Volume of income taxes paid by individuals has increased even if tax rates decreased. Info-Prim Neo interview with Galina Spac, head of the direct taxes division of the Main State Tax Inspectorate

[- In what conditions the private individual is obliged to present income statements?] - Under article 83 (paragraphs 1 and 2) of the Tax Code, the resident private individuals (Moldovan citizens, foreigners and stateless persons) that earn a taxable income in the form of salary and from other sources that exceeds 25,200 lei, we refer to the incomes earned in 2008 – are obliged to present income statements. The individuals that have only one job are an exception. If the persons earn incomes from several sources – work or other activities - these incomes must be declared. The persons that have a single job can present income statements if they consider that they paid a higher income tax than they should. If this fact is confirmed after verification, the difference is paid back. But this process takes time as a lot of documents should be examined and inspections carried out. The legislation says that this should be done within 40 days of the submission of the application, but we do not always manage to do this in time. If the taxpayer intends to change the permanent place of residence from Moldova in another country, they are obliged to submit the income statement for the fiscal year when they lived in Moldova. [- Should the statements be filed to the local subdivisions of the State Main Tax Inspectorate?] - Yes, the statements should be lodged with the fiscal inspectorates located in the settlements where the taxpayers reside. If the taxpayers do not have residence permits for the settlement where they live and work, the statement is submitted to the local fiscal inspectorate that served the company where they work or the last company where they worked. [- What changes were made to the format of the statement compared with a year earlier?] - No essential changes were made. There is a standard form of the CET08 statement. It was published in the Official Gazette on December 19. The statements can be sent by mail and email (www.fisc.md.). No documents are needed to confirm the incomes. The taxpayer is responsible for the information included in the statement. The tax rates are: 7% for the taxable income that does not exceed 25,200 lei and 18% of the yearly taxable income that exceeds this sum. The personal exemption for 2008 was 6,300 lei, while the exemption for maintained persons – 1,560 lei. The husband (wife) can benefit from additional exemption of 6,300 lei if the wife (husband) did not benefit from personal exemption. [- What incomes should be declared besides salary?] - All the incomes specified in article 18 of the Tax Code: incomes from entrepreneurial activities, rental incomes, incomes from capital gains, interest and other revenues. [- Should the persons that receive money from abroad declare it?] - These incomes are taxed in the countries were they are earned. If we make the people declare these sums and pay taxes on them, this would mean double taxation. This money should not be declared and taxed. But certain resources transferred for investment purposes, i.e. financing for implementing investment projects, are declared and, respectively, taxed. [- Are the prizes taxed?] - If the prize is lower than 10% of the personal exemption for 2008 (6,300 lei) – 630 lei – it is not declared and taxed. If it is larger, it should be declared and taxed. [What about capital gains? During the last two years, the sums collected from this kind of incomes rose from 2.2% - the share of incomes earned by private individuals in the total incomes - in 2006 to 6.8% in 2007] - If the person sold an apartment, a house, a car and the capital has increased. The taxpayer is taxed 50% of the rise. If the apartment where the person lived is sold, a sum of 10,000 lei is set for every year that this person lived in the given apartment and this sum is not taxed. [- Should the persons that sell products obtained from the land near houses or from the plots cultivated by fruit and vegetable growing associations to acquisition companies declare these incomes?] - No. The legal entities that purchase these products deduct 10% from their cost. [- Can you describe the taxpayers’ behavior during the past years?] - We see a rise in the number of income statements presented in the set terms, i.e. by March 31. The number of income statements in 2006 was 70,174, while in 2007 – 72,439. The volume of income taxes paid by private individuals rose from 1.12 billion lei in 2006 to 1.32 billion lei in 2007, though the tax rates decreased. [- Are there changes in the income categories in the total incomes declared?] - If we refer to the incomes for 2006- 2007, there were few changes. The salaries paid in 2007 made up 87% of the total incomes, as against 95% in 2006. The incomes from entrepreneurial activities, i.e from trades and provision of services, are low – 2.3% of the total incomes earned in 2007. This is not much. This means that most of the private individuals live from salaries and do not have other sources of income. The rental incomes have slightly increased, but it is hard to give concrete figures because many people are not aware that they have to sign a contract when they rent a house or an apartment. The interest constituted 0.05% of the incomes earned in 2006 and 0.1% in 2007. [Info-Prim Neo note:] 166 persons earned over 1 million lei according to the income statements for 2007, as opposed to 62 in 2006. The maximum sum declared was 11.7 million lei. The number of persons that earned incomes of up to 1 million lei also increased. However, the largest part of the persons declared incomes lower than 100,000 lei. These persons work in more than one place. Experts consider that these data do not yet allow saying that Moldova has a middle class that forms the basis of any society.