ORDER OF THE GOVERNMENT OF THE REPUBLIC OF MOLDOVA

of March 14, 2007 No. 289

About approval of the Regulations on accounting treatment and depreciations of fixed assets for the purpose of the taxation

For the purpose of accomplishment of provisions of part (10) Article 26 and parts (16) and (17) article 26-1 of the Tax Code No. 1163-XIII of April 24, 1997 (repeated publication: The official monitor of the Republic of Moldova, 2005, special release), with subsequent changes and amendments, DECIDES: the Government

Approve Regulations on accounting treatment and depreciations of fixed assets for the purpose of the taxation it (is applied).

Approved by the Order of the Government of the Republic of Moldova of March 14, 2007 No. 289

Regulations on accounting treatment and depreciations of fixed assets for the purpose of the taxation

Chapter I. This provision purpose

1. The purpose of this provision consists in the description of accounting treatment and calculation of fixed asset depreciation for the purpose of the taxation, procedure for determination of deductible repair expenses of these means, and also calculation of tax result in case of their disposal.

Chapter II. Scope of application

2. Action of this provision extends on all legal entities and physical person which are engaged in business activity and registered according to the legislation of the Republic of Moldova.

Chapter III. Depreciation subject

3. The property on which depreciation is charged is the corporeal property reflected in balance of the taxpayer according to the legislation and used in business activity which cost presumably decreases in process of physical and obsolescence which term of use is more than one year, and cost exceeds the sum determined by provisions of the Tax code.

The fixed assets received in the form of fee in the authorized capital and used in business activity are depreciation subject.

Property on which depreciation is charged also investments into the fixed assets specified in part are recognized (3) Article 26 and part (3) article 26-1 of the Tax Code.

Calculation and deduction of fixed asset depreciation, being the subject of the agreement of leasing, are performed by the leasing recipient in case of financial leasing and the lessor – in case of operational leasing.

Depreciation on the parcels of land, the productive and working cattle (except working horses, sentry dogs), the library stock, long-term plantings which did not enter fructification time is not charged; fixed assets which are not used in business activity, construction in progress.

The deduction of fixed asset depreciation, received gratuitously is not allowed, except cases when their cost is included in the leviable income of the taxpayer.

In case of partial financing of acquisition of fixed assets and/or creation by own forces from the sources constituting the free income, depreciation is charged on the part suffered by the company.

The amount of the subsidies received as a result of implementation of investments by acquisition of fixed assets at the expense of own means does not influence the extent of cost basis of fixed assets.

3-1. The business entities who received resident status of the information and technological park within tax year have no right to deduction for tax purposes of depreciation expenses of fixed assets in the corresponding tax year.

Chapter IV. Fixed asset accounting

4. For depreciation according to articles 26 and 27 of the Tax Code all fixed assets are classified by five property categories.

Property categories by which fixed assets for tax purposes are classified are applied only to realization of provisions st.st.26-27 the Tax code, the Order of the Government No. 338 of March 21, 2003 "About approval of the Catalogue of fixed assets and intangible assets", and also this provision.

Since 2004 reference of property to property categories is performed according to the Catalogue of fixed assets and intangible assets approved by the Order of the Government No. 338 of March 21, 2003.

On the property representing investments into the fixed assets which are the subject of the agreement of operational leasing, property hiring, concession and lease, the depreciation is performed according to the procedure, provided for property category to which the corresponding fixed assets belong.

4-1. Fixed asset accounting for the purpose of the taxation according to article 261 of the Tax Code is kept on each object separately

Chapter V. Depreciation method of fixed assets for the purpose of the taxation

Section 1. Calculation of depreciation according to articles 26 and 27 of the Tax Code"

5. According to part (5) the size of fixed asset depreciation which is deductible is determined by Art. 26 of the Tax code by multiplication of cost basis of the fixed assets by the end of the reporting period belonging to any property category by the corresponding norm of depreciation:

where Uf - charged depreciation for the purpose of the taxation;

Bf - cost basis of fixed assets by the end of the reporting period;

Nu - depreciation rate of the corresponding property category.

For the property belonging to the I category, the size of fixed asset depreciation which is deductible is determined by each object separately, and for the property belonging to the II-V categories, depreciation is determined proceeding from cost basis by the end of the reporting period of the corresponding category.

Example 1. The cost basis of the machine for the beginning of the accounting period makes 10 000 lei and belongs to the V property category on which the depreciation rate is equal to 30%.

For calculation of fixed asset depreciation for the purpose of the taxation the sheet of fixed asset accounting on property categories and their depreciation for the purpose of the taxation is filled in:

Table 1

                                                       (in lei)

5-1. To business entities at whom according to the legislation on information and technological parks the resident status of the information and technological park, for application of the tax regime set in the Section II of the Tax code is withdrawn the entrance cost of fixed assets on each property category equals, for tax purposes, book value of these assets at the beginning of the month following after month in which the resident status of the information and technological park is withdrawn.

6. The cost basis of fixed assets is by the end of the reporting period determined as the cost basis of fixed assets for the beginning of the accounting period increased by cost of the fixed assets which are again acquired and/or created by own efforts and on the amount of adjustments and the corrected cost basis of the fixed assets alienated in case of donation, voluntary conveyance reduced on reduced by the corrected cost basis of the fixed assets alienated in case of forced disposal or write-off of nedoamortizirovanny object.

The amount of adjustments which belongs on increase in cost basis of fixed assets of the corresponding property category consists from:

a) the amounts of exceeding of the expenses incurred within tax year on repair of property over the regulation established in parts (8) and (9) Art. 27 of the Tax code from cost basis of the corresponding property category for the beginning of the accounting period;

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