In December 2022, The Republic of Moldova officially implemented its inaugural transfer pricing regulations, marking a significant development for businesses operating within the country. These regulations have been crafted in accordance with the guidelines set forth by the Organisation for Economic Co-operation and Development (OECD) on transfer pricing. It’s important to note that these regulatory changes will take effect starting from January 1, 2024.
What has changed?
Moldova’s Law No. 356, enacted on December 29, 2022, encompasses a series of fiscal and customs policy measures for 2023, with a notable focus on the implementation of a new transfer pricing regime. This development carries significant implications for multinational enterprises (MNE’s) operating in and from Moldova.
The Moldovan government has set two materiality thresholds to be considered with regard to taxpayers that fall under transfer pricing requirements:
Materiality Threshold 1:
If your company conducts transactions with related parties, and the total annual value of these related-party transactions equals or exceeds MDL 20 million, you need to prepare and present information about these transactions as well as a transfer pricing file. However, you must provide this information and the transfer pricing file only upon request by the tax authorities. It’s not mandatory to provide them proactively; you’ll do so when asked by the tax authorities.
Materiality Threshold 2:
If your company engages in transactions with related parties, and the total annual value of these related-party transactions equals or exceeds MDL 50 million, there’s a stricter requirement. In this case, you must prepare and present both the information on related-party transactions and the transfer pricing file. This means you need to have these documents ready and available at the time of the transactions, rather than providing them only upon request.
These thresholds and requirements are set by the Moldovan government to regulate transfer pricing compliance for businesses engaging in related-party transactions. The level of detail and timing of compliance depends on the total value of such transactions your company is involved in. It’s essential to be aware of these thresholds and ensure your documentation and reporting are in line with Moldovan tax regulations.
What might the content of these regulations further look like?
The specific format, content, and submission process for transfer pricing information and files will be determined by the Ministry of Finance. It’s essential to understand and comply with these rules to ensure that your company follows Moldovan tax regulations and avoids penalties for non-compliance.
You must keep your transfer pricing files for at least 6 years after submitting them.
Penalties for Non-compliance:
Penalties for non-compliance include fines for late submissions, false information, and failure to submit. These fines range from MDL 30,000 to MDL 500,000, depending on the nature and severity of the violation.
If your company has annual transactions with related parties worth MDL 20 million or more, you must provide transfer pricing information by the 25th day of the third month after the fiscal year ends. If the tax authorities request it, you should also prepare and submit a detailed transfer pricing file within 60 days of their request.
For businesses with annual related-party transactions of MDL 50 million or more, you must proactively provide both the transfer pricing information and the transfer pricing file by the 25th day of the third month after the fiscal year ends.
Double Taxation Mitigation:
The rules also cover how to deal with double taxation when adjustments are made to controlled transactions. This includes corresponding adjustments for transactions with related parties, whether they are residents or non-residents.
Next steps for companies and how TPGenie can assist
Moldovan transfer pricing regulations require companies to ensure that their international transactions are priced fairly. TPGenie is a all-in-one transfer pricing documentation software provided by Intra Pricing Solutions. TPGenie provides a comprehensive solution to assist Moldovan businesses in achieving transfer pricing compliance. It helps calculate and document appropriate transfer prices, ensuring adherence to local regulations. It can assist MNE’s in many ways including the following:
- Documentation and Reporting – TPGenie simplifies the process of transfer pricing documentation and reporting in Moldova. It generates the necessary reports and documents required by Moldovan tax authorities, saving time and effort for companies. It ensures that the documentation is complete, accurate, and in line with Moldovan regulations.
- Risk Assessment and Planning – For Moldovan companies, TPGenie can help assess transfer pricing risks and develop appropriate strategies. It offers advanced analytics and risk assessment tools to identify potential transfer pricing issues and suggests strategies to mitigate them. This proactive approach helps manage transfer pricing risks and minimize the chances of audits or penalties.
- Compliance with International Standards – Moldova has taken steps to align with international standards. TP Genie can assist Moldovan companies in ensuring their transfer pricing policies comply with these standards. It helps businesses implement best practices, such as country-by-country reporting (CbCR) and master file preparation, to meet international requirements.
- Cost Efficiency and Accuracy – TPGenie automates the transfer pricing process, reducing the manual effort needed for calculations and documentation. This enhances efficiency, minimizes errors, and conserves valuable resources. It also stays updated with changes in transfer pricing regulations, ensuring precise and current calculations for Moldovan businesses.
- Expert Support and Guidance – Intra Pricing Solutions offers expert support and guidance to Moldovan companies using TP Genie. Their transfer pricing professionals can assist businesses in understanding the intricacies of Moldovan transfer pricing regulations and provide personalized advice. This support helps companies navigate the transfer pricing landscape effectively and make well-informed decisions.
TPGenie to simplify complex new regulations
TPGenie from Intra Pricing Solutions can greatly benefit companies in Moldova by simplifying transfer pricing compliance, reducing risks, ensuring accuracy, and providing expert support in this complex area of taxation.