Important amendments made to the legislation regarding transfer pricing of the Republic of Moldova

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

The main amendments related to transfer pricing made by this Law are the following:

AMENDMENTS THAT ENTERED INTO FORCE STARTING 01 JANUARY 2024:

• The concept of a 'Local transaction' has been revised.  Thus, local transactions that fall under the transfer pricing documentation requirements were limited to those transactions carried out between resident taxpayers in the Republic of Moldova, where one or both taxpayers are residents of free economic zones/IT parks or apply different tax rates and/or have a different taxable base for corporate income tax purpose. This change is relevant in determining the transfer pricing documentation requirements.

• The concept of „Transaction" has been revised, so that it includes any sale, purchase, provision and receipt of service, assignment, leasing, credit, loan or any other transfer of any interest or the right to use any tangible and intangible property.

• It has been clarified that, for the purpose of establishing thresholds and documenting transactions in order to prepare and file the Information and/or the Transfer pricing file:
  
  • the total value of the transactions represents the revenues and/or expenses recognized according to the statutory books arising from transactions performed with all related parties;
    
    
  • FX differences and revaluation of assets and liabilities reflected in the statutory books as a result of transactions performed with related parties are not considered, except for foreign exchange transactions.
• The deadline for preparation and filing of the Transfer pricing documentation applicable to taxpayers undertaking intercompany transactions above the lei 50 mil. threshold, which is set to 6 months following the end of the financial year, has been introduced also in the Tax Code.

• The restriction regarding voluntary adjustments of the revenues and/or expenses in cases where these would lead to a decrease in the Corporate income tax declared to the state budget has been eliminated.

AMENDMENTS THAT ENTERED INTO FORCE STARTING 15 AUGUST 2024:

• The fine for failure to file the Transfer pricing information has been reduced to an amount ranging from 100,000 lei to 150,000 lei, which may be applied during tax audits initiated by the State Tax Service for fiscal periods starting in 2024.

• We mention that the fines established for the late filing of the Transfer pricing information, as well as those for the late filing or failure to file the Transfer pricing file were not modified; these can be applied during tax audits initiated by the State Fiscal Service for fiscal periods starting 2024.

AMENDMENTS THAT WILL ENTER INTO FORCE STARTING 01 JANUARY 2025:

• The concept of "Advance Pricing Agreement" has been introduced, which represents a decision issued by the State Tax Service, that establishes and justifies the conditions and methods for determining transfer prices over a specified period for controlled transaction / transactions performed between related parties. The Advance Pricing Agreement has inter alia the following main particularities:
  
  • it can be concluded unilaterally (issued by the State Tax Service), as well as bilaterally/multilaterally (issued by the State Tax Service and the competent foreign authorities of the states in whose jurisdiction the related parties of the applicant are located);
    
    
  • the bilateral/multilateral Advance Pricing Agreement can only be issued if there is a double taxation treaty concluded between the state of the non-resident related person and the Republic of Moldova;
    
    
  • it can be issued for ongoing or future controlled transactions and cannot exceed 5 fiscal periods, including the fiscal period in which the request is filed;
    
    
  • it can also be issued for controlled transactions that have been completed in the last two fiscal periods, not covering the fiscal period in which the request is filed;
    
    
  • the taxpayer concluding an Advance Pricing Agreement will be required to prepare and file an annual report on the compliance and execution of the Advance Pricing Agreement for each fiscal period covered by it, that must be filed by the deadline established for the corporate income tax return filing;
    
    
  • the fee for issuing/amending the Advance Pricing Agreement will be as follows:
    
    • in case of unilateral Advance Pricing Agreements - 30,000 lei per transaction, and
      
      
    • in case of bilateral/multilateral Advance Pricing Agreements - 50,000 lei per transaction.
• The amount and applicability of the following fines has been amended as follows:
  
  • a fine ranging from 60,000 lei to 90,000 lei will be applied for filing the transfer pricing Information form with untruthful information that resulted in the understatement or evasion of tax obligations;
    
    
  • a fine ranging from 150,000 lei to 200,000 lei will be applied for filing the Transfer Pricing File with untruthful information that resulted in the understatement or evasion of tax obligations;
    
    
  • these fines can be imposed during tax audits initiated by the State Tax Service for fiscal periods starting with 2028.

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.