LETTER OF THE MAIN STATE TAX AUTHORITIES

of April 17, 1997 No. 10-22-03/8

About procedure for calculation and payment in the budget of the income tax of the companies

The main state tax authorities direct you the specifying N 10-22-03/8 of 17.04.97 about procedure for calculation and payment to the budget of the income tax of the companies.

It is necessary to be guided by these instructions in case of control of correctness of calculation of the income tax of the companies for 1996 and the first quarter 1997.

Due to the arriving Requests and need of promoting of procedure for the taxation of profit (income) of legal entities the Main state tax authorities report the following.

Now the taxation of profit (income) of legal entities is conducted according to the following legislative and regulations of the Republic of Moldova: The law on bases of the taxation system N 1198-XII of November 17, 1992., the Law on the income tax of the N 1214-XII companies of December 2, 1992, the Resolution of Parliament on enforcement of the Law on the income tax of the companies of December 2, 1992, the Law to the State Tax Administration N 876-XII of January 22, 1992 and the Law on entrepreneurship and the N 845-XII companies of January 3, 1992 with subsequent changes and amendments, the Law on the government budget for 1996 N 686-XIII of December 14 1995, the orders of the Government accepted in pursuance of the Resolution of Parliament on enforcement of the Law on the income tax of the companies both others legislative and regulations which establish procedure for calculation and payment in the budget of tax not profit.

According to the Resolution of Parliament on enforcement of the Law on the income tax of the companies, this law is enacted since January 1, 1993. It is at the same time determined what with introduction of the specified law voids earlier existing regulations regulating the tax matters of profit (income).

According to the procedure, provided by this letter, the profit got both in the territory of the Republic of Moldova and beyond its limits, including countries of the Commonwealth of Independent States is assessed with tax.

Provisions of this letter do not extend on:

a) the banks and the companies gaining income from transactions with securities which pay tax according to other legal acts of the republic;

b) the companies with foreign investments and the foreign legal entities getting profit on activities in the Republic of Moldova and abroad;

c) individual farms and physical persons which entrepreneurial incomes are assessed with tax according to the Law "About the Income Tax from Physical Persons" N 1218-XII of December 3, 1992.

Procedure for calculation and payment in the budget the income tax and the income of the specified legal entities and physical persons are regulated by other regulations of the Ministry of finance.

I. Taxpayers

1. Income tax payers are:

a) all economic subjects located in the territory of the Republic of Moldova (state, cooperative, joint-stock, rent, collective, public and others - further the companies) irrespective of types of property and forms of business which are performing business activity having separate balance and who are legal entities;

c) agricultural enterprises of industrial type which list is approved by the order of the Government of May 17, 1993 N 266, agricultural research institutions and organizations (except for their experienced agricultural structural divisions keeping independent account), intereconomic district associations on biological and agrochemical servicing of agricultural industry, the intereconomic meliorative associations and the companies, other agro-industrial forming which are not making products of agricultural industry.

Agricultural enterprises, except for the companies of industrial type, do not pay the income tax from production and realization of the agricultural products, and also from the sales of products received as a result of industrial conversion of exclusively own raw materials by the structural divisions which are not constituting the separate balance sheet there can be shop on conversion of exclusively agricultural raw materials from own harvest.

c) the profit of agricultural enterprises got from excess of non-operating incomes over expenses and from nonagricultural activities including on realization of the industrial output received from to the be provided and purchased from other farms agricultural raw materials is assessed with tax in accordance with general practice. In case of determination of the amount of the taxable profit got from realization of industrial output from to the be provided and prepared from other farms agricultural raw materials it is necessary to proceed from specific weight of the raw materials which arrived in conversion for the accounting period, and on primary winemaking and canning produktsiiza year of its conversion.

2. According to article 21 of the Law on entrepreneurship and the companies the companies are granted the right to establish out of the location branches and representations with the right of opening of the subsettlement (current) account. Branches and representations are not legal entities and cannot be independent income tax payers.

II. Calculation of leviable profit

3. For calculation of the income tax the balance sheet profit of the company consisting of profit (loss) from sales of products (works, services), goods, fixed assets and other assets of the company and the income from the non-operating transactions reduced by expense amount on these transactions is accepted.

4. The profit (loss) from sales of products (works) is determined as difference between proceeds from sales of products (works, services) in current prices (without the value added tax and excises) and the costs for their production and realization included in cost.

In case of cost determination and financial results of the companies it is necessary to be guided by basic provisions on structure of production costs and sales of products (works, services) included in 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, with the subsequent changes and additions to it made by the orders of the Government of the Republic of Moldova of 20.04.94 N 148, of 09.06.94 N 405, of 28.12.94 N 953, of 26.07.95 N 527, of 04.09.95 N 615, of 21.06.96 N 342, of 24.10.96 N 575, and also the industry methodical instructions and recommendations about questions of accounting and calculation of product cost (works, services) approved with the Ministry of Finance, the Ministry of Economics and State Department of the republic according to the statistics.

According to the specified Basic provisions the following procedure for determination of sales proceeds is provided and forming arrived.

In case of preliminary and letter of credit payment method products (works, services) and goods are considered implemented only after the actual shipment (delivery to transport organization or the buyer), and in case of payments with cash - in process of receipt of funds in cash desk.

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