1. Generalprinciples of taxation

Taxes are the obligatory payments collected by the state on the basis of law from juridical and physical persons -enterprises, organizations, citizens - for satisfaction of social necessities.

The states tax adjusting of profits basic task is concentration in the hands of the state and local budgets of monetary resources necessary for the decision of problems of social, economic, scientific and technical development that appear during the life of people, state and industries in a whole.

Public purpose of taxes is showed in their functions. They are two -fiscal and economic.

The fiscal consists of forming of money profits of the state. Money is used for maintenance of state machine, army, development of science and technique, for maintenance of all layers of population, defense of environment. Part of money goes to education, health protection.

The economic function of taxes consists in influence through taxes on all processes in the economy of country, and also socio-economic processes in society. Taxes from this point of view can play an encouraging (grant or tax deductions), restrictive (increase of tax rates) and supervisory role.The functions of taxes are correlated - realization of fiscal function provides material basis for realization of economic role of the state, i.e. to the economic function.

For the better understanding of the essence of tax payments, it is important to define the basic principles of taxation. As a rule, they are the same for taxation systems of any country and consist in the following:1. Productivity or Fiscal Adequacy:An important principle of a good tax system for a developing country is that it should yield adequate amount of resources for the Government so that it should be able to perform its increasing welfare and developmental activities. If the tax system fails to yield enough resources, the Government will resort to deficit financing.An excessive dose of deficit financing is bound to raise prices which are harmful for the society. To make the tax system sufficiently productive it should be broad-based and both direct and indirect taxes find place in it. Moreover, taxes should be progressive so that the revenue from them rises with the increase in income of the people.2. Elasticity of Taxation:Another principle of taxation suitable for the developing countries is the principle of elasticity of taxation. According to the concept of elasticity of the taxation system, as national income increases as a result of economic growth, the Government revenue from taxes should also increase.In developing countries, the share of tax revenue as a proportion of national income is low as compared to the developed countries. This share of tax revenue will rise as national income increases, if the tax system is sufficiently elastic. Progressive taxation of income and wealth provides this elasticity to the tax system. Impositions of higher indirect (axes on luxury goods having a high income elasticity of demand also makes the tax system elastic.3. Diversity:A good tax system should follow the principle of diversity. This implies that there should not be a single or a few taxes from which Government seeks to raise large revenue. This is because if a Government tries to get large revenue from a single tax or few taxes, it will have to raise the rates of taxation too high which will not only adversely affect the incentives to work, save and invest but also encourage evasion of taxes.Therefore, the tax system should be a multiple tax system with a large variety of taxes so that all those who can contribute to the public revenue should be made to do so. This calls for a mix of various direct and indirect taxes. With the diverse tax system, the principles of fiscal adequacy and equity will also be better satisfied.Commending diversity in the tax system Arthur Young writes, If I were to define a good system of taxation, it should be that of bearing lightly on an infinite number of points, heavily on none. Similarly, another expert of public finance writes, Excessive reliance on any one base may produce adverse economic effects because the rates may become too high. Therefore, a tax system may do less economic damage if it raises moderate amounts from several bases rather than large amounts from one or two.4. Taxation as in Instrument of Economic Growth:In a developing economy such as ours, taxation should serve as an instrument of economic growth. Economic growth is primarily a function of rate of capital formation. If in the development strategy public sector has been assigned an eminent place, then capital formation in the public sector must occur at a relatively higher rate.This calls for mobilization of resources by the Government so as to finance capital formation in public sector. Therefore, a good tax system for a developing country will be such as will enable the Government to mobilise adequate resources for capital formation or economic growth.This it can do in the following two ways:(a)Mobilisation of Economic Surplus:An important principle for a developing country is that it should mobilise economic surplus found in the economy. Economic surplus is the surplus of national income over essential consumption. It is the task of taxation system that it should restrain non-essential or unproductive consumption through appropriate system of progressive direct and indirect taxes and thereby mobilize economic surplus.In an underdeveloped economy, there are particular economic sectors and classes of people where the economic surplus is generally found and which therefore should receive the special attention of tax authorities in such countries.(b)Increase in the Intermental Saving Ratio:A good tax system not only tries to mobilise the existing economic surplus but also seeks to raise it with a view to mop up relatively greater amount of increase in national income for the purpose of capital formation. Thus taxation in a developing economy has not only to restrain current unproductive consumption but also to check the large increases in consumption when with the increase in national income, economic surplus goes up.This will ensure rise in the incremental or marginal saving ratio which is a prime determinant of continuous economic growth. In other words, through the means of taxation consumption should not be allowed to increase in proportion to increase in incomes.Expansion in economic surplus accruing to the individuals should be mobilised and invested in the public sector for further growth. Progressive income tax and indirect taxes on goods with higher income elasticity will ensure this.5. Taxation as an Instrument for Improving Income Distribution:A good tax system for a developing economy should also serve as an instrument for reducing economic inequalities. The purpose of a good tax system for a developing economy is not merely to raise revenue for the Government but also to ensure that burden of taxes falls more on the rich.This requires that the rates of progressive direct taxes on income, wealth, expenditure, capital gains etc., must be sufficiently high. This objective of reducing income inequalities will be better served if a good part of the tax revenue is used for poverty alleviation programmes.6. Taxation for Ensuring Economic Stability:A tax system must also ensure economic stability. Economic fluctuations have been a big problem in the developed countries and for reducing these fluctuations taxation can play a useful role. For this purpose, tax system must have built-in-flexibility. To have built-in-flexibility, the taxation system must be progressive in relation in the changes in national income.This will ensure that when national income rises, an increasing part of the rise in income should automatically accrue to the Government. On the other hand, when national income falls, as in a recession or depression, the revenue obtained progressive from taxes will fall more rapidly than the decline in national income.Built-in-flexibility attained through progressive taxation ensures that when incomes are increasing during the period of boom or inflation, the relatively greater amount of tax revenue accruing to Government will moderate the increase in purchasing power with the people and aggregate demand and thus help in keeping prices under check.Likewise, under progressive taxation at times of depression or recession, tax revenue will fall faster than the income so that purchasing power of the people does not fall as fast as their pre-tax income. This will serve to check decline in economic activity.However, in developing countries, the problem is more of restraining inflation so as to achieve price stability. By discouraging or restraining consumption, especially of non-essential or unproductive type, taxation can pay a useful role in controlling inflation in the developing countries.Conclusion:From the foregoing analysis, we conclude that in the world today taxation is called upon to achieve several socio-economic objectives. It is not just a means of raising revenue for the limited functions of the State. Neutrality principle of taxation, that is, leave them as you find them, no longer finds favour with the modern economists. Tax system today has to play a more positive role. It is intended to bring about rapid economic growth, reduce inequalities of incomes, promote stability and to achieve other socio-economic objectives.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.1. 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.1. Taxes are received as a payment for the good, as they are added to the price.1. For the consumer, indirect taxes are convenient for the following reasons:1. Insignificance of the amounts paid1. Time convenience1. The lack of a constraining factor1. The lack of time requirements for making the payment1. 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.

