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PROVISION OF THE MINISTRY OF FINANCE OF THE REPUBLIC OF MOLDOVA

of March 5, 1999 No. 10(10-3-02/1)

About compensation (return) of tax amounts on value added

I. General provisions

1.1 This Provision determines the right, and also procedure for calculation and compensation (return) of VAT amounts according to provisions of the Section III of the Tax Code of the Republic of Moldova "Value added tax" N1415-XIII of 17.12.97, the Law on the budget for 1998 N1446-XIII of 27.12.97, the Law on the budget for 1999, N216-XIV of 12.12.98 and the Law "About Procedure for Tax Collection, Charges and Other Payments" N633-XIII of 10.11.95.

1.2 In this Provision concepts which value is provided in the relevant articles of the legal acts listed in item 1.1 are used.

II. Right to compensation (return) of VAT amounts

2.1. Compensation (return) * the VAT amounts to the subject of the taxation from the budget which are earlier paid or subject to payment (except for offsets), is made in cases:

a) VAT liability of goods (services) in zero rate;

b) taxation of goods and services in the lowered rate;

c) mistakes in calculation of VAT amounts and charge of penalty fee;

d) others.

2.2. According to part 8 of article 102 compensation of the VAT for acquired inventory items, services in deliveries to export, is allowed in the presence of confirmation of the foreign receiver of goods, services, including transport.

2.3. If the subject of the taxation has debt on the budget for the VAT, other taxes and payments, then compensation is not made, and the amount which is subject to compensation becomes engrossed in reading on account of the VAT or can be offset on account of other taxes and payments, according to part (4) article 8 of the Law "About Procedure for Tax Collection, Charges and Other Payments" provided that money came to the budget or are subject to compensation according to the law.

2.4. The VAT amounts which are subject to compensation can be directed to repayment of the added amounts of penalty fee and penalties.

2.5. Compensation of VAT amounts can be made provided that the statement of the subject of the taxation on return arrived no later than three years from the date of their introduction (part (1) article 8 of the Law "About Procedure for Tax Collection, Charges and Other Payments")

III. Procedure for determination of the amounts which are subject to compensation in case of application of the zero and lowered rates and also in other cases

3.1. The zero rate is established:

- letter and) Article 104 of the Section III of the Tax Code on deliveries of goods, services to export and all types of the international passenger and freight transportation;

- Article 27 (1) the Law on the budget for 1998 and Article 26 (1) the Law on the budget for 1999 on electrical supplies to the population.

3.2. The lowered rate in the amount of 8 percent is established:

- Article 27 (7) the Law on the budget for 1998 and Article 26 (5) the Law on the budget for 1999 on deliveries of bread and bakery products, milk and dairy products.

3.3. The VAT amount which is subject to compensation, in case of supply activity listed in item 3.1., it is determined based on part 3 of Article 101 of Section 3 of the Tax Code as the amount of excess of the VAT for acquired goods, services for implementation of the specified deliveries over the VAT amounts received from buyers for the leviable deliveries (Dt> of Kt made during this period).

3.4. If the amount of excess is more than amount estimated by multiplication of the standard rate (20%) by delivery cost which is subject to taxation on zero rate, then compensation is made only within the estimated amount at the standard rate.

3.5. The difference between the actual amount of excess of the VAT and the amount estimated at the standard rate is transferred to the following tax period.

3.6. The excess amounts which passed to the following tax period can be shown to compensation if the company monthly has mainly the deliveries assessed on zero rate.

3.7. In case of application by producers on the performed deliveries of the lowered rate from the budget are subject to compensation of the amount of excess of the VAT for acquired goods, services for implementation of the specified deliveries over VAT amounts from realization of these products and other products (Dt> of Kt).

3.8. The amounts of excess are subject to compensation if implementation by the subject of the taxation of the deliveries which are subject to taxation on the zero (lowered) rate is the reason of excess of VAT amounts on acquired goods (services).

3.9. In other cases in case of which there is need of compensation of VAT amounts the specified amounts are determined in the settlement way depending on specific situation.

At the same time to compensation only those amounts which were not accepted to offsetting earlier can be accepted.

IV. Reflection of the VAT amounts which are subject to compensation in declarations on the VAT

4.1. The subjects of the taxation applying for performing compensation of the VAT shall determine the sum of compensations according to the procedure of determined in the Section III of this provision.

4.2. The amounts of compensations are determined for that tax period in which deliveries were performed or adjustments on which compensation is provided took place.

4.3. As the basis for compensation of the VAT (offsetting on account of the VAT, other taxes and payments) serves the application submitted in the State tax authorities by the subject of the taxation together with the declaration on the VAT for the corresponding period.

4.4. The amounts which the subject of the taxation determined to compensation according to lit.a) - b) Item 2.1., are reflected in the declaration on the value added tax for the corresponding period on line 10 of the Section II. The VAT amount specified on line 10 is reflected also in line 14 III of the Section.

4.5. The amounts which the subject of the taxation will determine to compensation according to lit.s) Item 2.1., are reflected in the declaration on the VAT for the corresponding tax period on line 15 of the Section IV.

4.6. In case of submission of the declaration to tax authority the specified VAT amount to compensation is exposed to preliminary check (without entry into the company). After check the amount which is subject to compensation is specified in the Section VII of the declaration regarding reflection in personal account of the subject of the taxation.

V. Control of tax authorities of correctness of determination of the VAT amounts which are subject to compensation

5.1. The VAT amount reflected in the declaration on the VAT and in personal account of the subject of the taxation is compensated in the following procedure:

- if the compensation amount of the VAT to 5.0 thousand leu, then compensation is performed by results of preliminary check;

- if the compensation amount of the VAT of 5.0 thousand leu and more, then compensation is performed after conducting documentary check by tax authority.

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