Moldova's tax on digital sales from non-resident businesses

Moldova is the latest in a burgeoning number of tax jurisdictions that have revised rules to tax the cross-border sales by digital businesses. The new rules came into effect in April 2020.

Since the introduction of the rules the tax authorities in Moldova have started to reach out to non-resident digital businesses informing them of their obligations to register, collect and remit VAT on their sales to customers based in Moldova.

In their correspondence the email from the Moldovan tax authority states that: “The State Tax Service of the Republic of Moldova encourages you to review your tax position and comply with the legal requirements.” 

These non-resident digital businesses should have been applying 20% VAT to their cross-border digital sales since the rules were introduced in April 2020.

No threshold to registration

Affected digital businesses, as they do elsewhere, must register with the Moldovan tax authorities. A simplified registration system has been created to enable such registrations. These digital businesses need to register so that they can collect and remit the tax collected on their sales to Moldovan-based customers.

There is no threshold to registration. This means that affected businesses have to apply Moldova VAT to all of their digital sales to Moldova-based customers.

Early Moldovan estimates are that the move could result in an extra €5 million for its treasury.

Moldova following a global trend

The Eastern European state has followed in the path of recent plans in Singapore and Malaysia (where rules came into effect  on January 1, 2020); Mexico (June 1, 2020), Chile (June 1, 2020), Indonesia (July 1, 2020), and Ecuador (from September 16, 2020).

This tax reform is one of the first significant moves by a Moldovan government under prime minister Ion Chicu. Mr Chicu was officially approved as prime minister by parliament on November 14.

The global approach Kazakhstan, Oman and Ukraine also assessing plans to extend VAT/GST rules to such cross-border digital sales.

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