of tax administra-tion amendments, with a view to reducing budgetarycosts and enhancing tax compliance. Such measuresinclude:s simplified rules for issuing and filling in VAT in-

voices, as well as their registration in the GeneralElectronic Register of VAT invoices;

s updated list of documents necessary for VAT refundrelated to export operations;

s removing the obligation for certification of comput-erized information systems used for accountingand tax purposes (under the current tax law, such li-ability is to be introduced starting from 2017);

s more possibilities allowed for taxpayers to post-pone or reschedule the settlement of tax liabilities;

s an updated list of persons subject to indirect meth-ods of taxation.

In this context, it is noteworthy that a moratoriumon state inspections has been recently established bythe Moldovan Parliament. As a result, taxpayerscannot be subject to tax inspections, whether plannedor unannounced, in the period April 1 to July 1, 2016.The Government may extend the moratorium beforethe expiry of the current three-month term.

According to the provisions included in the TaxCode in June 2015 at the request of the business com-munity, the amendments to the Tax Code should enterinto force after 180 days from publication. It seemsthat the Parliament will once again derogate from thisprinciple and the amendments to the Tax Code, cur-rently under examination, will enter into force on May1, 2016, i.e. shortly after their publication.

Further Expected Reforms

The initial version of the draft law prepared by theGovernment contained the formal transfer pricingregulations to be used in Moldova. However, becauseof negative feedback from the business community,expressed during public consultations, the Ministry ofFinance agreed to postpone this initiative.

Although the tax policy for 2016 has not yet beenapproved, the Ministry of Finance has already starteddeveloping the draft tax policy for 2017. The new draftlaw is expected to include more substantial amend-ments, e.g. measures aimed at transposing the EU Di-rectives governing indirect taxation into nationallaws. Work on the new Tax Code will start soon, withthe support of international financial donors, accord-ing to statements from Government officials.

Alexandru Munteanu, ManagerAnastasia Dereveanchina, Senior Consultant

PwC Moldovahttp://www.pwc.com/md/en.html

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