ORDER OF THE GOVERNMENT OF THE REPUBLIC OF MOLDOVA

of January 30, 2008 No. 77

About approval of some provisions

List of amending documents

For the purpose of accomplishment of provisions of Art. 15-1 of the Section II of the Tax code No. 1163-XIII of April 24, 1997 (repeated publication: The official monitor of the Republic of Moldova, 2007, special release), with subsequent changes and amendments, DECIDES: the Government

1. Approve:

Regulations on determination of the tax liabilities on the income tax according to appendix No. 1;

Regulations on calculation of the tax liabilities on the income tax of the physical persons who are not engaged in business activity according to appendix No. 2;

Regulations on income tax withholding at payment source from other payments other than the salary, according to appendix No. 3.

2. To the Ministry of Finance in 2-month time to bring the regulations into accord with this resolution.

Prime Minister

Vasile Tarlev

Countersign: Minister of Finance

Mihail Pop

Minister of Economy and Trade

Igor Dodon

Appendix №1

to the Order of the Government of the Republic of Moldova of January 30, 2008 No. 77

Regulations on determination of the tax liabilities on the income tax

Chapter I. General provisions

1. The purpose of the Regulations on determination of the tax liabilities on the income tax (further - the Provision) consists in regulation of procedure of payments and payment of the income tax, accounting principles, konstatirovaniye of the taxable incomes and deductible expenses, procedure for submission of the declaration on the income tax, terms and payment procedure of the income tax according to provisions of the Tax code No. 1163-XIII of April 24, 1997 (further - the Code) (repeated publication: The official monitor of the Republic of Moldova, 2007, special release) and the Law on enforcement of Sections I and II of the Tax code No. 1164-XIII of April 24, 1997 (further - the Law) (repeated publication: Official monitor of the Republic of Moldova, 2007, special release).

2. Subjects of taxation by the income tax are stipulated in Clause the 13th code.

3. The income tax is determined according to the rates provided by the Code.

4. The structure of taxable tax, and also income sources, not taxable, are regulated by Code provisions.

Chapter II. Taxation object

5. The taxation object is the gross income gained by legal entities and physical persons from all sources which are in the Republic of Moldova and also income gained from any sources which are outside the Republic of Moldova minus deductions and releases to which these persons have the right.

6. For determination of the taxation object the financial result received by person who is engaged in business activity, and determined according to requirements of national accounting standards (further - NSBU) or International accounting standards (further - IFRS), is adjusted (increases, decreases) by the amounts relating to certain income types and expenses which taking into account provisions of the Code are determined according to the rules approved by it.

For determination of the taxation object the financial result is adjusted on the amount of adjustments according to the income and on expenses.

Chapter III. Surplus and losses of the capital

7. Surplus amounts or losses of the capital are recognized in case of realization, exchange or other form of disposal (alienation) of capital assets.

Disposal of capital assets assumes transition of the property right to capital assets from one person to another.

The redemption of capital assets after the term of their repayment (the documents testimonial of receivables availability) is not considered as the transaction connected with disposal of capital assets from which the surplus or losses of the capital result. The difference between the acquisition value of capital assets and their nominal value paid in case of the redemption is reflected in proportion during the period of ownership of assets:

a) as a part of gross income - if acquisition value of capital assets is lower than their nominal value;

b) as a part of deductions according to article 25 of the Code - if acquisition value of capital assets is higher than their nominal value.

8. The structure of capital assets is regulated by Code provisions.

9. The size of the capital gain received as a result of realization, exchange or other form of disposal of capital assets is equal to excess of the received amount over cost basis of these assets.

10. The size of the losses of the capital suffered as a result of realization, exchange or other form of disposal of capital assets is equal to excess of cost basis of these assets over the gained income.

11. The amount received from realization, exchange or other form of disposal of capital assets is equal to the cash amount and cost estimated at the market price the capital assets received in non-cash form (h (4) to Art. 37 of the Code).

12. The cost basis of capital assets represents acquisition value of capital assets, and also the expenses connected with their acquisition (broker komissiona, bank komissiona, taxes, stipulated by the legislation, the cost of consulting services, etc.).

