Tax legislation amendments in August-September 2019
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During the period of July-September 2019 Moldovan Parliament passed a number of amendments to tax legislation. Some of them are briefly overviewed below:
- The obligatory use of electronic fiscal invoices postponed for one year
The obligatory use of e-invoices, particularly for supplies under the public procurement contracts, was expected to become effective on 01 July 2019. However, it was decided to postpone their obligatory use until July 2020.
The fiscal invoices must be used by companies that are VAT payers in cases of supplies of goods or services. It was planned to introduce electronic fiscal invoices for most of the companies. The use of e-invoces remained obligatory only for those companies that are included in the special list administered by the State Fiscal Service.
- Tobacco sticks becomes excisable
Parliament decided to introduce excise for tobacco sticks for tobacco heating devices (e.g. IQOS). The excise became applicable from 16 August 2019.
Heat-not-burn products became particularly popular in Moldova after the recent smoking-ban inside public spaces. Many bars and restaurants allowed their use inside their premises.
Additionally to the introduction of excise for tobacco sticks, Parliament decided to extend the ban to the use of heat-not-burn products in public spaces which will become effective on 01 January 2020.
- Lottery and betting winnings become taxable
Lottery and betting winnings will become taxable after 01 January 2020. Previously such winnings were not subject to income tax. However, it was decided to introduce income tax for all winnings over 1 % of the amount of personal tax exemption (which would constitute MDL 240, or approx. EUR 12 EUR, per year).
- VAT-related tax relief for public-private partnerships cancelled
Parliament cancelled the right to claim a refund of VAT paid by companies making capital investments within public-private partnership projects (PPP) established by Government in the areas of national interest.
It also cancelled VAT exemption for goods and services imported by companies that were private partners under the PPP projects of national interest.
However, the aforementioned tax reliefs will continue applying to those public-private partnerships that were established during the period in which the tax relief was effective (01 January 2018 – 31 August 2019) until the expiry of the respective PPP contracts.
- Personal income tax exemption subject to gross annual income of the person
The general personal income tax exemption for all personal incomes up to MDL 24,000 (approx. EUR 1,200) will only apply to persons whose gross annual income is less than MDL 36,000.00 (approx. EUR 1.800). Previously this exemption applied to all residents regardless of their total annual income.
However, the exemption will not cover some special categories of personal incomes, e.g. income received from lease agreements, dividends and royalties, lottery and betting winnings, crop production. At the same time these types of income are not included in the gross annual income mentioned above.
- Rules on capital gains modified
Starting from 01 January 2020 the provisions on capital gains tax will only apply to natural persons (residents or non-residents) that do not carry out business activities.
At the same time the amount of taxable capital gains is increased from 20% to 50%.
- The rate of tax withheld by business entities making payments to natural persons increased
As a general rule, business entities that make payments in favour of natural persons have to withhold part of the payable tax. Previously, the amount of the withholding constituted 7 % of the sums paid. Under the latest amendments, it was increased up to 10 %.
- Reduced VAT rate for HoReCa industry cancelled
Starting from the 01 January 2020 the reduced VAT rate for HoReCa industry (Hotels, Restaurants and Catering) will be cancelled and the businesses in this industry will have to pay a standard VAT rate of 20 %.
Before these amendments they have been paying a reduced rate of 10 %.
The amendments were approved by Parliament despite open protests by the representatives of the industry who claimed that doubling the VAT rate would significantly damage the industry.
- Non-taxed limits for personal goods received by post reduced
Until recently, there was a general rule applied to goods imported in Moldova by natural persons for non-commercial purposes and personal use. It provided that individuals only had to pay VAT if they imported goods whose value exceeded the non-taxable limit of EUR 300 (in the case of land transport) or EUR 430 (in the case of air and sea transport).
However, the newly passed amendments provide a new rule for goods received by individuals by post as a result of B2C (business-to-consumer) transactions. From 01 January such individuals will have to pay VAT for all goods of commercial nature received by post, if their internal value will exceed EUR 200. The internal value means the value of the goods without all transport and insurance related costs.
The goods are considered to be of non-commercial nature, if collectively they are of random nature and are intended exclusively for personal use by recipients or their family and which, by their nature or quantity, are not intended for commercial or industrial activities.
Additionally to VAT, recipients of goods that are of commercial nature may be obliged to pay the excise (if those goods are excisable).
- VAT and excise exemptions only for duty-free shops situated in the departure zones
From 2020 only those goods that are sold in duty-free shops that are located in the departure zones will be exempted from VAT and excises.
Right now all goods sold in duty-free shops are exempted, even those located at the entry in the Republic of Moldova.