Part 2.

Direct Tax Characteristics Chronologically, the mechanisms for direct taxation appeared earlier tat those for indirect taxation. The criterion for dividing taxes into direct and indirect ones is the possibility to transfer them to the consumer. This criterion is based on the assumption that the final payer of the direct tax is the owner of the taxed property or the earner of the taxed income, while the final payer of the indirect tax is the consumer of the good, to the price of which the tax is added. Direct taxes constitute the basis of the taxation system. Historically, having appeared later than the direct taxes, indirect taxation mechanisms are transformed into a more palpable channel for the provision of state budget revenues, i.e. for covering the expenses of the state. Direct taxes are divided into real and individual ones. Real taxes are applied to the sale, purchase or ownership of wealth, and their deduction does not depend on the individual financial capacity of the taxpayer (land tax, wealth tax, real estate tax). In contrast, individual taxes take into consideration the financial status of the taxpayer and his/her capacity to pay (profit tax, individual income tax, the tax for returns on capital). There are two methods for distinguishing direct and indirect taxes: 1. In correspondence with the payment indices: direct taxes are paid and carried by the same entity, while indirect taxes are carried by one person and paid by another one. 2. On economic basis: direct taxes are subtracted from the production of valuables, i.e. from income or wealth, while indirect taxes are applied to the consumption of valuables. Direct taxes are the most progressive form of taxation because their deduction takes into consideration the income and family situation of the taxpayer. When paying direct taxes, the payer can determine the exact tax amount, the tax rate, as well as the strictly applied deadlines. Yet, for indirect taxation, the buyers of various goods usually do not know exactly when and how much they are paying to the state through indirect taxes. Direct taxes are divided into real and individual ones. Real taxes comprise the land, housing, and industrial tax. Real taxes were widely used in the period when land was the main form of wealth. This is when the land tax was introduced in Europe. Various methods were used for the calculation of this tax, including the number of ploughs, the area of the processed lands, and others. These criteria did not allow, however, an accurate determination of the purchase price of land. In this context, the most important development was the transition to taxing land profitability determined according to the cadastre (the land register that accounted for land fertility). With time, buildings became an important taxation form; this is why the house tax was introduced. The size of this tax was determined on the basis of the following criteria: number and purpose of rooms, number of doors, and windows. However, these criteria could not insure the fairness of taxation, this is why the level of income and the family situation started to be taken into consideration. In the second half of the 19th century, a transition to individual taxes started to happen. Individual taxes are income or wealth taxes collected at the source or on basis of a self-assessment. For the collection of individual taxes, objects are considered individually for each payer. This involves taking into consideration the size of the income, family situation and other factors. In the RM, direct taxes include the income tax, land tax, real estate tax, road charges and the state tax. Part 3. Indirect Taxes Characteristics The formation of the budget revenues entails the collection not only of direct, but also of indirect taxes. In developed countries the relative weight of indirect taxes is usually lower than that of direct ones, while in developing countriesthe opposite occurs. Indirect taxes are applied to goods and services and take the form of an addition to its price or tariff. The payers of indirect taxes are the buyers or the consumers. All the citizens, independently of their income pay indirect taxes because they consume goods and services necessary for survival and which are chargeable to indirect taxation. Indirect taxes are the simplest to collect and are also difficult to evade by the taxpayer. These taxes are also attractive to the government for the reason that their receipt does not depend directly on the

financial-economic activity of the taxation subject, and the fiscal effect is achieved even in conditions of production downfalls and unprofitable periods of enterprises. At the same time, the state has to apply direct taxes as well such that taxation covers as many activities of the taxpayer as possible: processes that create the material and technical basis for economic activities, the wealth of enterprises, the work force, the resources used in production, and the income. This creates a rather stable inflow of tax payments and also increases the causality between the amount of taxes paid and the effectiveness of the taxpayer. Indirect taxes are divided into excises, state fiscal monopoly, and customs duties. Excises can be either individual or universal. A good example of a universal excise is the VAT, which is used in the world taxation system since the end of the 60-ies. Individual excises are applied to certain types and groups of goods. Customs duties are applied in most countries only to imported goods. Usually, exporting goods is not taxed through a customs duty. Fiscal monopoly taxes are applied for the state production of goods (ex. salt, matches, spirit). Customs duties are classified into export, import and transit duties. In most countries import taxes constitute the largest part of customs duties. In the RM, indirect taxes include the VAT, excises, and customs duties. Indirect taxes make up 55% of the total budget revenue. The largest part of indirect taxes is transferred into the state budget, while most of the direct taxes are transferred into the local budgets. The advantages of indirect taxes include the following: 1) They increase the state revenue as a result of an increase in the population number or in its wealth. This is most advantageous for the countries that face economic progress. 2) By influencing the consumption rate through increasing the price of one product or another, the state limits the consumption of products that are dangerous for health. 3) Taxes are received as a payment for the good, as they are added to the price. 4) For the consumer, indirect taxes are convenient for the following reasons: Insignificance of the amounts paid Time convenience The lack of a constraining factor The lack of time requirements for making the payment Does not require the accumulation of a certain sum. The evolution of indirect taxes, according to many experts, is a general tendency covering essential as well as luxury goods, or instead of taxing a large number of items it concentrated on a selected few. Part 1. The Concept of the Taxation System The taxation system represents the totality of various types of taxes, the elaboration and calculation of which relies on certain principles. The taxation systems of most countries developed throughout centuries under the influence of various economic, political, and social conditions. This is why it is natural that taxation systems of different countries vary in the types of taxes used, according to the structure of taxes, to their rates, methods of collection, fiscal authorities from various levels, according to the rate, magnitude and quantity of allowances offered, as well as other indices. Yet, all the countries follow some general principles, which allow the creation of optimal taxation systems. Since the taxation system of the RM was built following the framework of developed countries, it is necessary to make a review of these countries taxation systems of. The existing taxation system of developed countries includes a large number of taxes and its structure depends on the organization of the state. In unitary states the taxation system includes two elements: state and local taxes. In federal governments the taxation system includes three elements: state (federal) taxes, taxes related to the federation subjects (regional taxes), and local taxes. The main taxes, which result in the highest collections for the budget, are related to the state budget. They include the income tax, corporation profit tax, VAT, excises and customs duties. The international experience has proven that the highest level of taxes is collected through the income tax (from 25 to 45% of the state budget). This tax is collected by using progressive rates, determined through the method of complex progression. There are two systems of applying the income tax: 2

