The Moldavian tax office announced that for services performed by subcontractors for the beneficiaries of technical assistance projects a nil VAT rate shall be applied. The State Tax Service published a written clarification on 22 June 2017 with details on the specific application that is to be prepared.
Based on article 104 (c1) of the Tax Code (TC), the State Tax Service explained that in case of imports and supplies of goods and services for projects related with technical assistance and investment located on the territory of Moldova, the transactions shall be subject to a nil VAT rate.
The above shall be applied in cases when resident VAT registered taxpayers deliver goods and/or provide services to the following parties:
- - Donors, beneficiaries and project implementers;
- - Contractors with duly concluded agreements with donors, project implementers and beneficiaries, as well as their subcontractors.
In order to finalize the newly clarified procedure, the VAT registered tax payer is obliged to provide the following supporting documentation:
- - Confirmation letter issued from the contractual party (donor, implementer or beneficiary) disclosing the name of the legal entity to which the supply of goods or services is made as part of a technical assistance or investment project;
- - Detailed list and explanation of the projects, approved by the government, subject to the nil VAT rate.
The above documents shall ensure the application of a nil VAT rate to the supply of goods and services within the scope of technical assistance projects. Otherwise, the VAT registered tax payer bears the risk of rejection and potential penalty imposed by the competent tax authority.