Features of in modern states

FranceThis country deserves special attention it is a first country that introduced in fiscal practice VAT in its modern understanding. The tax system that is operating today was forming in 1930-1965, when the process of unification and association of many taxes took place.

The Value Added Tax was introducing gradually, starting with year 1954, in some industries, and in 1968 was widely spread on retail sales.

VAT is used for levying of any goods and services made in France, where it is a taxable supply made by taxable person in the course of any activity.

The standard rate of VAT in France is 20 %.A reduced rate of 10%,5.5%,2.1% is applied for certain goods and services.It is worth noting that special VAT rates are available in the French overseas departments (Martinique, Guadeloupe, Reunion Island), as well as in Corsica.VAT is temporarily not applicable in French Guyana.The list of exemptions includes some medical supplies, postal services, education, charities, some financial transactions, insurance, betting, gaming and lotteries.

In France as payers of VAT should be registered all businesses that make taxable supplies for which it is liable to pay VAT. Entities established in France may be exempted from registration if their supplies were, the previous year, less than (amounts tax excluded) EUR 32,600 for services of EUR 81,500 for goods.

In Germany Value-Added Tax was introduced in 1973 and in present it has the second place by the revenues collected in the budget. Its share in the budget is approximately 28%. The including of VAT in the tax system of Germany had two main goals: increasing of state revenues due to the taxes on consumption and performing of the main mandatory condition for entrance in the European Union.

The VAT is due to any tax and services made in Germany that are taxable supplies made by taxable persons. Some transactions are not liable to VAT: cash payments, the assumption of a debt as a form of payment, genuine compensation payments.

In present the standard VAT rate is 19%.

There is a reduced rate of 10.7%,5.5%,7%,0% for certain goods and services.The next supplies are exempted from VAT: postal services, insurance services, health and welfare services, education, lotteries.

All entities that make taxable supplies in Germany must notify the German authorities for registering as a VAT payer. VAT returns should be made if the entity sold products or services in the amount of more than 17500 EUR in the previous year and not more than 50000 EUR in the current year. Some non-taxable legal entities and small entrepreneurs are not required to register.

As in other European countries in Great Britain any supply of goods and services is supposed to VAT taxation.

The standard rate of VAT is in present 20%. It was increased on 4th January 2011 from 17.5%. The rate was temporarily reduced from 1 December 2008 to 31 December 2009 and constituted 15%.

There is a reduced rate of 0%,5%.The main supplies exempted from VAT are the following: insurance, education, health and welfare, cultural services, gambling and lotteries, postal services, finance services, sports and physical education, works of Art, charity.

The VAT registration threshold in UK is 77000 GBP from 1st April 2012. So all businesses making taxable supplies in UK in amount more than this sum must register and account for UK VAT.