1. The schedule system (or the English system). This system has been applied for a long period of time (1842-1973) in Great Britain and a number of other countries. This taxation system involves taxation at the source of income not on the entire amount but on parts of the income. 2. The global system, which represents an income tax, applied to the entire income of the taxpayer. Currently in western countries, a global taxation system is applied. For the income tax there is an untaxed minimum, i.e. a part of the taxpayers income is not taxed. In most countries the income tax was introduced in the 20th century. In the beginning, a large number of citizens did not pay this tax because the untaxed minimum was set at a very high level. In the years of the World War II, however, income tax became universal. And also, right after the war, very high tax rates were established (in USA the maximum rate reached 91%). Then, in the beginning of the 80s, a taxation reform was introduced, which led to a significant decrease of the tax rates. In the last few decades a continuous decrease in the share of the profit tax in the budget revenues can be noticed. This is related to the constant rise in tax allowances and to the decrease of profit tax rates. The main tax allowances applied to corporation profits are the fast track depreciation, charity expenditures deductions, scientific research expenditures and capital investments. Among indirect taxes, VAT and excises are the most important. VAT is used in all countries of the EU, as well as in Norway, Israel and a few other countries. VAT is not implemented in the USA. This tax constitutes 30 to 50% of all the indirect taxes. After the World War II, the share of customs duties decreased significantly due to the GATT and WTO. Part 2. Taxation Legislation Taxation legislation is the aggregation of all the legal financial documents including legislation acts, presidential decrees, government resolutions, Ministry of Finance letters, which regulate the taxations relations between enterprises and the population on the one hand and the state on the other hand in the process of creating the budget revenues. The taxation legislation of the Republic of Moldova consists of the National Constitution and other legislative acts approved in correspondence with the constitution. Normative acts approved by the government, Ministry of Finance, GNS on the basis of, and in compliance with the Taxation Code cannot contradict its provisions and surpass its frameworks. In case of divergence between the provisions of the Taxation Code and those of other taxation legislative acts regarding the granting of real allowances, the provisions of the Taxation Code are apply. If, for reasons of avoiding double taxation through international agreements to which the Republic of Moldova is a party, other provisions are stipulated, the rules of the international agreements apply. The taxation legislation changes and adapts to market relations and new economic conditions. In order to promote the legal functioning of the taxation system, in 1992 the Law on the Basis of the Taxation System was adopted, and on 01.01.1998 the two first sections of the TC came into force. These are General Provisions and the Income taxation sections, while on 1.07.1998 the third section, dealing with the VAT entered into force. In 2000, another two sections were approved: section 4 Excises and section 6 Real Estate Taxation. Entry into force of these sections was assigned for the years 2001 and 2005 respectively. These laws entail the principles of the taxation system, its structure, rights, obligations and responsibilities of the taxpayers and taxation authorities, as well as logistical matters of tax collections and payment control. Part 3. The Taxation System of the Republic of Moldova The taxation system of the RM is the aggregation of taxes, principles, forms and methods of their determination, modifications and annulments as well as measures for insuring actual payment set forth in the Taxation Code. Taxes, duties and charges deducted in accordance with the TC and with other normative acts constitute a part of the national public budget. Taxes (duties) are mandatory, unrefundable payments unrelated to certain actions of the authorised body or person in favour or in connection to the taxpayer. Charges are the mandatory, unrefundable payments that are not taxes or duties. In the RM there are national and local taxes, duties, and charges. The system of national taxes includes: Income tax VAT 3

Excises Individual tax Customs duties Charges for the Road Fund The local taxation system comprises: 1. Real estate Tax 2. Natural resources charges 3. Spatial planning charges 4. Charges for the right to organise local auctions and lotteries 5. Hotel charges 6. Advertisement placement charges 7. Charges for the utilization of the local logo 8. Charges for the establishment of retail units 9. Market charges 10. Car parking charges 11. Resort charges 12. Dog ownership charges 13. Charges for the right to make television and film shoots 14. Charges for the right to cross the border 15. Charges for retail activity rights on the border zone 16. Charges for the right to transport passengers 17. Charges for the sanitary maintenance of the territory, for the utilization of containers, for the disposal of solid household and industrial waste. Part 4. The Taxation Apparatus A special taxation apparatus deals with taxation and tax collection issues. In accordance with the law On the state taxation service from 1992, in the unitary State Taxation System are included: The General State Taxation Inspectorate (GSTI) adjoining the Ministry of Finance The territorial taxation inspectorates The main purpose of the taxation inspectorates of all levels is to verify the compliance with the taxation legislation, the accuracy of calculations, the completeness and punctuality of tax and other payments to the budget. The GSTI of the Ministry of Finance fulfils the following functions: Organises inspectorate subordinates in executing the work of verification the compliance with the taxation legislation, the accuracy of calculations, the completeness and punctuality of tax and other payments to the budget. Verifies the work of subordinates of taxation inspectorates, examines letters, declarations, and complaints and takes measures for increasing work effectiveness. Organises awareness-building events and explains the legislation on taxation and other payments to the state budget and extra-budgetary funds. Territorial taxation inspectorates fulfil the following functions: 1. Insuring the completeness and punctuality of accounting by the payers of all types of taxes and other payments 2. Executing the decisions of the local authorities regarding the calculations of the local charges and granting of tax allowances 3. Verifying the accuracy of calculations, the completeness and punctuality of tax and other payments to the budget. 4. Organizing the registration, evaluation and sale of goods that have been confiscated, were unidentified or have been inherited by the state 5. Explaining the legislation on taxation and other types of payments to the budget and extra-budgetary funds, examines letters, declarations and complaints of payers of all types of taxes and other payments.

Part 1. A General Overview of the Income Tax In the RM the unitary income tax was introduced on 1.01.98 and replaced three taxes: the profit tax of enterprises, the individual income tax, and the profit tax of banks and other crediting institutions. In most countries of the world individual and corporate income tax vary; this is why the unification of these taxes is an innovation in the taxation practice. The income tax subjects comprise juridical and natural persons receiving income from any sources on the territory of the RM during the taxation year, and juridical persons-residents, which receive investment and financial income from sources outside the RM. Since there are various interpretations of the terms individual and company in the taxation and civil legislation, we will explain some of them. According to the taxation legislation juridical persons are: 1. Any enterprises, institutions, and organizations involved in enterpreneurial activity with the exception of individual enterprises and farms. 2. Non-residents with an economic presence on the RM territory According to the taxation legislation natural persons are the individual enterprises and farms. According to the taxation legislation, taxation subjects are the entities legally responsible for paying taxes. The income tax object is the net income, including the allowances received from all sources by all juridical and natural persons minus the deductions and exemptions granted to the given entity by law. The taxed income=net income (accounting for concesions)-deductions-exemptions. Part 2. Coverage Scope of the Income Tax The net income covered by the income tax includes all types of income: 1. Income from enterpreneurial, professional or any type of such activity. 2. Income of associations and investment funds 3. Payment for the work executed and services provided, including salaries and wages, benefits offered by the employer, fees, commission fees, bonuses and other such type of premiums; 4. Income from renting out wealth; 5. Capital increases resulting from asset operations; 6. Income received in the form of percentage interest rates; 7. Royalties (income from providing the right to utilize non-material property); 8. Annuities (regular insurance payments, pensions and benefits with the exception of social security payments and benefits (pensions and compensations) received on basis of intergovernmental agreements); 9. State subsidies, premiums and prizes, not defined specifically as non-taxable in the law establishing these payments; 10. Dividends received from economic subjects non-residents; 11. Allowances for temporary inability to work, received by natural persons from the state social security fund and others. Part 3. Deductions Allowed for Taxation Purposes Deductions are defined as the sums deducted from the net income of the payer at the calculation of the taxable income. In conformity with the TC, for the purposes of determining the taxation basis, it is permitted to deduct from the net income the following items: 5

1. 2. 3. 4. 5. 6. 7.

Regular and necessary expenses payed or bourne by the payer during the taxation year exclusively in the purposes of the enterpreneurial activity; Expenses related to the business trips of employees, membership fees, company insurance payments, but only within the limits established by the Government; Percentual disbursements if these are necessary outflows for the enterpreneurial activity and if the majority of the shareholders are not foreign citizens or exempt from taxation; Accrued wear and tear for each type of property during the taxation year; Spendings related to the extraction of non-renewable natural resources; Amortization of each non-material property item (invention patents, author rights, industrial drawings and blueprints with a limited life-time); Bad debts, which have lost value and are not expected to be payed duting the taxation year.

