Significant changes within the tax legislation

Law no. 214 of 31 July 2024 on the amendment of certain normative acts, published in the Official Gazette no. 355-356 of 15 August 2024.

The main amendments made to the tax legislation by this Law are the following:

AMENDMENTS THAT WILL ENTER INTO FORCE STARTING 01 JANUARY 2025:

I. Corporate income tax

• The gifts in kind, including vouchers, granted to employees will be deductible up to a 10% limit of the average monthly salary per the economy forecasted by the Government for the respective year, regardless of the occasion for which they are granted.

• For certain types of expenses related to employees trainings and team-building activities, a deductible cap of 5% per annum has been established. This cap is calculated based on the difference between the total payroll for the entity, as determined for either the previous year or the current year, and the payroll amount for individuals in minor groups 112 and 121 of the Classification of Occupations in the Republic of Moldova for the same year.

• The 5% cap on the payroll amount that could be used to deduct expenses for compensating employees for the cost of alternative childcare services for their children under the age of 3 has been removed.

• For the following types of expenses to be qualified as taxable fringe benefits provided by the employer, the related deduction limits established for corporate income tax purposes should be applied:
  
  • gifts in kind, including vouchers;
    
    
  • certain expenses with employees trainings, as well as teambuilding related activities;
    
    
  • subscriptions for the use of sports facilities in order to practice sports and physical education for maintenance, prophylactic or therapeutic purposes;
    
    
  • contracting medical services;
    
    
  • optional health insurance premiums;
    
    
  • costs for alternative childcare services for children up to 3 years of age.
• All business entities will be eligible to apply the accelerated depreciation method for the first year of operation of a fixed asset, with the exception of those engaged in financial activities or insurance/reinsurance, as defined in Section K of the Classification of Activities in the Republic of Moldova.

• Deductions for losses incurred from the sale or exchange of property, execution of works, and provision of services conducted directly or indirectly between related persons will be permitted if the arm's length principle was applied in establishing the transaction prices.

• The threshold for a debt qualified as a bad debt due to an expired statute of limitations has been raised from 1,000 lei to 2,000 lei, and it will be deductible for tax purposes.

• The tax exemptions granted to individuals have been increased as follows:
  • the personal exemption – 29,700 lei annually;
    
    
  • the exemption for dependants – 9,900 lei annually;
    
    
  • the increased personal exemption – 34,620 lei annually.
• It has been clarified that the employer will not have the obligation to monitor the loss of the employee's right to use the personal tax exemption.

• For the purpose of applying the income tax, the mandate relationships between the legal entity and its administrator will be recognized as employment relationships and will be taxed similarly to a salary.

• The concept of ‘Primary residence,’ used in applying the personal income tax exemption, has been amended so that the property will still qualify as a ‘Primary residence’ even if the taxpayer’s domicile/residence was cancelled no more than 90 days prior to the date of its disposal.

• There was introduced a long-term incentive program known as the Stock-option plan, granting employees and/or administrators of the legal entity the right to purchase at a preferential price or to receive free of charge a certain number of participation shares (quotas) issued by the respective legal entity. Generally, the Stock-option plan has the following main characteristics:
  • participants in the program may acquire or receive free of charge participation shares no more than 25% of the share capital, in relation to all participants in the program;
    
    
  • the program must include a minimum period of 3 years between the moment the right is granted and the moment it is exercised (the acquisition/receipt of the shares or participation shares (quotas);
    
    
  • the rights granted under the Stock-option plan, at the granting moment, will be considered non-taxable income;
    
    
  • expenses incurred by the legal entity for the purpose of redeeming/cancelling options under the Stock-option plan will not be allowed for deductions;
    
    
  • capital gain or loss from transactions under the Stock-option plan will be determined as the difference between the selling price of the shares or participation shares (quotas) and their value base.
• Income earned by non-residents from private individuals not engaged in business activities, arising from lease, rental, sublease, subrental, superficies, or usufruct agreements involving the following types of property, will be subject to a 12% income tax on the monthly value of the contract:
  • real estate located on the territory of the Republic of Moldova;
    
    
  • maritime vessels, aircraft, rail/road transport vehicles, including those operated in international traffic, as well as movable properties related to their operation.

Non-residents are required to register the respective contract with the State Tax Service within 7 days from the date the contract is concluded.

II. Value added tax

• There was introduced the obligation to use electronic tax invoices (e-invoices) for the supply of goods/services (except for the supply of electricity, thermal energy, natural gas, electronic communication services, and utility services):
  • to business entities that do not have fiscal relationships with the budgetary system of the Republic of Moldova;
    
    
  • for the services related to implementing technical assistance and investment projects.
• VAT related to the procurement of goods and services used for the settlement of additional costs or revenues resulting from the balancing of the system according to the rules established by the relevant legislation, will be allowed for deduction similar to taxable supplies.

III. Excise duties

• The excise duty rate has been increased for the following goods:
  • tobacco refills, reconstituted tobacco refills, or tobacco substitute refills for tobacco heating devices at 1,384.55 lei;
    
    
  • cartridges/tanks for electronic cigarettes, including disposable electronic cigarettes at 3,094.50 lei;
    
    
  • refill bottles containing nicotine for use in cartridges and electronic cigarettes at 3,094.50 lei.

IV. Wealth tax

• The value of the property subject to the wealth tax has been increased to the equivalent of at least 200 average monthly salaries forecasted and approved by the Government for the respective year, replacing the previous threshold of 2 million lei.

V. Tax administration

• The threshold for the tax obligation that can be contested within the Dispute Resolution Council has been increased as follows:
  • for legal entities to 335,000 lei;
    
    
  • for individuals to 170,000 lei.
• The period during which amended tax returns can be filed has been limited to 6 years from the deadline for filing the initial tax return (except for those concerning mandatory state social security contributions).

• The fine for failing to issue a fiscal invoice within the deadlines required by legislation will be applied to VAT taxpayers only.

VI. Local taxes

• Taxpayers will be required to pay and report local taxes on a semi-annual basis, with the deadline being the 25th of the month following the end of the reporting semester, compared with the current requirement of quarterly payment and reporting.

AMENDMENTS THAT WILL ENTER INTO FORCE STARTING 01 JANUARY 2026:

The provision conditioning the deduction of VAT for goods and services purchased from suppliers included in the list of taxpayers required to use electronic tax invoices (e-invoice) has been repealed.

This update is accurate to the best of our knowledge at the time of issue.  It is, however, meant as a general guide and comes with the recommendation that professional advice be sought before any action is taken.