In Sweden the Value-Added tax was introduced on 1st January 1969. Firstly, only some particular groups of goods and services were supposed to VAT levying, but in 1991 the Legislation was changed and all goods and services became subjects of taxation with some exceptions. Essential changes took place on 1st January 1995 when Sweden became a part of European Union.

In comparison with other EU countries in Sweden is the highest VAT rate for goods and products 25%. This tax is also imposed on drinking water, alcoholic beverages, tobacco.

There is a reduced rate of 0%,6%,12%.The main products that are exempted from VAT are:1) health and welfare2) education3) library activities4) human organs, blood and breast milk5) insurance services6) business transfers7) lotteries8) funeral services9) periodical editions of non-profit organizations 10)museum activities supported by the state

It is important to mention that in Sweden dont exist registration thresholds for VAT. All entities which are making taxable supplies in Sweden must obligatory register and account for Swedish VAT.

VAT-generalnotionsTheValueAddedTax(VAT)wasestablishedintheRepublicofMoldovaon01.01.1992anditreplacedthetaxonthemovementofgoods. DuringthewholeperiodofitsexistingtheVAThassufferedmultiplechanges,whichhadanegativeinfluenceontheeconomicactivityofenterprisesandpopulationswell-being. FortheVATstabilizingitwasintroducedintheTaxCode(TitleIII). AccordingtotheTaxCodethesubjectsoftaxationare: Asubjectconductingbusinessactivityanddeliveringgoodsand/orservices, thetotalvalueofwhichexceed600.000leiwithin12consecutivemonth; individualsandlegalentitiesimportinggoods, exceptindividualswhoimportgoodsforpersonaluseorconsumption, thevalueofwhichdoesnotexceedtheceilingstipulatedbycurrentlegislation(300Euros).Theobjectsoftaxationare: Deliveryofgoodsandservicesbysubjectsoftaxation,representingtheoutcomeoftheirbusinessactivityintheRepublicofMoldova; imports of goods into the Republic of Moldova, except goods imported by individuals for personal use or consumption, the value of which does not exceed the ceiling stipulated by current legislation; imported services in Republic of Moldova.The following rates of VAT are set:

1) Standard rate - 20% of taxable value of imported goods and services and deliveries made on the territory of the Republic of Moldova;2) reduced rates in the amount of: 8% rate for bread and bakery products; for milk and dairy products; for medicines; for natural and liquefied gas.0%rate goods and services for export; all kinds of international passenger and cargo; electric power, thermal energy and hot water for population; imports and/or deliveries on the territory of Republic of Moldova of goods, services designated for the official use of diplomatic missions in Republic of Moldova; import and/or delivery within the country of goods and services designed for technical assistance projects conducted on the territory of Moldova by international organizations and donor sates in treaties to which it is party; investment support projects, financed from loans and grants awarded to the Government or with state guarantee, from loans granted by international financial institutions and from grants awarded to the budget institutions. goods, services delivered within the free economic zones outside the customs territory of the Republic of Moldova, delivered from the free economic zones outside the customs territory of the Republic of Moldova, delivered in the free economic zone in the rest of the customs territory of the Republic, as well as those delivered by free economic zones residents of the Republic of Moldova to each other; the services of light industry enterprises on the territory of Republic of Moldova under contract processing customs procedure for inward; goods supplied in duty-free shops.

DeliveriesexemptedfromVAT

AnydeliverymadebyVATpayerthatisnotexemptedfromVATisconsideredtaxabledelivery. All deliveries shall be taxed at the standard rate in force, except for deliveries taxed atzero and reduced rates.

VATshallnotbeappliedon(isvaluablefordeliveriesontheterritoryofRepublicofMoldovaandforimportofgoods): Residential housing, land and their rent, the right to housing and land tenancy and rent, except for commission fees for housing and land transactions; food for children under 1 year old; state property bought as a result of privatization; pre-school institutions, clubs, sanatoriums, and other facilities for social, cultural and housing purposes; roads, electrical lines and substations, gas supply networks, underground water pumping plants and other similar objects, transferred gratuitously to the central and local public authorities, as well as transfers made gratuitously between enterprises, organizations, institutions, central and local public authorities, state authorities; goods, services of education institutions related to instructive, production and educational process, personnel training and development services; services (actions) performed by the authorized bodies for which a state duty is charged; all types of activities related to taxes and fees collected by the state for issuing licenses, registration and patents, as well as fees and duties levied by central and local public authorities; services rendered by lawyers and notaries, bailiffs and administrators of the process of insolvency, judicial restructuring, bankruptcy and liquidation; real estate registration services; services related to patent and licensing issuing operations (except for mediation services) related to the industrial property, as well as to obtaining copyrights and other related rights; seized property, property in abeyance, property of entities declared in process of insolvency, judicial restructuring, bankruptcy and liquidation, property which was legally transferred into state ownership as a result of succession of patrimonial rights, treasures; services provided for supporting ill and elderly persons, as well as goods for packages to be gratuitously transferred to poor elderly persons by charitable organizations; medical services; goods produced by university and school canteens, by canteens of other education institutions, hospitals, pre-school institutions, as well as by the canteens of other social and cultural organizations and institutions, partially or entirely financed from the budget; financial services: operations with credits, loans, accounts, shares, stocks, bonds, other securities and derivative financial instruments; investing operations; insurance and re-insurance services; import of banknotes and coins; postal services; services related to gambling; burial and incineration of human and animal bodies, and related activities; services for the general public: rental of dwelling space, technical services for residential housing blocks, water supply, sewage, heating, sanitation, elevators; passenger transportation services throughout the country; electric power imported and supplied through the distribution network; services related to the confirmation on land ownership rights; some books and periodical publications; services delivered by agricultural service cooperatives.