It is not allowed to deduct the following outflows:

Sums payed for the purchase of land or property, which is subject to depreciation or of fixed assets with a lifetime longer than 1 year; Compensations and rewards, percentage interest rates and losses, incurred in the interests of an official or related person; Undocumented expenses above the limit established by the government; Personal and family expenses. Part 1. Preferential Taxation Treatment for the Individial Income Tax

Each taxpayer (individual person, resident) in the year 2012 has the right to a personal tax exemption of 8640 lei per year720 lei per month. The amount of the individual preferential exemption constitutes 12840 lei per yearfor the following: 1. Persons who have contracted and experienced radiation-related illness caused by the accident at the Cernobil AES. 2. Disabeled persons, whose disability has been proven to be related to the accident at the Cernobil AES. 3. Parents and spouses of deceased and missing participants to the military operations for the protection of the territorial integrity and independence of the RM as well as to the military operations in the Republic of Afganistan. 4. Disabled persons, whose disability occurred during military operations for the protection of the territorial integrity and independence of the RM as well as to the military operations in the Republic of Afganistan. 5. Disabled natural persons, whose disability occurred during wars, disable from childhood, disabled of category I or II or retired individuals who are rehabilitated victims of political repressions. Married individuals residents of the country, have the right to an additional discount in the sum of 12840 per year this allowance has the name of married couples allowance, which is applied if the spouse is not exempt from tax. The taxpayer (the individual resident) has the right to an additional discount in the amount of 1920 lei per year for each dependent with the exception of disabled individuals, whose disability appeared in childhood, the discount for whom constitutes 8640 per year. In case the dependent has a number of custodians, the discount is offered to all the custodians. For tax discount purposes, a dependent must meet the following criteria: Be a primary relation to the employee or the spouse of the employee either through ascending or descending relation (parents, children, adopters).

Live together with the taxpayer or separately, but the latter applies only in cases where the dependent is enrolled full-time in an institution of higher education for more than five months of the taxation year. Is being maintained by the taxpayer Does not have an income higher than 8640 lei per year. Part 2. Calculation Methods of the Income Tax Subtracted from Salaries and Wages

According to the legislation of the RM, the employer executing the payments of salaries and wages, including remunerations and allowances offered to the employee is obligated to retain and transfer income taxes to the budget, taking into account the exemptions that apply to each employee. Taxes are retained from any type of income: salaries and wages, rewards, salary bonuses, premiums, subsidies, fees, commission fees and other payments. The taxable income also includes allowances offered by the employer, such as: 1. Payments offered by the employer for the purpose of reimbursing personal expenses of the employees (this can include spendings for education, health care, or the maintenance of children in pre-school institutions); 2. The cancellation of the employees debts to the employer; 3. Financial aid provided by the employer for housing expenses of the employee, when the housing is provided by the employer; 4. Expenses of the employer for providing the employee with the right to use property for personal purposes; 5. Contributions to pension funds, with the exception of contributions to qualified non-governmental pension funds. The net income of the employee does not include the following types of income: 1. Insurance compensations obtained as a result of insurance contracts; 2. Compensations received as a remuneration for health injuries, including cases of disability incidents; 3. Student allowances for high school, undergraduate and postgraduate students, scholarships from charity organizations as well as one-time grants payed to young professionals offered jobs in rural areas according to the staff distribution; 4. Alimonies and child maintenance allowances; 5. Leave allowances; 6. Special compensations for the less privileged and socially vulnerable social groups; 7. Wealth received as a gift or through inheritance; 8. Allowances received from charity organisations and others. According to the RM legislation, the calculation of the income tax retained at the source and transferred to the budget is done according to the personal record book. Part 3. Income Tax Deductions from Payments Other than Salaries and Wages 1) Dividend taxation. Residents of the RM pay dividents from the net profits remaining after income taxation and they do not retain any income taxes on the dividends at the source of payment. However, in the cases where the economic subject pays dividents to its shareholders residents of the RM from profits before taxes, he/she must retain from the dividend amount an income tax of 15% Tax retention on percentage interest rates and royalties. Each payer of percentage interest rates and royalties must retain as income tax an amount equal to 15% of the percentage interest rates and royalties. 7

2)

3)

Tax retention from other payments. Each person (resident) involved in enterpreneurial activity, or institution, organization, public authority or public institution of the RM, which pays for services, retains as part of the tax 5% from the amount corresponding to the sum payable. Services include: rent, advertising services, audit, management, marketing and consulting, security of individuals, property and services related to the installation, exploitation and repairs of computers.

Part 4. Individual Income Tax Self-assessments The following categories must present an individual income tax self-assessment each year before March 31st: Natural personsresidents with the obligation to pay taxes; Natural personsresidents receiving income from sources other than salaries and wages exceeding the personal exemption of 8640 lei per year; hose who received a salary or wage above 25200 lei per year, with the exception of juridical persons who received the income in the form of salary in one single workplace; hose who received income either in the form of salary or in any other form and from any source, exceeding 25 200 per year. Part 1. Taxation of Separate Taxpayer Categories Since there are differences between the taxation arrangements for various types of economic agents, we will look into the peculiarities of the following taxpayer categories: Public Authorities are exempt from income tax if they are financed by the state and local budget. The income earned by these bodies from secondary economic activities are covered by the income tax, however, and it is allowed to apply to them the discounts stipulated in the TC. Non-commercial organisations. These include the following: 1. Health care, education, science and cultural institutions; 2. Associations of the blind, deaf, desabled and the enterprises established for achieving the goals of these associations, social associations, religious, and charitable organisations; 3. Trade and labour unions, associations of veterans, employers, enterpreneurs and individual farmers; 4. Parties and other socio-political organisations. Non-commercial organisations are expempt from taxes if they fulfill the following requirements: 1) They are registered according to the legislation 2) The use all of their income for achieving their objectives 3) They do not use any part of the property or income for the benefit of any one member of the organisation or any one individual 4) They do not support any political party, election block or candidate for a public authority position, and are not using any part of the income or property for the financing of the above (this does not apply to item 4). The legal status of diplomatic representatives of foreign states is regulated by the law of the RM on the status of Diplomatic Representative Offices of Foreign States in the RM. The diplomatic representative office and its staff are offered a preferential tax treatment and immunities for the purpose of fulfilling their duties. According to agreements with the governments of other countries and with the leaders of international organisations, the staffs of diplimatic representative offices and their consultants are exempt from paying taxes on the income received in the RM. Part 2. Taxation of Associations and Investment Funds

An association is any organisation involved in enterpreneurial activity on basis of partnership and which is founded in conformity to the legislation. Usually, associations do not have more than 20 membersresidents and meet the requirements of the proportional distribution of gains and losses between the owners of capital. Associations do not pay income taxes. This is related to the fact that each income component is distributed among the members of the associations. Each member of the association pays income tax separately, depending on the income earned during the given taxation year. Income tax calculations for investment funds if are subject to special rules. Any investment fund has several types of income, which it is obligated to distribute to its shareholders; these are: 1. The dividends received from the economic subject whose shares belong fully or partially to the IF; 2. Capital increases of the IF gained as a result of operations on the stock market; 3. Percentage interest rates received as a result of investing the funds of the IF. 1. Dividends, capital increases and percentage interest rates are types of IF income that are accounted for in a separate income account. The payments made by the IF to its shareholders in accordance with the number of shares belonging to each shareholder of the fund are made from separate income accounts and are taxed when they reach the shareholder, i.e. as if they had been received by the shareholder without the participation of the fund. Part 3. Taxation of Qualified Non-governmental Pension Funds The creation of non-governmental pension funds allows for imporvements in the social insurance status of employees. However, the requirements that have to be met by qualified pension funds entail such strict limitations, that the creation of even a few such funds is problematic. Below are the conditions that non-governmental pension funds have to comply with: 1. 2. 3. 4. 5. The share of the employee in the capital or income of such a fund must be transferred immediately to a separate account and it is forbidden to remove funds from this account before the employee reaches the retirement age, dies or becomes desabled. In case of the employees death, the funds remaining in his/her account are paid to the inheritors. The assets and income of such a fund is kept in a separate account, in a financial institution. The fund provides for a reasonable protection of the funds form being lent, from sale of assets and form similar operations. The fund should be registered in accordance with the RM legislation.