The cost basis of capital assets is adjusted on the positive difference received as a result of the revaluation which is carried out according to Chapter IV of the Law No. 1164-XIII of April 24, 1997 on enforcement of Sections I and II of the Tax code.

13. The cost basis of the capital assets which are not exposed to depreciation and being in ownership of the taxpayer as of January 1, 1998 shall not be lower than their cost for this date or market value of identical objects.

14. In case of determination of result from alienation of capital assets (surplus or losses of the capital) by means of the performed exchange the received amount is equal to the cash amount estimated at the market price capital asset values, received in non-cash form.

15. The capital surplus amount in tax year which is included the taxable income is equal to 50 percent of the amount exceeding acknowledged capital gain over any its losses suffered within tax year.

16. The losses of the capital suffered by the taxpayer for tax year are subtracted within capital gain. Losses of the capital which deduction is not resolved in the corresponding tax year (which exceed capital gain), are considered as the losses of the capital suffered next tax year.

Chapter IV. The special rules relating to determination of the income

Section 1. Assessment of the gross income gained in non-cash form

17. Income gained in non-cash form is estimated by each subject of the taxation and constitutes average price of delivery of goods and/or rendering similar services in the month preceding month in which income in non-cash form was gained. If in the month preceding month in which income in non-cash form was gained deliveries of goods were not performed and/or services were not rendered, income gained in non-cash form cannot be less cost of the goods and/or services delivered and/or rendered for current month.

Section 2. Determination of the tax liabilities in case of implementation of foreign currency transactions

18. The amount of gross income, other receipts, and also the incured costs expressed in foreign currency is recalculated in national currency on the official rate of Moldovan leu operating for transaction date.

19. Transaction date the date reflected in the account statement in bank, and in other cases date, specified in the source document is considered. In case of shipment of goods the date specified in accompanying documents of the supplier which shall match with date of transfer of their transport organization or with the date of receipt by the representative of the buyer irrespective of the period in which it was reflected in financial accounting of contracting parties is considered date of transaction. Date of transmission of transport organization of goods is considered their transition to property of the buyer and date of transaction (item 6 of the Regulations on procedure for the calculation of the tax liabilities when implementing foreign currency transactions approved by the Order of the Government No. 488 of May 4, 1998) (The official monitor of the Republic of Moldova, 1998, Art. No. No. 62-65, 599).

20. Any debt both the taxpayer, and to the taxpayer whose amount is expressed in foreign currency it is recalculated on the official rate of Moldovan leu established the last day of tax year.

21. Any debt or loss as a result of recalculation of debt according to Item 20 of this provision are considered as income gained or the loss formed in the last day of tax year.

Proceeding from provisions of accounting standards, the debit debts / duties expressed in foreign currency shall be estimated by the taxpayer - for date of creation of the balance sheet.

22. The evaluation procedure of results from implementation of foreign currency transactions for calculation of the tax liabilities is determined according to the Order of the Government No. 488 of May 4, 1998 "About approval of the Regulations on procedure for calculation of the tax liabilities when implementing foreign currency transactions" (The official monitor of the Republic of Moldova, 1998, Art. No. No. 62-65, 599), with subsequent changes and amendments.

Section 3. Non-recognition of the income in case of forced property exchange

23. The income in case of property exchange on property of the same type in case of forced loss is not recognized.

Provisions of this Item belong to cases when as a result of complete or partial loss of property the taxpayer received compensation: or in the form of insurance indemnity from insurance company in cases when this property was insured, or against other persons guilty of loss of property, or against realization of useful waste.

The income is not recognized to the taxation if the received compensation is reinvested on acquisition or construction of other property of the same type or in case of partial loss of property is invested on repair of partially damaged property during the period permitted for replacement.

If the amount directed to replacement of other similar property (repair of the damaged property) is less than amount of the received compensation, this difference is stated as the taxable income that year in which there was property exchange (repair of the damaged property).

In case the taxpayer decided not to replace the lost property with another with it similar (repair of the damaged property) and at the same time received compensation, this amount is included gross income and is assessed with the income tax in generally established procedure in the first tax year or in year of receipt of compensation, - if these periods do not match.