On imports:

Goodsentering the customs territory and placed in transit customs regimes, customs warehouse, processing under customs control, free customs warehouse, destruction, renounce in favor of the state; domestic goods previously exported and reintroduced within 3 years; goods placed under the customs regime of temporary admission; supplementary items imported for blind, deaf, disabled people by legal entities for non-commercial purposes when their value does not exceed 50 euros; goods, servicesmeantforshops serving exclusively for diplomatic missions and other similar missions in the country; goods, services for assistance in case of natural disasters, armed conflict and other emergencies, for supplies, services defined as humanitarian aid.

Note: - foreign goods apply VAT to their introduction into the customs territory and their placement under the customs regime inward, with subsequent refund of VAT paid on removal from the customs territory of the processed products.VAT is reimbursed in accordance with the instructions MSTI in a period not exceeding 45 days.- The removal of the goods from the customs territory placed under the customs regime of re amount of VAT paid shall be refunded to the introduction of such goods into the customs territory within a period not exceeding 45 days.

Registering as a VAT payerSubject carrying out a business activity, except for public authorities, public institutions (financed from the state budget, local budgets and state social insurance budget), and entrepreneur patent holders, is required to register as a VAT payer, if he performed in a period of 12 consecutive months supply of goods and services in the amount exceeding 600 thousand lei (since 01 September 2010), except for exempted supplies.Also, the subject carrying out a business activity has the opportunity to register voluntary as a VAT payer if: He performed over a period of 12 consecutive months supply of goods and services in the amount exceeding 100 thousand lei, except exempted supplies; deliveries were paid by buyers (customers) by transfer to the bank account of the taxpayer. The individual must apply in the territorial tax inspectorate by the end of the month when the ceilings was reached.He is considered registered from the first day of the month following the month in which the application was filed.The registered subject of taxation receives a certificate of registration for VAT indicating: name and legal address of the subject of taxation taxpayer's tax code date of registration first fiscal periodIn the case of suspension of deliveries subject to VAT, subject of taxation is obliged to inform the State Tax Service.State Tax Service is obliged to cancel the registration of VAT taxpayer.If the subject of taxation will not make taxable supplies and will not want to remain registered, he must inform the State Tax Service and prove that in the last 12 months, the volume of deliveries did not exceed the ceiling prescribed for registration.If the taxablesubject wants to cancel the registration document heshall inform the State Tax Service, he must demonstrate that future taxable supplies volume will not exceed the ceiling fixed for registration, in this case the State Tax Service unsubscribeshim.Cancellation of registration shall enter into force on the date of termination of taxable supplies by taxable subject or after the month in which notice was received, and the evidence referred to above. State Tax Service has the right to cancel the registration if: The total value of supplies for 12 consecutive months shall not exceed the threshold of 100 thousand lei Thetaxpayer has not presented VAT statement for each tax period.

VAT tax baseAccording to TC the VAT base is the value of taxable supplies.The tax base is determined at the date of delivery of goods or services.The tax base is determined by:- prices negotiated between the seller and buyer ;- negotiated rates for services ;- the sum agreed between the intermediaries;- market prices, and in their absence costs for goods sent free of charge;- custom value, plus additional expenses and all taxes related to imports of goods (excluding VAT);- auction price for the forced transfer of ownershipThe value of taxable supplies can not be less than the costs for production or the purchase price (import) of goods or services supplied.The value of supplies includes additional costs on transportation of goods, the amount of all taxes to be paid for these deliveries.The value of supplies is the value to be received for deliveries excluding VAT.If payment is received for deliveries partially or totally in natural expression, the taxable value of such property is the market value.If the delivery is made at a lower price than the market either because of specific relations between the supplier and the consumer, whether the consumer is an employee of the provider, then the object is taxable at market value of such supplies.The taxable value of imported goods is the customs value (transport costs, insurance costs and other costs related to bringing goods to customs), determined in accordance with the customs legislation, which includes the value of goods according to the accompanying documents, as well as taxes and charges are to be paid on imports of such goods, excluding VAT.In the absence of documents confirming the value of imported goods or the reduction of the value of the goods by the importer, the taxable value of goods is determined by the customs authorities in accordance with the rights granted by law to those authorities.The value of taxable supplies of goods and services can be adjusted after delivery and their payment if: the value of taxable supply, approved in advance, changed as a result of price change; taxable supply has been totally or partially returned to the subject which made the delivery ; taxable value was reduced after giving discount for early payment.Adjustment shall be made only if present documents confirming those operations.