The sum paid on behalf on an individual by his/her employer during the taxation year to a qualified nongovernmental pension fund with the purpose of accumulation is subtracted from the net income of the individual, but only with the condition that this sum does not exceed 15% of the income earned by this individual during the taxation year. The income of the qualified non-governmental pension fund is not taxable under the income tax, but any payments from the fund are included in the net income of the receiver. Part 4. Taxation of Economic Agents Non-Residents Any income received by a non-resident may be received either in the RM or outside its borders. Income sources in the RM include the following: 1) 2) 3) Percentage interest rates on loan obligations of the RM public authorities, an economic subjectresident or a resident association; Dividends paid by a resident economic subject; Income fom work activity and services provided in the RM; 9

4) 5) 6) 7)

Income from renting out in the RM real estate and movables; Income from the sale of real estate located in the RM; Income from the sale of movables (with the exception of stock of goods), given that the buyer is a resident; Royalties and contributions on insurance and reinsurance contracts, which have been signed in the RM.

The criterion for defining the income of the non-resident as received outside the borders of the RM is the impossibility to related the given income to the one received in the RM. The non-residents who receive taxable income in the RM are also granted deductions, which reduce the taxable income amount, but this only applies to the particular income. All revenues received by non-residents on the territory of the RM are taxed at the rate of 5%, whith the exception of royalties, taxed at the rate of 15% and insurance and reinsurance contractsat the rate of 2%. Part 1. The Determination of the Income Taxation Object When determining the taxation object, the financial result on the entity involved in enterpreneurial activity, which is determined in conformity with the requirements of the National Accounting Standarts, is adjusted (increased or decreased) for some expenses and revenues, taking into consideration the provisions of the TC. In order to determine the sum of the taxable income, the financial results sum is increased by the adjusted amount for revenues and decreased by the adjusted amount for expenses. The provisions used for revenue adjustments are the following: 1) The result of capital assets operations are taxed at the rate of 50% of the sum; 2) Interest revenues on bank deposits and state bonds are not chargeable to taxation until 01.01.2010. Part 2. Norms and Regulations Used for Adjustable Expenditures The RM legislation includes the following norms and regulations relevant for adjusting expenses for taxation purposes: Expenses related to the business trips of employees. The structure and procedure of determining business trips expenses on the territory of the RM and of CIS countries is regulated by the resolution of the RM government, which stipulates that: A) transportation expenses for travel within the RM and in CIS countries are reimbursed according to supporting documents or to the minimum ticket cost; B) diurnal expenses are reimbursed in the amount of 35 lei for each day spent on a business trip within the territory of the RM, except for the departure and return days, when diurnal expenses are reimbursed at a rate of 50%; C) lodging expenses are established as 70 lei on the territory of the RM and 150 lei in Chisinau. Representative expenses. The maximum amount allowed for deductions as representative expenses constitute: 0.5% of the net income received from the sale of merchandise (inventory turnover); 1% of all the taxable income amount in accordance with the TC. Expenses unsupported by documented evidence. It is allowed to subtract incurred and payed expenses related to the enterpreneurial activity and which cannot be supported by documented evidence in the amount of 0.1% of the taxable income. Donations for charitable causes. It is allowed to subtract documented expenses for charitable causes in a sum that does not exceed 10% of the taxable income before accounting for the relevant exemptions stipulated in the TC. Expenses for the maintenance, repair and reconstruction of fixed assets. If during a certain taxation year the expenses for the maintenance, repair and reconstruction of fixed assets does not exceed 10% from the cost base of the given property category, the subtraction of these expenses is allowed for 10

that year; if however, such expenses exceed 10% of the cost base of the fixed assets, the surplus amount is defined as expenses for reconstruction and are classified into the fixed assets account. The determination of depreciation for taxation purposes. The amount of the subtraction during the taxation year on one or another category of property is determined by applying to the cost base of one or another category of property (at the end of the taxation year) the following depreciation norms: I property category5%, II category8%, III category10%, IV category20%, and the V category30%.

EXERCISE. The financial result of an enterprise for the year 2002 constituted 500,000 lei. Income tax retained at the payment source amounted to 10,000 lei, and the amount payed in installments was 120,000 lei. Determine the amount of the income tax payable to the budget given the following data about the revenues and expenses of the enterprise: Indicators Amount indicated in the Financial Statement 10000 2000 3000 5000 Amount Difference indicated (3-2) for taxation purposes 5000 -5000 0 0 0 -2000 -3000 -5000 -15000 5000 -2000 -2000 1000

1. Capital assets operations results 2. % interest revenues from the Central Bank 3. % interest revenues on bank deposits 4. Dividends received from residents Total adjustment of revenues 1. Fixed Assets Depreciation 2. Expenses for Fixed Assets repairs 3. Incurred expenses related to the Central Bank Total adjustment of expenses

Taxable income=500000+(-15000)-1000=484000 Income tax=484000*15%=.. Income tax payable to the budget=..-10000-120000=9000. Part 3. Income Tax Self-Assessments of Entities Involved in Enterpreneurial Activity According to article 83 of the Taxation Code, the follwing categories of entities involved in enterpreneurial activity are obligated to submit an income tax self-assessment: 1) Juridical persons residents, with the exception of public authorities and state institutions, 2) Enterprises-residents with the status of an individualindividual enterprises and farms, 3) Permanent representative offices of non-residents of the RM, 4) Juridical persons non-residents obligated to pay income taxes.

11

The self-assessment must be submitted to the GNS at the place of registration (the endorsement of the fiscal code) not later than the 31 March of the year, following the taxation-reporting year. If the taxpayer termintates the activity during the taxation year, the person in charge is obligated to announce the taxation inspectorate within 5 days after the termination of activity about it, and, within 60 days, to submit an income tax self-assessment for the entire period of the reporting year, during which the company was involved in enterpreneurial activity. The following categories must present an individual income tax self-assessment each year before March 31st: Natural personsresidents with the obligation to pay taxes; Natural personsresidents receiving income from sources other than salaries and wages exceeding the personal exemption of 8640 lei per year; Those who received a salary or wage above 25200 lei per year, with the exception of juridical persons who received the income in the form of salary in one single workplace; Those who received income either in the form of salary or in any other form and from any source, exceeding 25 200 per year. Part 3. General Overview of the Land Tax In the RM, land is used against payment. The payers of the land tax are juridical and natural persons, who have been granted with the right of ownership, possession or use of a land area and who qualify as the owners of the land. The land tax objects are the land areas offered into the ownership, possession or use, irrespective of the use duration, purpose or location of the land area. For the land that belongs to the state and is rented out, the land tax is payed by the tennant, according to the rent contract. It is in the competency of local public authorities to issue documents, which prove the possession right of the land area, certificates proving the right to temporary use of land, as well as contracts for the rent of land in cases of rental arrangements. The cadastre register of the landowners contains the cadastre information about all the registered landowners. This register contains other information as well: the address of the user, the number of the issued document, the size of the land area, and its utilization purpose. The cadastre register contains qualitative and quantitative information about the land sections within the borders of the village, town or district. The rates of the land tax are established per unit of area in conformity with the category and location of the land. Agricultural grounds are the land sections such as arable lands, sections covered by multiannual plants, hayfields, pastures, breeding nurseries, etc. used for agricultural plants. Agricultural grounds are taxed through two rates, which apply to hayfields and pastures and to all other agricultural grounds. These rates are set for 1 ha of land, either without an estimated cadastre value for 1 point-hectar of land, or with an estimated cadastre value. 1 point-hectar of land equals the sector, the area of which equals to 1 ha and the quality indicator is of 1 point. The areas of land located within inhabited regions are sections within their borders and in the possession of the local public authority. Part 5. Real Estate Tax and Land Tax Allowances The following entities are exempt from real estate taxation: 1. Institutions financed from the budgets of any levels; 2. Organisations and enterprises of associations for the blind, deaf, and the disabled; 3. Enterprises of penitenciary institutions; 4. Objects of civil protection; 5. Diplomatic representative offices on real estate granted on reciprocity grounds and which do not entail rent payments; 6. Religious organisations for the real estate aimed for conducting cult ceremonies; 12

7. a. b. c.

