ORDER OF THE GOVERNMENT OF THE REPUBLIC OF MOLDOVA

of July 11, 2018 No. 693

About determination of the tax liabilities on the income tax

For the purpose of accomplishment of provisions of Article 15-1, of parts (3), (19) and (21) Articles 36, Article 49 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, special release of February 8, 2007), with subsequent changes and amendments, DECIDES: the Government

1. Approve:

1) Regulations on determination of the tax liabilities on the income tax of the legal entities and physical persons performing business activity according to appendix No. 1;

2) Regulations on calculation of the tax liabilities on the income tax of physical resident persons of citizens of the Republic of Moldova according to appendix No. 2;

3) Regulations on the income tax of nonresidents according to appendix No. 3.

2. Recognize invalid some orders of the Government according to appendix No. 4.

Appendix No. 1

to the Order of the Government of the Republic of Moldova of July 11, 2018 No. 693

Regulations on determination of the tax liabilities on the income tax of the legal entities and physical persons performing business activity

Chapter I. General provisions

1. The purpose of the Regulations on determination of the tax liabilities on the income tax of the legal entities and physical persons performing business activity (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, according to provisions of the Tax code No. 1163-XIII of April 24, 1997 (repeated publication: The official monitor of the Republic of Moldova, special release of February 8, 2007), with subsequent changes and amendments, (further – the Code) and the Law No. 1164-XIII of April 24, 1997 on enforcement of Sections I and II Tax (repeated publication: The official monitor of the Republic of Moldova, special release of February 8, 2007), with subsequent changes and amendments.

2. Subjects of the taxation are provided in article 13 of the Code.

3. The taxation object is established in article 14 of the Code.

4. The taxation object on the prizes and the income relating to final tax withholding from some income types (specified in article 90-1 of the Code), is only this prize and/or the income.

5. In case of calculation of the taxable income the gross income of the legal entities and physical persons performing business activity does not join income types, specified as free of the Code and the Law No. 1164-XIII of April 24, 1997 on enforcement of Sections I and II of the Tax code.

6. The sizes of the income tax rates for the corresponding tax period are established in article 15 of the Code.

7. This Provision in the part relating to deductions of costs for provision of private grants is applied also to the persons performing professional activity in the sphere of justice and in health sector (specified in Chapter 10-1 of the Section II of the Code).

Chapter II. Rules of accounting

8. Rules of ascertaining of the income and expenses, and also their accounting are established in articles 44 and 45 of the Code.

9. The subjects of the taxation provided by this Provision determine the tax liabilities by the income tax according to accrual method and cash method, as necessary.

Chapter III. Taxable income

10. For determination of the taxable income, the financial result received by person who is engaged in business activity, and determined according to requirements of the National accounting standards approved by the Order of the Ministry of Finance No. 118/2013 or International accounting standards is adjusted (increases, decreases) by the amounts relating to certain income types and expenses which, taking into account Code provisions, are determined according to the rules approved by it.

11. 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 in the income, shall perform adjustments of the income and expenses of the period in which transaction on the corresponding amount is made.

12. For application of Chapter 6 of the Section II of the Code:

1) the income is recognized earned if products are sold, works are performed, services are provided, etc., that is the actions connected with income acquisition were performed.

The amount of the advance payments received on account of the subsequent sales of products, goods, works, services is not reflected as a part of the income;

2) the percent of performance of works reflects part of the executed contract for the end of tax year and is determined as the relation of expense amount, actually suffered in connection with implementation of the agreement for the end of tax year, to the total amount of the expenses provided in the estimate;

3) the gross income estimated from percent of performance of works in tax period is determined by the following formula:

SVf = (Pi x Ct) – SVp,

where:

SVf – the amount of gross income determined according to method of determination of percent of accomplishment in tax year;

Pi – percent of accomplishment, %;

Ct – total cost of the agreement;

SVp – income amount, the determination of percent of accomplishment reflected in the previous tax periods according to method;

4) upon completion of agreement performance (agreement) distribution of tax on tax years according to method of determination of percent of accomplishment is recalculated taking into account the actual indicators. This provision is applied to all long-term agreements (agreements) in case of submission of the tax declaration for year of completion of the agreement (agreement), but not earlier than.

Chapter IV. Special rules of determination of the taxable income

Section 1. Rules of non-recognition of the income in case of forced loss of property

13. Part provisions (1) article 22 of the Code treat cases when as a result of complete or partial loss of property the taxpayer received compensation: 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 utilizable waste.

14. 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.

15. 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).

16. 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.

17. In case of non-recognition of the income the cost basis of replacement property is considered the corrected cost basis of the replaced property increased by expense amount, suffered on acquisition of property which is not covered from income gained in case of forced loss.

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