VAT tax liability

Deliveries within the countrybecome taxable supply atthemomentof provision.For goods, delivery date is the date of transmission of consumer goods in possession, when the transportation of goods is made by the third person (organization of transport), the delivery date is consideredthe date of the beginning of transportation.Incaseofworkingwith immovableproperty, delivery date is the date when the property is included in the register of realty attheTerritorial Cadaster Office.For services, delivery date is the date of service provision, date of issue of the invoice or receipt of full payment by the subject of taxation or partial, depending on the event taking place before.If the invoice is issued or payment is received until the time of delivery, delivery date is the date of issue of the invoice or receipt of payment, depending on what occurs earlier.This procedure also applies toregulardeliveries over a period of time stipulated in the contract and in this case the delivery date is the date of issue of the invoice or receipt of each regular pay, depending on the event taking place before.For imported goods used in entrepreneurial activity, the term tax liability is the date of declaration of goods at the customat entry and payment date - the date of paying of funds by the importer to the customs authorities or respective accounts of the State Treasury at the Ministry Finance, confirmed by a statement from the bank account.For services used for entrepreneurial activity, the terms of honoring VAT tax liability and payment date is the date of payment for the imported service.For goods exported date of delivery is the date when the goods cross the border of the Republic of Moldova.

ThecalculationofVAT

ForthecalculationofVATthatshouldbepaidtothebudgetweshouldcalculateVATpaidbytheconsumersforthegoodsandservicesandVATthatshouldbepaidtothesuppliersforrawmaterials(itincludesVATforimportedmaterials).

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

VATreceivedandpaidiscalculatedaccordingtotheRegisterofevidenceofsuppliesandRegisterofevidenceofacquisitionwhicharefilledfromtaxinvoices.IfVATpaidtothesupplierformaterialsisbiggerthanVATreceivedfromconsumersthanthedifferenceistransferredinthenexttaxperiodanditbecomesapartofVATthatshouldbepaid.

Example1:

InMarchtheeconomicagenthad registerednextoperations:1) CommercializedontheterritoryofRMgoodsinamountof40.000lei;2) hasreceivedfromsuppliersmaterialsinamountof160.000lei(withVAT);3) hasimportedgoodsinamountof7000lei(withVAT).DetermineVATpaidtothebudgetinMarch.

Solution:1) VAT received = 40.000*20%/100%=8000lei2) VATpaid =(160.000+7000)*20%/120%=27.833lei3) VATbudget=8000-27833=-19.833lei(istransferredinthenextperiod)Answer:VATpaidtothebudgetinMarchiszero,butthesumof-19.833-19.833leishouldbepaidinApril.

IfVATthatshouldbepaidfor raw materials by enterprisesthatproducebakeryordairyproductsisbiggerthanVATreceived atthemomentof realizationofproducts, thedifferenceshouldberefundedfromthebudgettillthestandardVAT rate, multipliedbyvalueofsupply, whichisleviedatreducedrate. VATisrefundedin45daysbyStateTaxInspectorate.

Example2:VATpaidinFebruarytothesuppliersformaterialsconstituted-125.300lei;The valueofgoodsleviedatreducedrate937.500lei. Determinethesumthatwillberefundedfromthebudget.

Solution:1) VATreceived=937.500*8%/100%=75.000lei2) VATpaid=125.300lei3) VATbudget=75.000-125.300=-50.300lei4) Possiblelimitsforrefund=937.500*20%/100%=187.500leiAnswer: 50.300leisumislessthanVATlimit, so, thissumwillberefundedfromthebudget.

Example3:VATpaidto thesuppliers formaterials225.000lei; Thevalueofgoodsleviedatreducedrate800.000lei.Determinethesumthatwillberefundedfromthebudget.

Solution:1) VATreceived=800.000*8%/100%=64.000lei2) VATpaid = 225.000lei3) VATbudget=64.000-225.000=-161.000lei4) Possiblelimitsforrefund: 800.000*20%/100%=160.000leiAnswer: 160.000leiwillberefunded, becausethissumissmallerthan161.000lei.

IfVATpaidforrawmaterialsandservicesisbiggerthanVATreceivedduetothefactthatthesubjectoftaxationmadeadeliverythatisleviedatzerorate,hehastherighttoaskfortherefundofexceededsum, inthelimitofstandardratemultipliedwiththevolumeofdeliveryleviedatzerorate.

Example4:InAugustFlorinaLLChadmadenextsuppliesofgoods:Oninternalmarket-100.000lei; onexport-120.000lei;acquisitionsofrawmaterials180.000lei(withoutVAT);Determinethesumthatwillberefundedfromthebudget.