Selected categories of natural persons: Persons who have reached the age of retirement; Desabled persons from category I and II, with a disability from childhood; Disabled persons of category III (participants to the military operations for the protection of the territorial integrity and independence of the RM, participants to the military operation in Afganistan, participants to the liquidation of the accident consequences at the Cernobil APP). These categories of citizens (with the exception of desabled persons of category I and II with the disability from childhood) are exempt from tax in case they do not live together with a working family member. d. Families of the deceased during the military operations for the protection of the territorial integrity and independence of the RM, the military operation in Afganistan, and the liquidation of the accident consequences at the Cernobil APP. The following persons are exempt from real estate taxation: 1. Reserves, national parks, botanical gardens, lands belonging to the forestry and water funds not used for industrial activities; 2. Scientific organisations, research institutions with an agricultural or forestry focus and which use lands for scientific and educational purposes, fish farms for the water areas of the lakes; 3. Institutions of culture, art, cinematography, education, health care, and sports with the exception of resort institutions and monuments of nature, history and culture financed either from the state budget or by unions; 4. Enterprises, institutions, organisations, farms as well as natural persons who, for agricultural purposes, have received degraded land areas, have recultivated and restored them (the allowance is offered for the initial 5 years of utilization); 5. Areas of the state border; 6. Land areas of general use situated at the border of inhabited regions; 7. Cult institutions; 8. Land areas allocated for the permanent use of common railways.

Lecture 15. Special Road Charges The law on the Road Fund of the Republic of Moldova stipulates the followng formation sources for the the fund: Deductions from the excises on automobile petrol and diesel; Charges for the transit of the RM roads by vehicles not registered on the territory of the RM, applied to users, who do not have tax relations with the budget of the RM and who are using its territory for transit; Charges for the utilization of roads from the owners of vehicles registered in the RM; Permit release charges for the passage of vehicles exceeding volume and wheight load on the axle limitations as well as for executing works on the protection zone of roads; Charges from juridical and natural persons for the issuance of licences for the execution of transportation works and of construction, repair and road maintenance works as well as for the international vehicle transit; Fines for damaging roads, road installations and equipment set up adjacent to the road.

The charge from the owners of vehicles registered in the RM is retained not later than on the 31st of July, irrespective of the date of the technical revision, the rates are established in lei: Motorcycles36lei; Cars, in accordance with the engine volume: 13

Up to 1500 cm354lei From 1501 to 2000 cm3108lei From 2001 to 2500 cm3360lei Over 2500 cm3900lei Minibuses and busses, in accordance with the number of seating places: -up to 11 places900 -from 12 to 17 places1080 -from 18 to 24 places1260 -from 25 to 40 places1440 -over 25 places1620

Part 1. The Economic Essence of the VAT VAT is the indirect tax, which is included in the price of goods and services and is therefore played by the consumer. Starting from 01.07.1998, the VAT is calculated in conformity with section III of the TC. The TC stipulates that the VAT is a republican, state tax and represents a method of extracting for the budget a part of the cost of the taxable goods delivered and services provided on the territory of the RM, as well as a part of the cost of taxable goods and services imported into the RM. The VAT objects are: 1. Juridical and natural persons registered or who must register in accordance with the requirements for the registration of taxation subjects. 2. Juridical and natural persons who are importing goods, with the exception of natural persons who are importing goods for personal use and consumption 3. Juridical and natural persons who are importing services defined as taxable deliveries, made by the indicated persons. The taxation objects are the deliveries of goods and services by the taxation subjects; these result from economic activity on the territory of the RM or from goods and services imports into the RM, with the exception of the goods imported by natural persons for personal use and consumption. The TC stipulates 4 types of VAT rates: 1) 2)

3) 4)

20% of the taxable value of the taxable deliveries of standard goods; 0% for the following: goods and services to be exported, including all types of passenger and freight transportation goods and services intended for the official use of diplomatic and other similar representative offices in the RM, for the personal use and consumption fo the members of the diplomatic, administrative and technical personnel of the representative offices goods and services of the international organisations in accrodance with agreements to which the RM is a party. 8% for bread, pastry, milk and dairy products 5% for natural gas and for agricultural products.

VAT payable to the budget = VAT received from buyers for goods VAT payed to the suppliers for primary materials and for imports.

14

Part 2. Deliveries exempted from VAT In accordance with the TC, VAT is not imposed on the following deliveries: 1. Housing, land and land areas under housing blocks, their rent, and the right to furnish and rent them out, with the exception of commission deals; 2. Food and non-food goods for children (children food, adaptation milk mixtures, homogenised juices, school textbooks, books for children) 3. State property bought during the privatisation process; 4. Pre-school insitutions, clubs, resorts, and other objects of social, cultural, housing and community purposes, which are transferred for free to the public authorities; 5. Services, on which state dues are imposed; 6. Confiscated property or items without an owner, which have been transferred into the possession of the state; 7. Health and elderly care services; 8. Goods of own production of university and school cafeteria, hospitals, and socio-cultural institutions; 9. Financial services: the granting and transfer of loans, operations related to the maintenance of deposit accounts, operations related to currency, cash, and bank notes management, share issuance, bonds, debentures and other securities, investment fund management services, insurance and reinsurance services, except for the services of insurance agents; 10. The post office services, including the delivery of pensions and compensations; 11. scientific works, financed from the budget; 12. Ritual services; 13. Services related to housing rental, hostel residences, and utility services offered to the public; 14. The services of the town public transport, as well as railway and river transport; 15. Import goods in case: they constitute aid for natural disasters situations, military operations and as humanitarian aid, or if the goods are imported temporarily with the obligation to export during the period stipulated in the customs legislation, transit goods. Part 3. VAT Administration (the Registration of the Subject and the Declation of the VAT) The criterion for the mandatory registration is determined through the established limit of the total value of taxable deliveries within any 12 consecutive months. This limit is set at the level of 200,000 lei. This means that the economic subject who has been receiving a return exceeding the limit of 200,000 lei from taxable deliveries of goods and services within the last 12 months, must mandatorily register with the taxation authorities. It is notable that taxable deliveries include deliveries of goods and services taxed at the zero, or standard rate as well as the deliveries of import services. In order to register, the economic subject must submit to the taxation authority a request for registration, written in accordance with the sample. This should be done in the month following the date when the value of deliveries exceeded the 200,000 limit. The subject is considered registered on the 1st day of the month following the month, during which he was obligated to submit the official notification. In case of termination of VAT taxable deliveries, the taxation subject is obligated to notify the state tax service about the termination. The latter must cancel the registration of the VAT payer. The cancellation of the VAT payer registration enters into force on the date of the taxable deliveries termination by the subject. The notification is satisfied if the following requirements are met: 1) The taxation subject stops the execution of taxable deliveries. In this case, it can still deliver the goods and services exempt from VAT. 15

2)

The taxation subject has delivered goods and services costing less than 200,000 lei within the last 12 months.

