EY Tax Alert - Transfer pricing regulations applicable starting from 1 January 2024 in Republic of Moldova. Introduction

Starting 1 January 2024, the transfer pricing principle is applicable in the fiscal legislation of the Republic of Moldova. Through Law no. 356/2022, Chapter 112: Special Rules for Determining Transfer Prices according to the arm's length principle has been introduced into the Title V of the Moldovan Tax Code.

The transfer pricing regulations stipulate that a taxpayer conducting transactions with affiliated parties of a total value of at least mil. MDL 20 is required to prepare and present the Transfer Pricing Information and if the value of the transactions is at least 50 mil. MDL, in addition to the aforementioned Information, the taxpayer is also required to present the Transfer Pricing File. The value of the transactions during a fiscal period is calculated by summing up the value of the transactions undertaken with all affiliated parties, excluding VAT.

Deadlines

Taxpayers with an annual transaction value of at least mil. MDL 20 (but less than mil. MDL 50):

• Transfer pricing information - to be presented no later than the 25th of the third month following the end of the tax period.
• Transfer pricing file - to be presented only upon request by the State Tax Service (“SFS”), within 60 days of the request.

Taxpayers with an annual transactions value of at least mil. MDL 50:

• Transfer pricing information - to be presented no later than the 25th of the third month following the end of the tax period.
• Transfer pricing file - to be prepared and submitted within 6 months from the end of the tax period (mandatory annual preparation and presentation).

Penalties

• MDL 30,000 – MDL 50,000 – for the late submission of the transfer pricing information and of the transfer pricing file;
• MDL 150,000 – MDL 200,000 – for submitting unauthentic information on transfer prices that led to the reduction or avoidance of tax obligations, or for submitting a transfer pricing file with unauthentic information;
• MDL 300,000 – MDL 500,000 – for non-submission of transfer pricing information or for non-submission of the transfer pricing file.

Introduction of secondary legislation on implementation of transfer pricing rules

(Order of the Ministry of Finance No. 9 of 26 January 2024 on the approval of the rules for the implementation of the transfer pricing, published in the Official Gazette No. 61-63 of 9 February 2024)

On 9 February 2024, the Ministry of Finance published the Order no. 9 of 26 January 2024, on the approval of the rules for the implementation of the transfer pricing (hereinafter referred to as the “Order”).

The main regulations approved by this Order are the following:

• Outlines procedures for establishing, applying, and verifying the transfer prices, in accordance with the arm’s length principle, that are applicable to legal entities and branches in the Republic of Moldova.
• The methodology for performing a comparability analysis, the transfer pricing setting and testing methods (the comparable uncontrolled prices method; the resale price method; the cost-plus method; the transactional net margin method; the profit split method and any other method recognized under the OECD Transfer Pricing Guidelines) as well as the determination of the market range (introducing the concept of interquartile range).
• The content of the (local) Transfer Pricing File, as well as the template and instructions for completing the Transfer Pricing Information to be prepared and submitted to the SFS.
• Voluntary adjustments of the transfer prices that can be undertaken if these will not result in a decrease in the income tax declared. Also, such adjustments are not allowed if a tax inspection on transfer pricing has been initiated at one of the parties to the transaction.
• The compliance with the arm’s length principle in controlled transactions will be verified through a preliminary check, as well as a tax audit conducted by the SFS. The Order details procedural aspects to be considered during these checks.

Upon identifying discrepancies following the preliminary check, the taxpayer has the right to voluntarily adjust transfer prices related to the controlled transactions examined. Should this not be the case, and the taxpayer does not voluntarily adjust transfer prices for the verified controlled transactions, the SFS will initiate a tax audit according to the general rules set by the Moldovan Tax Code. Transfer pricing adjustments determined by the SFS further to a tax audit are made at the median value of the comparable prices range.

• Moreover, it has been established that taxpayers who have transactions with affiliated parties, with a total value not exceeding MDL 1,000,000 during a tax period (calculated by summing the value of transactions conducted with all affiliated parties, excluding VAT), will not be subject to checks on compliance with the arm’s length principle.

The Order entered into force on 9 February 2024 (when it was published in the Official Gazette), while the transfer pricing rules introduced in Moldova apply starting with 1 January 2024.