Solution:1) VATreceived=100.000*20%/100%+120.000*0%=20.000lei;2) VATpaid=180.000*20%/100%=36.000lei;3) VATbudget=20.000-36.000=-16.000lei;4) Possiblelimitsforrefund:120.000*20%/100%=24.000leiAnswer: Inthiscase16.000leiwillberefundedfromthebudgetbecausethissumdoesnotexceedthelimit.

Example5:AneconomicagenthadsoldinSeptemberandOctober,5430and3250unitsofgood. Thepriceforoneunitis890lei(withoutVAT). FromthesalesmadeinOctober3000unitswereexported. InOctoberfromthesupplierswereboughtmaterialsinamountof546230lei(withVAT). DetermineVATpaidtothebudgetforeverytaxperiod.

Solution:ForSeptember: 1) VATreceived=(5430*890)*20%=966540lei2) VATpaid=03) VATbudget=966540leiForOctober:1) VATreceived=(250*890)*20%+(3000*890)*0%=44500lei2) VATpaid=546230*20%/120%=91038,33lei3) VATbudget=44500-910038,33=-46538,33leiPossiblelimitforrefund: (3000*890)*20%=534000leiAnswer: InSeptembertothebudgetwillbepaid966540lei, butinOctoberwillberefunded46538,33lei.

Example6:AneconomicagentinMarch, AprilandMayhadsoldgoodsintheamountof34500lei,29000leiand58300lei(withoutVAT).Fromthesupplierswereboughtrawmaterialsinamountof:March-42400lei,April-15000lei,May-5500lei(withVAT). DetermineVATpaidtothebudget.

March

Determination of VAT on the import - export of goods

All goods imported into the country are subject to VAT, except for goods exempted from tax under Art.103 of the Tax Code or goods value of which does not exceed the threshold set in the budget law and are imported by individuals for their own use:List of goods and articles of personal use or consumption for which it is not needed paying VAT, excise duties, customs duties and charges for customs procedures:- Beer made from malt 2 liters;- natural grape wines, liqueurs and other spirituous beverages 1- cigarettes , cigarillos 50 pcs - 200 tobacco cigarettes- leather goods, travel goods, handbags 1 unit- articles of apparel and clothing accessories, knitted 1-dresses and accessories, other than those knitted-1 - 2 pairs of shoes- calculating machines 1- Watches 1Legal and natural persons importing goods for entrepreneurial activity pay VAT before or at the moment ofpresentationofcustom declaration, i.e. until the time when the goodsareintroduced into the Republic of Moldova.Individuals who import goods for personal use or consumption, whose value exceeds the limit set in the budget law, pay VAT when customs control of luggage take place.Toimportervalueof goods on which VAT is calculated is the cost of goods when entering the Republic of Moldova, including all fees related to import duties, taxes, insurance, freight, transportation costs, royalties and other payments to bepaid by the importer.Importers are required to submit documents confirming the value of imported goods, such as invoice, contracts or other documents as determined by law.VAT will be imposed at the rate of 20% of the calculated value of goods, except goods, whose rate is reduced.Importers of goods are required to indicate their tax code in the declaration unless the goods are not intended for resale or other business activities.Taxpayers, who import goods for entrepreneurship activity, can transfer on their account VAT paid on imports, taking into consideration the restrictions about transferring on account VAT on exempted supplies.Imports of services.Services imported in RM are objects of taxation and are defined in accordance with art.93 of CF.The value of imported services is considered the price paid or to be paid to the supplier by legal or natural person - beneficiary of the services rendered.The amount will include payments made in RM or payments made outside the country.Exports. Taxpayers who exports goods or services from Moldova are taxed at zerorate.To get right to the refund of VAT on goods, exportedservices, subject of taxation shall submit the following documents: document confirming the arrival of goods in the country of destination,the recipient country customs declaration confirmingimportof goods under the customs regime;However, in the absence of the customs declaration, confirmation document can serve commercial documents available, which, depending on the type of transport are: transportation by motor transport - CMR; transportation by rail - Railway Bill; transportation of all types of shipping (including sea and river) - Bill of lading; the transportation by air transport - Airway BillRequired documents arenecessary as accompanying document to international transport.This document notes about crossing state boundaries and arrival ofgoodsat the destination.In the absence of documents confirming export, subject of taxation is not entitled to claim a VAT refund in the amount of 0%.However, in this case VAT is calculated regardless of whether or not the subject of taxation levy VAT from the consumer.