The VAT declaration is completed by the payer independently and is submitted to the taxation authorities monthly, before the end of the month following the last reporting month.

16

Part 1. General Overview of Excises Excises are the universal state taxes established for selected consumer goods and for gambling services. From 01.01.2001, excises are regulated by the fourth section Excises of the Taxation Code of the RM (Law # 1053-XIV from 16.06.2000). For excises, the taxation subjects are juridical and natural persons, who process or/and produce excise foods on the territory of the RM, or who import excise goods into its territory, as well as juridical persons involved in gambling services activities. The taxation objects include: alcohol drinks, tobacco and tobacco products, petrol and diesel fuel, juelry, audio and video equipment, cars and licences for gambling services. The excise rates are established in absolute amounts per measurement unit of the good, per value added of the market value of the good, or per value added of the gambling licence cost. Excise goods such as vodka, liquers, cognac, and tobacco products that are sold, transported, or stored on the territory of the RM, or which are imported for sale on the RM territory, in addition to excise goods purchased from economic subject from Transnistria must be stamped with excise labels. The labelling is executed either during the production process before the excise products are imported, or for the goods produced in the RMat the moment of their unloading (transportation) from the excise room. Part 2. Excises Calculation Procedure The sum of the excise payable to the budget is determined on basis of the excise rates stipulated in section four of the TC, where the following excise rates are established:

Excise goods 1. Coffee, processed and nprocessed, caffeinated and decaffeinated 2. Red caviar 3. Sturgeon black caviar 4. Beer 5. Champagne 6. Classical sparkling wines 7. Natural sparkling wines 8. Ethil alcohol with a spirit concentration of 80% of the volume or higher,

Measurement Units Price in lei Price in lei Price in lei 1 litre 1 litre 1 litre 1 litre 1 litre of absolute alcohol

Excise Rates 10% 20% 25% 1.00 lei 10%, but not less than2.50lei 10%, but not less than2.50lei 10%, but not less than2.50lei 0.09 lei / % volume / litre 17

with the exception of medical spirit 9. Wisky, rom, spirit liquers and divines 10. Cigars 11. Cigarettes containing tobacco with filter 12. Cigarettes without filter 13. Petrol 14. Diesel fuel 15. Perfumes 16. Juelry items

1 litre of absolute alcohol 1000 items 1000 items 1000 items 1 tonn 1 tonn Price in lei Price in lei

* 1240 lei 8.70 lei 3.70 lei 1200 lei 1200 lei 10% 10%

Part 3. Excise Allowances Excises are not imposed: 1) At the import of excise goods, sent as humanitarian aid or technical assistance, offered by state, governmental or international organisations and of goods intended for the official use of diplomatic and other similar representative offices in the RM, for the personal use and consumption fo the members of the diplomatic, administrative and technical personnel of the representative offices as well as by their family members residing with them; 2) At the export of excise goods 3) When excise goods are brought (sent) under temporary customs regimes, if they are in transit, customs wearhouse, free customs wearhouse, or are destroyed or rejected in the interests of the state. When foreign excise goods are placed in a processing customs regime on the customs territory, the following procedure applies: at the entry, the goods are subjected to excises, which are reimbursed at the exit of the processed goods from the customs territory; 4) When foreign excise goods are placed in customs processing regime and under customs supervision 5) At the exit of domestic products placed under the customs regime of re-import or under processing outside the customs territory; 6) For natural persons importing: pure alcohol (1 litre), spirits (1 l), beer (5 l), cigarettes (200 items), cigars (50 items), vehicle fuel with the condition that it is located in one container of the vehicle, audio equipment and televisionsone item for each category. At the removal from the customs territory of foreign excise goods, placed under the customs regime of reexports, the sums payed at their entry on the customs territory are reimbursed. The taxation subject is allowed to reckon the excises paid for intermediary excise goods, which have been used during the processing and/or production of other excise goods, but only with the condition that he/she holds documents proving the payment of excises for the intermediary goods. The taxation subject, who exports excise goods, will receive the sum of the excises paid for the excise goods used for the processing and / or production of the exported goods within 10 days after the relevant documented evidence is submitted. Part 1. General Overview of Customs Duties According to the law on customs tarrifs, a cusoms duty is defined as the mandatory payment subtracted by the customs authorities for the entry of goods on the customs territory of the RM or for the removal of goods from its territory. The customs tarrif is a catalog, which includes the nomenclature of goods 18

brought to and removed from the customs territory of the RM, as well as the customs duties rates imposed on such goods. There are the following types of customs duties: 1) 2) 3) 4) a. b. c. Value added duties are calculated in percens from the customs value of the good (eg. for shampoo this rate is 6.5%). Specific duties are calculated per unit in accordance with an established rate (liquers1 Euro per 1 litre). Combined duties combine the value added and specific rates (this type is not used in the RM at the moment). Exceptional duties, which are divided into the following: Special duties, which have the purpose to protect the local production and are imposed at the entry of foreign goods on the customs territory if they are in a quantity and under conditions, which cause or may cause significant material damage to the local producers; Anti-dumping duties are used if the goods brought into the customs territory are priced at a lower rate than they are on the domestic market of the exporting country (the domestic price is taken at the moment of entry) in case this price can cause harm to the domestic producers; Compesation duties are used if the production or export of the goods brought into the customs territory relied on direct or indirect subsidies, in case this already has or may have a negative impact on the interest of the local producers.

The rates of the customs duties and the list of goods to which these rates apply are established by the Parliament. These rates are universal and unchangeable, with the exception of the cases provided for in the legislation or in international agreements, to which the RM is a party. Part 2. Methods for the Determination of the Customs Value of Goods The customs value of the goods, which enter the customs territory, can be determined in accordance with 1) The price of the deal, the object of which is the particular merchandise; 2) The price of a deal, the object of which is an identical merchandise; 3) The price of a deal, the object of which is a homogenous merchandise; 4) The unit price of the goods; 5) The estimated value of the merchandise; 6) The reserve method Usually, the determination of the customs value of the goods is done in accordance with the price of the deal, the object of which is the particular merchandise. If this method cannot be used, other methods apply. In this case, each consecutive method is used if the previous method could not be applied. Each method for determining the customs value of the merchandise has its specific features. For example, when appling the first method, the price of the deal includes the following components: 1. Expenses for the delivery of the merchandise to the airport or another place of entry of the merchandise on the customs territory; 2. Insurance costs; 3. Transportation costs; 4. Loading costs; 5. Unloading and transfer costs; 6. Commission fees; 7. Brokerage fees; 8. Container, package and packaging costs; 9. Licence and other payments for the utilization of intellectual property rights. 19

Part 3. Calculation Procedures of Customs Duties In addition to customs duties, which are calculated according to the value of the merchandise and the rate stipulated in the customs tarrif, the customs authorities retain charges for the execution of customs procedures. This entails the following types of customs procedures and charge rates: 1) 2) 3) 4) Customs legalisation of the merchandize: 5 for merchandise valued from 50 to 1000; 0.25% of the customs value of the merchandise, not exceeding 900 for merchandise valued over 1000; The customs legalization of the temporary import and export of property30; The storage of merchandise in the customs wearhouses: in the first 10 days0.1 for each kg per day of storage; in the latter calendar days0.5 for each kg per day of storage. Export of goods-0.5 per km of mileage