24. The property is considered by force lost if it is fully or partially destroyed, stolen if it it is seized or it is intended to demolition or if the taxpayer is forced to leave otherwise it because of threat or inevitability of one of the above-stated actions or events.

25. The replacement property is considered as similar if it has the same properties or the nature, as the replaced property (irrespective of whether it is property of the same level or quality).

26. The period of replacement is the period which is coming to an end in the tax year following after year in which there was loss.

27. In case of non-recognition of the income the cost basis of replacement property is considered the corrected cost basis of the replaced property.

Section 4. Accounting of compensated deductions

28. In case of compensation to the taxpayer within tax year of earlier subtracted expenses, losses or bad debts the compensated amount is considered and joins in its gross income that year in which it was received.

Section 5. Determination of the income when implementing donations (provision of Art. 42 of the Code)

29. Person who presented any gift (including to the organizations specified in Art. 36 of the Code), is considered as person who sold the property presented to them at the price which is the largest size from its corrected cost basis and its market value at the time of donation.

30. Donation can be performed in the form of transfer:

fixed assets;

capital assets;

other current assets (finished goods, materials, goods, money, etc.).

31. Income gained as a result of implementation of donations and taxable is determined depending on category of the presented assets:

a) for fixed assets and capital assets - as difference between market value at the time of donation and the size of their corrected cost basis.

The corrected cost basis of fixed assets when implementing donations is determined according to the procedure, provided in item 88 of the Catalogue of fixed assets and intangible assets approved by the Order of the Government No. 338 of March 21, 2003 (The official monitor of the Republic of Moldova, 2003, Art. No. No. 62-66, 379), with subsequent changes and amendments;

b) for current tangible assets - as difference between market price of these assets and the incured costs (expenses) connected with acquisition or production of these assets.

32. When implementing donations in the form of money the corresponding amount is not allowed to deduction and shall be corrected if these expenses were reflected as current expenses of the company according to provisions NSBU or IFRS.

33. If donation of money is performed for the income account after the taxation, the amount of the presented money is not included the taxable income and, respectively, is not assessed with the income tax.

Section 6. The basic rules in case of cancellation of the transaction

34. In case the transaction is cancelled and participants are brought to initial line item, the company which reflected the cost of the sold assets or cost of the rendered services on the income, shall perform adjustments of the income and expenses of the period in which transaction on the corresponding amount is performed.

Chapter V. Income sources, not taxable

35. The gross income of persons who are engaged in business activity in case of calculation of the taxable income does not join the following income types:

a) the insurance sums and compensations received according to insurance contracts and joint insurances except received in case of forced property exchange according to article 22 of the Code;

b) the income from non-paid receipt of property, including money, according to the decision of the Government or authorized bodies of local public authority;

c) investments in the capital of business entity, stipulated in Article 55 Codes;

d) income gained as a result of use of tax benefits on the income tax;

e) the amounts received by legal entities in compensation of the caused damage or/and the uncollected income in connection with carrying out archaeological researches on the parcels of land which are in property or in ownership of these persons;

f) the amounts received by legal entities in compensation of the damage caused to them as a result of illegal actions (failure to act) or owing to spontaneous or technogenic catastrophes, cataclysms, epidemics, epizooty;

g) the amounts received by owners or owners of the property confiscated for the benefit of society, for the period requisitions according to the legislation;

h) income gained from write-off of penalty fee and tax sanctions (debt in the national public budget);

i) income gained owing to compensation of material damage in part in which the provided compensation does not exceed the caused material damage;

j) the money received from special funds and used according to appointment of funds;

k) income gained by administration of the free enterprise zone;

l) the income of the diplomatic and other equated to them representative offices of the organizations of foreign states, the international organizations, stipulated in Article 54 Codes;

m) percentage charges on government securities till January 1, 2015;

n) prizes from advertizing campaigns in part in which the size of each prize does not exceed 10 percent of the indicator established in part (1) article 33 of the Code;

o) other income established as income sources, not taxable according to Code provisions.

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