Exciseduties -generalcharacteristics

Excise duty isanindirect tax that is imposed on consumer goods.The excise duty is included in the price of goods or services.Currently this tax is applied in all countries with market economies. It isleviedon some goods and services and can be viewed in two ways: firstly, as a source of income to the budget, and secondly, as a way of limiting the consumption of some excisable goods (usually harmful one).According to the Tax Code of the RM excise duties take part of general state taxes and are settle for: - some consumer goods;- gambling activity.The subjects of taxation, depending on the nature and type of activity are: a) natural and legal persons who process and / or manufacture excisable goods in Moldova;b) natural and legal persons who import excisable goods, except goods which are exempted from tax;c) legal entities active in the field of gambling.The subjects of taxation that produce or plan to produce excisable goods and people expected to work in the field of gambling are required to register as excise payer and receive the excise certificate.Excise Certificate is a document issued by the State Tax Service to the subject of taxation, the registration assigns the right to transact with excisable goods and to conduct business in gambling.To obtain an excise certificate, economic agents are required to register as taxable subjects at the State Tax Inspectorate on which territory they are activating with an application for a certificate request.The application request shall indicate the name (name, surname), legal address, the principal place of business and data on the license issued by the competent bodies.Economic agents that will be registered as excise payers have to declare the excise room. The excise room represents all places belonging to the subject of taxation, including buildings, spaces, territories, lands, or any other places that are located separately, determined in excise certificate where excisable goods are processed and / or manufactured by the subjects of taxation and where gambling is taking place.Excise certificate is issued within maximum 2 days after its receipt of the request.In case of changes or additions to the constituent documents (except change the tax code), such as: - reorganization of legal form;- change of legal address; - change of name of entity; - modification of information about excise room etc.excise certificate is replaced.

The objects of taxation and excise duty rates

As objects of taxation are excisable goods and licenses for gambling activity specified in the Annex to Title IV of CF RM.The tax base for: 1) excisable goods:a) volume in naturalexpression (liter, ton, liter of absolute alcohol, pieces, cm3); b) the market value of the goods;2) gambling activity: a) the cost of the license for gambling activity.

When calculating excise duties the following rates are applied:1) the absolute amount of the commodity unit (applies in situations where the tax base for excisable goods is the volume in natural expression);2) ad valorem percentage of the market value of the goods (for situations when the tax base for excisable goods is the value of goods) taking into account taxes and fees to be paid at import, without excise and VAT;3) ad valorem percentage of the cost of the license for gambling activities.

According to the Tax Code the are following tax exemptions:a) Excise tax is not paid by individuals who import goods for personal use or consumption of an amount or quantity does not exceed the limit established by law;b) Excise tax is not paid for importing the following goods: - defined as humanitarian aid, established by the Government;- Technical assistance for projects, conducted within the Republic of Moldova by international organizations within the agreements to which it is a party;- Intended for official use of diplomatic missions and other similar missions in Moldova;c) No excise duty is payable if the subject of taxation is exporting goods that are levied with excise duties independently or under the contract of commission;d) Excise tax is not paid on excisable goods into the customs territory and their placement in transit customs procedures, customs warehouse, destruction or waiver for the state and duty free shop.

Marking with excise stamps.

Excise stampisamarking that isprinted on specialized unit, authorized by the Ministry of Finance.Excisable goods such as vodka, liqueurs, wines, cognacs (brandies) and other spirituous beverages, tobacco, sold, transported or stored in the Republic of Moldova and imported itemsare subjected to mandatory marking with excise stamps. Marking is carried out during the manufacture of excisable goods, beforetheir import and for goods manufactured in the Republic of Moldova - until theirdispatch (transportation) inthe exciseroom.Suchgoodsassparkling wines, brandies (cognacs) in souvenir bottles with capacity up to 0.25 liters, 1.5, 3 and 6 liters are not mandatory marked with excise stamp, as well as excisable goods placed under the customs regimes of transit, custom storage, temporary admission, duty free shop and excisable goods manufactured in the Republic of Moldova for export.For goods subjected to marking with excise stamps markings are divided for:1. Champagne, sparkling wines and;2. Wines;3. Alcoholic beverages;4. Cognac (brandy);5. Articles from tobacco;6. Imported articles from tobacco.

CalculationofexcisedutiesThesumofexcisesthatshouldbepaidtothebudgetdependsonleviedvolume. Fordeterminingthissumthevolumeofexcisablegoodsismultipliedwithexciserates.Example1:Anenterprise