Also, the following customs duties rates apply: 1. 2. 3. 4. 5. 6. 7. 8. 9. Butter15% Margerine5% Orange juice5% Fresh tomatoes: 1.01-31.03 - 10%; 1.04-30.04 - 15%; 1.05-31.10 - 20%; 1.11-20.12 - 10%; 21.12-31.12 - 15%. Beer1 per liter Perfume and eau de cologne-6.5% Unprocessed fur and leather KRS-0% Leather clothing-15% Cotton fabric-0%

Exercise: An amount of orrange juice in the sum of 235212 lei is imported. Determine all the taxes, duties and charges payable at the moment of crossing the border. 1) Customs duties = 235212 *5% = 11760,60 lei 2) Customs charges = 235212 *0.25% = 588.03 lei 3) VAT = (235212 + 11760,60 + 588.03) * 20% = 49512.13 lei. Part 4. Allowances on Customs Duties The following are exempt from paying customs Duties: 1. 2. 3. 4. 5. 6. Vehicles used for the international transsportation of passengers, luggage and freight, as well as items for the vehicles technical support and maintenance, fuel and food necessary for the their operation in transit, or which had been purchased abroad for repair purposes. Goods, which are imported or exported for the official use of foreign citizens in accordance with the legislation or international agreements, to which the RM is a party. National and foreign currency, with the exception of coins and notes used for numismatic purposes, as well as secturitiesin accordance with the legislation. Merchandise imported or exported as humanitarian aid, with the condition that its purpose is proved through documented evidence. Goods imported or exported as aid, provided free of charge (donations) or for charitable causes through state channels. Merchandise, imported or exported temporarily under customs supervision, in conformity with the corresponding customs regimes.

20

7.

Merchandise transiting the customs territory under customs supervision in transit regime to third countries. Local taxes

a) real estate tax; b) fees on natural resources; c) fee for area development; d) fee for organization of auctions and lotteries on the territory of administrative-territorial unit; e) fee for placement of advertisements; f) fee for use of local symbol; g) fee for commercial units and/or social service provision; h) market fee; i) accommodation hotel fee; j) resort fee; k) fee for provision of passenger road transport services on municipal, city and village (commune) routes; l) parking fee; m) fee charged to dog owners; n) fee for development of border areas where customs offices (posts) for passing customs frontier are located. Article 290. The subjects of taxation The subjects of taxation are to: a) tax on landscaping - legal or physical persons registered as entrepreneurs and have the tax base; b) the fee for organizing auctions and lotteries within the administrative unit - legal or physical persons registered as entrepreneurs - the organizers of auctions and lotteries; c) The fee for advertising - legal entities or individuals registered as entrepreneurs, post and / or distribute promotional information (not including outdoor advertising) through kinoobsluzhivanie, telephone, telegraph and telex lines in vehicles by other means ( Besides TV, the Internet, radio, periodicals, and other printed materials); c1) in the case of transfer of possession and / or use of posters, billboards and other intended for outdoor advertising of means, which are owned by public authorities, institutions financed from the budgets of all levels, and non-profit organizations - owners of property rights, provided that the latter are legal entities or individuals registered as entrepreneurs; d) the fee for the use of local symbols - legal or physical persons registered as entrepreneurs and use local symbols on their products; e) collection of objects of trade and / or facilities to provide social services - legal or physical persons registered as entrepreneurs and having the objects of trade and / or facilities for the provision of social services; f) market fees - legal or physical persons registered as entrepreneurs - the administrator of the market; g) the fee for a temporary residence - legal or physical persons registered as entrepreneurs and provide services for temporary accommodation; h) tourist tax - legal or physical persons registered as entrepreneurs and service providers associated with rest and treatment; i) the fee for the provision of services for the carriage of passengers on the territory of the municipalities, cities and villages (communes) - legal or physical persons registered as entrepreneurs and provide services for the carriage of passengers on the territory of the municipalities, cities and villages (communes); j) the fee for parking vehicles - legal or physical persons registered as entrepreneurs and provide services for parking vehicles; 21

k) levy on dog owners - individuals living in residential state, cooperative and public housing, as well as in the privatized apartments; m) the collection vehicle owners - legal or physical persons - owners of vehicles registered in the relevant local government authorities in the established order; n) the fee for parking - legal or physical persons-vehicle owners who use parking; o) the fee for street trading facilities and / or facilities to provide services - legal or physical persons having outdoor facilities for the sale of products and / or services; p) the fee for waste disposal - physical persons registered at the address declared as a place of residence; q) of the fee for advertising device - legal or natural persons registered as entrepreneurs who own billboards, posters, billboards and other intended for outdoor advertising techniques. Article 291. The taxable and the tax base (1) The object of taxation is to: a) tax on landscaping - workers and / or founder of the company that are not included in the quarterly average number of employees; b) the fee for organizing auctions and lotteries within the administrative unit - the declared goods for auction or raffle tickets issued; c) the fee for advertising, except for the completely located in the buffer zone of roads below the village accommodation and / or distribution of advertising through cinema and video, telephone, telegraph and telex lines in vehicles with other funds (except television, Internet, radio, periodicals, and other printed materials), as well as posters, billboards, and other technical means by which house outdoor advertising; d) the fee for the use of local symbols - the products made using local symbols; e) collection of objects of trade and / or facilities to provide social services, except for the completely located in the buffer zone below the road of the village, - the objects of trade and / or facilities for the provision of social services; f) market fees - the total area of land and property located in the market; g) the fee for a temporary residence - services provided by entities with functions of accommodation; h) Resort fee - tickets for rest and treatment; i) the fee for the provision of services for the carriage of passengers on the territory of the municipalities, cities and villages (communes) - motor transport unit based on the number of seats in it; j) the fee for parking vehicles - parking; k) levy on dog owners, dogs that are in the pay of the owners during the year; m) due from owners of vehicles - engine capacity, the total mass, the number of vehicles owned units, the weight load on the axle of the vehicle in the possession of one year; n) the fee for parking - a specially equipped parking space used for parking the vehicle for some time; o) the fee for street trading facilities and / or facilities to provide services - the objects of trade and / or facilities to provide services, such as: kiosks, stalls, coolers, tents, trays, special vehicles, etc., are outside the permitted market ; p) the fee for waste disposal - the number of individuals registered at the address declared as a place of residence; q) of the fee for advertising device - surface area (surface) advertising devices. (2) The tax base of taxable objects installed in the annex to this section. Chapter 3 RATES, the calculation and payment of local fees Article 292. Rates and terms of payment of local taxes (1) The payment of local taxes, as well as the timing of tax reports on local tax levies for entities established in the annex to this section. Individual entrepreneur, the peasant (farmer) economy in which the average number of employees during the tax period does not exceed three units that are not registered for VAT, constitute a single tax returns for local taxes, except for the subjects of taxation referred to in paragraph a) of Article 291, in part related to the peasant (farmer) households, by 31 March of the year following the tax reporting year, with payment of fees at the same time. (2) The rates of local taxes are set by local governments with the characteristics of a tax. 22

