Approved by the Ministry of Finance of the Republic of Moldova of November 26, 1993 No. 8-02

The instruction about procedure for calculation and payment in the budget of tax on the income from insurance activity

This instruction is published based on the Law of the Republic of Moldova "About bases of the taxation system" of November 17, 1992, the Law "About the State Tax Service" of January 22, 1992 and the Presidential decree of the Republic of Moldova of October 18, 1993 N 168 "About the taxation of the income from insurance activity".

According to the above-named Decree the taxation objects is the income from insurance activity reduced by expense amount, provided in connection therewith by the Decree, received both in the territory of the Republic of Moldova, and beyond its limits.

The procedure for the taxation of the income from insurance activity becomes effective since November 1, 1993.

I. TAXPAYERS

1. Taxpayers on the income from insurance activity are the following legal entities:

a) the companies, the organizations (including the companies with foreign investments) (further "companies") which received in the State insurance supervision under the Ministry of Finance the license for the right to be engaged in insurance activity;

b) the insurance companies formed according to legislations of foreign states which through the permanent missions perform in accordance with the established procedure insurance activity in the Republic of Moldova.

II. DETERMINATION OF THE INCOME

2. The income of the company represents revenue amount from performance of works and services, realization of material values and results from non-operating transactions less tax amounts on value added on the turnovers assessed by this tax.

III. CALCULATION OF THE TAXABLE INCOME

3. The taxable income is determined as the income of the company reduced by cost amount (without expenses on compensation), included in job cost and the services provided in "Basic provisions on structure of production costs and sales of products (works and services) included in cost, and about procedure for forming of financial results of the companies", approved by the Order of the Government of the Republic of Moldova of June 2, 1993 N 340.

4. Join in structure of the income considered in case of determination of the taxable income:

a) insurance payments (insurance premiums) according to the signed insurance contracts and reinsurance;

b) commission fees on reinsurance;

c) share of overcautious persons in the paid insurance sums and insurance indemnities;

d) amounts of return of special insurance reserves of previous period;

e) other income connected with insurance activity including investment incomes and placements of temporarily available funds on accounts in banks;

f) income from property leasing, realization of inventory items, and also non-operating incomes from other types of activity.

5. Join in structure of the expenses considered in case of determination of the taxable income:

a) payments of insurance indemnity and insurance sums;

b) assignments on precautionary actions;

c) contributions to the special insurance funds and reserves formed on percent which is provided in structure of the tariff charge approved with the State insurance supervision;

d) the commission fees paid to intermediaries (insurance agents, insurance brokers) in transactions of insurance and reinsurance;

e) insurance payments (awards) transferred to reinsurance;

f) return to overcautious persons of their share of special insurance reserves of previous year;

g) the sums granted on Social fund of the Republic of Moldova;

h) the amounts of the property tax of insurance company which is payable in the budget;

i) the depreciation charges on complete recovery of fixed assets added during the taxable period on the approved regulations;

j) the amounts of depreciation of intangible assets added on regulations of the taxpayer proceeding from original cost and term of their useful use, but no more than the term of activities of insurance company.

The regulation of depreciation of intangible assets which useful life cannot be determined is established per 10 years (this term shall not exceed the term of activities of insurance company);

j) expenses on lease of fixed assets and intangible assets in the amount of the rent amount;

l) the expenses connected with management of production including traveling expenses according to the standard rates established by the Government (except expenses on compensation);

m) the costs connected with preparation and retraining of personnel, advertizing, entertainment expenses within the standard rates established by the Government;

n) costs for interest payment on short-term loans of banks, except costs for interest payment according to overdue and delayed loans of banks;

o) the payments and costs provided "By basic provisions on structure of production costs and sales of products (works and services) included in its cost, and about procedure for forming of financial results of the companies", approved by the Order of the Government of June 2, 1993 N 340, except for of expenses on compensation.

6. In case of cost determination and financial results of insurance enterprise it is necessary to be guided "By basic provisions on structure of production costs and sales of products (works, services) included in its cost, and about procedure for forming of financial results of the companies", the approved by the Order of the Government of June 2, 1993 N 340, and also industry instructions for the cost accounting, calculation of cost of insurance services and financial results of insurance companies and the organizations approved with the Ministry of Finance, the Ministry of Economics and State Department according to the statistics of the Republic of Moldova.

The income from realization and other fixed asset retirement is determined as difference between proceeds from sales of fixed assets, including the cost of material values, by the prices of possible use, the disposed fixed assets which arrived in connection with write-off of property, and residual cost.

The income from realization of other assets is determined as difference between proceeds from sales of the intangible assets, materials and other values relating to current assets, currency means, securities and other financial investments and their book value (minus the added depreciation by intangible assets and the invaluable and fast-wearing-out objects).

The proceeds from sales of works and services are considered in process of receipt of money for the bank account (cash desk) of the company.

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