Since interest, royalties, and dividends should be taxed only once in one of the European Union member states, it is proposed to amend Sections II and V of the Tax Code (“Income Tax” and “Tax Administration”).
Controlled Foreign Company (CFC)
Effective January 1, 2028, a new chapter of the Tax Code will come into force, regulating the concept of a controlled foreign corporation (CFC) and the procedure for determining its tax base. It will specify the conditions for granting the right to offset income tax paid by a CFC abroad, reporting obligations, and the imposition of penalties for failure to submit or late submission of information regarding CFCs, the procedure for preventing double taxation, as well as the obligation to comply with its provisions, among other things.
The explanatory note to the draft states: since the EU single market is an internal market, transactions between entities from different EU member states should not be taxed under less favorable conditions.
Therefore, upon Moldova’s accession to the EU, provisions will apply recognizing as tax-exempt dividends distributed from the profits of residents of EU member states, as well as the rules governing the conditions under which income received from interest or royalties in Moldova will not be subject to tax.
The procedures for providing a bank guarantee to obtain the right not to withhold income tax at source, the tax treatment of dividends between parent and subsidiary companies, rules for the prevention of double taxation, mechanisms for resolving tax disputes, and others.