(3) The reports submitted by local taxes from the mandatory use of automated electronic reporting, as provided in paragraph (21) of Article 187. Article 293. Calculation procedure (1) The calculation of the charges specified in Article 291, except for the fees provided for in paragraphs a) (in respect of the peasant (farm)), k), n), o) and p), is subject to taxation on the taxable base and the rates of local taxes. (2) Calculation of fees specified in paragraphs a) (in respect of the peasant (farm)), k), n), o) and p) of Article 291 is carried out by bodies approved by the local public administration. (3) The payment of fees referred to in Article 291, is subject to taxation. (4) In cases where the subject of taxation referred to in paragraphs e) and q) of Article 291, is partially located in the buffer zone of roads, fee shall be calculated in proportion to the taxpayer own area, which takes place on the territory of the local public administration. (5) In the case of the objects specified in paragraphs e), i), j) and q) of Article 291, the associated fees are calculated on the date specified by the local public administration authorities issued their approval (agreement), until the day when authorization (approval) suspended, canceled, revoked in accordance with established local public authority of, or before the date when the validity period has expired. The local public administration quarterly present territorial tax inspection at the location of information on the subject of taxation, which have received permission (approval) have been suspended, canceled, revoked authorization (approval) or whose validity period has expired, indicating the date of authorization ( agreement) and the date of suspension, cancellation, withdrawal of permission (approval) or they expire. Article 294. Local dues (1) Local fees are listed subject to taxation on treasury income account of administrative-territorial units. (2) (peasant) farms can pay a fee directly to the landscaping body authorized by the local public administration. (3) Collection of dog owners, collecting the parking fee for the outdoor facilities of trade and / or facilities to provide services and fees for waste disposal may be paid body authorized by the local public administration. Chapter 4 Benefits to pay local fees Article 295. Exemption from fees Exempt: a) from all local taxes - public authorities and institutions financed from the budgets of all levels; b) from all local taxes - Diplomatic and other equivalent representative, as well as international organizations, in accordance with international agreements, to which the Republic of Moldova; c) from all local taxes - the National Bank of Moldova; d) from the collection for organizing auctions and lotteries within the administrative unit - the organizers of auctions held for loan repayment, damages, payment of debts to the budget, the auction for the sale of state property and property nnosti administrative units; e) to charge for advertising - manufacturers and distributors of social advertising and advertising mail; f) from collecting on landscaping - founders (peasant) farms have reached retirement age; g) from the collection of objects of trade and / or facilities to provide social services - persons whose activities are related to the provision of funeral services, including manufacturing industry coffins, wreaths, artificial flowers, garlands. i) from all local taxes - the owners or owners of property confiscated in the public interest - for the period of requisition under the law. Article 296. Exemption from local taxes Benefits provided by local governments Local public authorities may, with the simultaneous application of the relevant changes to the budgets of administrative-territorial units: a) provide the subjects of taxation than those mentioned in Article 295 of the fringe benefits; 23

b) extend the time of payment of local taxes for the current tax year; c) to provide benefits to vulnerable populations. LOCAL ADMINISTRATION FEES Article 297. The powers of local public administration (1) authorized the local public authorities can enter all or just some local fees - depending on the capabilities and needs of the administrative-territorial unit. (2) authorized the local public authorities have no right to introduce charges not covered by this section. (3) Local charges imposed, modified or canceled by the local public administration for approval or amendment to the budget of the administrative-territorial unit. (4) The executive bodies of local government monitor the adoption of decisions by local councils to impose local taxes on the administered territories, such solutions represent the State Tax Service, within ten days from the date of its adoption and shall be notified to the taxpayers. Article 298. Responsibility (1) The responsibility for the timely transfer of the budgets of administrative-territorial units of local taxes, except charges specified in paragraphs a) (in respect of the peasant (farm)), k), l), n), o) and p) Article 289, and to provide tax reporting responsibility to the taxpayers. (2) The responsibility for the timely transfer of the budgets of administrative-territorial units of local charges specified in paragraphs a) (in respect of the peasant (farm)), k), l), n), o) and p) of Article 289, assigned to the bodies authorized by local governments. [(3) The territorial state tax inspectorate to monitor the implementation by local governments of this section. (4) Fees that are not listed in a timely manner, shall be collected in accordance with the law. Taxes on natural resources Chapter 1 GENERAL Article 299. Concepts For the purposes of this section, the following definitions: 1) Natural resources - water, takes away from any source of minerals and timber sold on the vine. 2) Minerals - contained in the bowels of natural mineral formations and mineral formations deposited on the bottom of water bodies. 3) Core - part of the earth's crust, below the soil layer and the bottom of reservoirs and extending to depths accessible for exploration and development. 4) The underground spaces used for underground structures - caves, man-made underground spaces, developed the mine. 5) Underground facilities - mines, which are mined or previously mined minerals, other structures (objects), constructed under the ground for entrepreneurship. 6) Rate of extraction of water - the amount of water produced in the absence of counter-defined state body authorized by the Government. 7) Water intended for bottling and other containers used for medicinal purposes and as a mineral and drinking water - water, attributed to one of these categories on the basis of the certificate for the production and bottling of water according to international standards. 8) Water extracted - water extracted from the water bodies located within the Republic of Moldova. 9) Surface water - sources on the ground (rivers, natural and man-made ponds, lakes, springs, water temporarily in surface waters). 10) The waste water - water used for the implementation of its activities for the production of products, works and services. Article 300. Relations regulated by this section (1) This section establishes the types and rates of charges for natural resources, the procedure of calculation and payment, as well as benefits in their application. (2) A system of fees for natural resources is governed by this section include: a) The collection of water; 24

b) fee for minerals; c) The fee for the geological exploration of mineral resources; d) fees for mining; e) The fee for the use of underground space for the construction of underground facilities not related to mining; f) fee for the operation of underground facilities for the implementation of business activities not related to mining; g) fee for standing timber. Article 301. Terms of payment and reporting (1) Unless this Act provides otherwise, the payers of taxes on natural resources represent the territorial state tax office and make the appropriate report to the budget of the administrative-territorial units of the applicable fee to the last day of the month following the reporting quarter. (3) In the absence of an object collection, established by this section, reporting on fees to a territorial tax authority is not represented. (4) An individual entrepreneur, the peasant (farmer) economy in which the average number of employees during the tax period does not exceed three units, which are not registered for VAT, constitute a single tax returns for the collection of water charges in the period until 31 March following the tax reporting year, for a fee in the same period. (5) Reports on fees for natural resources are represented by the mandatory use of automated electronic reporting, as provided in paragraph (21) of Article 187. Chapter 2 FEE FOR WATER Article 302. The subjects of taxation The subjects of the fee for the water are the legal and natural persons registered as entrepreneurs and includes extraction of water from the Water Fund, as well as using water Hydrocentral. Article 303. Object of taxation The object of taxation is: a) the volume of water extracted from the water fund, with the exception of the volume of produced water is not subject to charges for water; b) the volume of water used Hydrocentral. Article 305. The procedure for calculating the collection (1) The fee for water is calculated independently subject to taxation based on the volume of produced water or water used Hydrocentral, according to the measuring instruments or, in their absence, according to the rules of production and / or use. (2) The development of norms of production and / or use of water and control the amount of water produced by government agencies and authorized the Govern telst tion. Article 306. Tax exemptions There is no fee for: a) the water extracted from the bowels of passing to mining or to prevent (liquidation) adverse effects of treatment; b) the water produced and delivered to the public, public bodies and agencies financed from the budgets of all levels; c) the water extracted for fighting fires or to file for this purpose; d) water, extracted enterprises societies blind, deaf and disabled, as well as public health institutions or submitted to them; e) water, extracted enterprises prison or gave to them. CHARGE FOR GEOLOGICAL EXPLORATION MINERAL Article 311. subjects collection The subjects of the fee for the geological exploration of mineral resources are the legal and natural persons engaged in geological exploration of mineral resources, except for institutions financed from the budgets of all levels. 25

Article 312. object collection The object of taxation is negotiable (estimated) cost of geological exploration of mineral resources. Article 313. rate of charge Tax rate for geological exploration of mineral resources is set at 5 percent of the contract (estimated) costs. Article 314. The calculation and payment of the fee (1) The fee shall be calculated and paid by taxpayers to the budget of the administrative-territorial unit in full before the start of the geological exploration of mineral resources. (2) There is no fee for the performance of exploration within the mining lease operating mining company.

26