Generaloverviewofcustomsduties Acustoms duty is a mandatory payment subtracted by the customs authorities for the entry of goods onthe customs territory of the RM or for the removal of goods from its territory. The customs tariff is a catalog, which includes the nomenclature of goods brought to and removed from the customs territory of the RM, as well as the customs duties rates imposed on such goods.There are following types of customs duties: 1) ad valorem, calculated as a percentage of the customs value of the goods;2) specific set fee, calculated based on a unit of agood;3) combined, combining types of customs duties specified in 1) and 2);4) Exceptional, which is divided into: a) special tax applied for protection of local producer if foreign goodsthat are entering the customs territory in quantities and under conditions whichmay cause considerable material damage tolocal producers of goods;b) anti-dumping dutyis levied on the introduction into the customs territory of goods at lower prices than their value in the exporting country at the time of importation, if there is danger of causing material damage todomestic producers of identical or similar goods or appear obstaclesto organization or expansion of productionofidenticalorsimilargoods in the country; c) compensation duty isapplied to the introduction of goods into the customs territory, atthe production or export of which, directly or indirectly, subsidies were used, if there is danger of causing material damage to domestic producers of identical or similar goods or appear obstacles to organization or expansion of production of identical or similar goods in the country.The methods for determining of the customs value of the goods: a) Transaction value of the goods or the price actually paid or to be paid;b) based on the transaction value of identical goods;c) based on the transaction value of similar goods;d) based on the unit cost of goods;e) based on the value of goods;f) Reserve method.The main method of the calculation of the customs value of the good is the method of determining the customs value of goods based on the transaction value of the commodity.If the main method cant be applied to other methods are used.Each successive method can be applied only if the customs value of goods cant be determined by the previous one.The methods based on the unit cost of goods and based on the value of goods can be applied in any consecutiveness. (1) In determining the customs value of goods based on the transaction value of the goods or in the price actually paid or to be paid, the transaction value includes the following components: a) costs of transporting goods to the airport or other place of introduction of goods into the customs territory: - the cost of insurance;- Transportation costs;- Cost of loading, unloading and shipment of goods;b) expenses incurred by the buyer: - commissions and bonuses for brokers; - The cost of containers; - The cost of packing, including cost of packaging materials and packaging work;c) the value of the next items if they have not been included in the price actually paid or to be paid: - materials, components, parts and similar items incorporated in goods; - Tools, dies, molds and other similar components used in the manufacture of goods;- Expended in the production of goods;- Works of engineering, development, artwork and design, plans and drawings, executed outside the country and necessary for the production of goods;d) royalties and license fees that the buyer must pay, directly or indirectly;e) the income from any resale, transfer or use of the goods, which would return, directly or indirectly, to the seller.

(2) The method based on transaction value of identical goods.Goods are considered identical if their next characteristics resemble: a) physical characteristics;b) quality and reputation of a good on the market;c) the country of origin;d) the manufacturer(3) Method of determining the customs value of goods based on the transaction value of similar goods The goods are considered similar if, although they are not identical, they have similar characteristics and consist of similar components, which can perform the same functions as the goods being valued in the same way and are commercially interchangeable.For determining the similarity of goods, the next characteristics are taking into account: a) the quality, the existence of trademark, market reputation;b) the country of origin;c) the manufacturer.(4)The determination of the customs value of the goods by the unit cost method (1) If the goods brought into the customs territory (evaluated commodity) is sold in the country of importation in the condition in which it was imported, the customs value of those goods, will be based on the unit price corresponding to sale of this commodity or identical or similar commodities and the commodity is imported by persons who are not interdependent with the seller, and taking into account next deductions: a ) commission paid and general expenses related to sales of goods of the same class or the same type;b) the usual costs of transport and insurance and associated costs incurred in Moldova;c) ) costs of transporting goods to the airport or other place of introduction of goods into the customs territory;d) possible taxes and fees in connection with the importation or sale of goods.(5) Method of determining the customs value based on the value of good The customs value of goods will be based on its calculated value, including: a) the value or price of materials and manufacturing operations or other work to produce the commodity;b) the volume of profits and general expenses usually included in the amount of sales of goods;c) costs of transporting goods to the airport or other place of introduction of goods into the customs territory.

(6) The customs value of goods determined by reserve methodThis method if used only if all previous methods couldnt be applied.The customs value is calculated using reasonable means in accordance with legislation, general principles of international agreements to which Moldova is a party and in base of available data.The customs value of exported goods is determined on the basis of their contractual value taking into account the conditions DAF ("Delivered at Frontier").

Exemption from customs duty The next goods shall be exempted from customs duty: a) transport used in international transport of passengers and baggage, cargo and material and technical supply items;b) goods for official by foreign citizens in accordance with legislation and international agreements to which Moldova is a party;c) national currency, foreign currency and securities;d) goods brought into or out of the customs territory as humanitarian aid; e) goods brought into or out of the customs territory as grants or with philanthropic purposes;f) goods brought temporarily into or taken temporarily from the customs territory under customs supervision;g) goods placed under the customs regime of transit, customs warehouse, customs destruction or abandonment in favor of the state;h) personal use or consumption of goods imported by individuals, whose value or quantity does not exceed the limit of 200 Euros;i) domestic goods previously exported and returned within 3 years in the same condition;j) the production of books and periodicals, teaching materials for preschool;k) goods placed and marketed in duty-free shops;l) goods (services) introduced in the free economic zone on the customs territory of the Republic of Moldova;m) loans and grants to the Government from international financial institutions;n) equipment and attributes received as donations by the National Olympic Committees;o) imported excise stamps for marking of excisable goods;p) goods imported for capital investments within and under the investment agreements;q) movable property whose value exceeds 6,000 lei and whose lifetime is longer than one year, imported by leasing enterprises to honor their contractual obligations arising from leases.