How to Avoid Double Taxation in the Republic of Moldova

Anyone who works or runs a business abroad faces the same question: how to avoid double taxation and not pay the same tax twice — both in Moldova and in another country?
This is a common issue for individuals earning income overseas and for companies engaged in international trade or cross-border services.

Double taxation occurs when the same income is taxed in two countries — in the country where it is earned and in the country where the taxpayer is a fiscal resident. To prevent this, states sign international Double Taxation Avoidance Agreements (DTAAs). Moldova has an extensive network of such treaties — with Russia, Romania, France, Germany, and many other countries.

In this article, we explain how Moldovan citizens and businesses can correctly apply these agreements, which documents are required to confirm tax residency, and how to legally minimize tax obligations when working with foreign income.

What Is Double Taxation and Why Does It Occur

Double taxation occurs when the same income is taxed twice in different countries.
For example, a citizen of Moldova works remotely for a company in Germany: Germany considers that the income is earned on its territory and should be taxed there, while Moldova considers that the person is its tax resident and must pay tax on global income. As a result — the same income is taxed twice.

Reasons for Double Taxation

1. Different tax jurisdictions.
   Each country has its own rules defining who must pay taxes and on what income.
   Some states tax income based on residency (all income earned worldwide), while others apply taxation based on the source of income (tax is paid where the income is generated).
   When both principles overlap, double taxation occurs.

2. Absence of an international agreement.
   If there is no Double Taxation Avoidance Agreement (DTAA) between the countries, each tax authority will treat the income as taxable under its own laws.

3. Errors in determining tax residency.
   Taxpayers often do not realize that tax residency status in Moldova is defined by the Fiscal Code:

   • living in Moldova for at least 183 days in a calendar year;

   • having a permanent home or center of vital interests in the country.
     If a person lives abroad but remains formally a resident, the Moldovan Tax Authority may require them to declare all income earned globally.

4. Lack of supporting documentation.
   Even if a DTAA exists, to benefit from it you must confirm your tax residency — by obtaining a certificate of tax residency from the State Tax Service of Moldova and submitting it to the foreign tax authorities.

💡 Conclusion: Double taxation is not a system error but a natural result of overlapping national tax rules. It can only be avoided by correctly applying international agreements and legal mechanisms.

How the Double Taxation Avoidance Mechanism Works

To prevent individuals and companies from paying taxes twice — in the country where they earn income and in the country where they reside — states conclude Double Taxation Avoidance Agreements (DTAAs).

These treaties define which country has the right to tax specific types of income — salaries, dividends, interest, royalties, and others.

Thanks to DTAAs, taxpayers gain the right to tax exemption or to a tax credit for taxes paid abroad, which prevents the same income from being taxed twice.

International Agreements and Their Role

The Republic of Moldova has signed over 50 Double Taxation Avoidance Agreements with various countries — including Romania, Germany, Italy, France, Russia, the United Kingdom, Poland, the Czech Republic, and more.

These treaties establish:

• criteria for determining tax residency;
• rules for where income is taxed (country of source or country of residence);
• maximum withholding tax rates on cross-border payments;
• methods for applying tax exemptions or credits.

For example, if a Moldovan citizen receives dividends from a German company, Germany withholds tax at source (according to the treaty rate), and Moldova credits that tax when calculating the final income tax due domestically.

Main Methods of Avoiding Double Taxation

There are three primary mechanisms:

1. Exemption Method
   Income earned abroad is exempt from taxation in the country of residence if it has already been taxed in the source country.
   👉 Example: if Moldova applies the exemption method, income earned in Romania is not taxed again in Moldova.

2. Tax Credit Method
   Tax paid abroad is credited against the tax due in Moldova.
   👉 Example: a person paid 10% income tax abroad, while Moldova’s rate is 12%; only the remaining 2% is payable domestically.

3. Reduced Withholding Rate
   For certain income types (dividends, royalties, interest), treaties provide preferential withholding tax rates — 5% or 10% instead of the standard 15%.

Example of Treaty Application in Practice

Suppose a Moldovan company provides IT services to a client in Germany.

• Under the DTAA between Moldova and Germany, the tax on income is payable in the country where the service provider is resident (i.e., Moldova).
• As a result, the German client does not withhold tax at source, and the Moldovan company pays income tax only in Moldova.

The same principle applies to individuals: if a Moldovan citizen works in Romania and a treaty exists between the two countries, the tax is paid in only one jurisdiction — depending on residency status and treaty provisions.

💡 Conclusion: The mechanism for avoiding double taxation is based on international treaties that ensure taxes are paid once — fairly and transparently — without double fiscal burden.

💡 Note: if income is earned in a country without a double taxation agreement, double taxation unfortunately cannot be avoided — the full tax amount is payable in Moldova.

Example for an Individual

A Moldovan citizen works in Germany and pays 20% income tax there.
Under the treaty between Moldova and Germany, the tax credit method applies.

• Germany withholds 20% tax at source;
• In Moldova, the rate is 12%, but the tax already paid abroad exceeds that;
• Therefore, in Moldova the person does not pay any additional tax, but must still declare the income and attach the relevant documents.

Example for a Company

A company from Chișinău provides IT services to clients in France.

• According to the DTAA with France, no withholding tax is applied if the service provider does not have a permanent establishment in France.
• The company pays income tax only in Moldova.
• To confirm eligibility for the exemption, the client is provided with a tax residency certificate.

Intelcont Expert Tip:
Even small mistakes — such as missing the residency certificate, using the wrong income code, or filing a declaration late — can lead to tax reassessment and penalties. Therefore, for cross-border operations it is highly recommended to consult an accountant or tax lawyer in advance.

Common Mistakes and How to Avoid Them

Even with international treaties in place, many taxpayers make mistakes that cost them their right to benefits and lead to paying taxes twice. Below is a list of the most frequent issues and practical tips to prevent them.

Mistake #1. Missing Tax Residency Certificate

Many individuals and companies believe that having a treaty between countries automatically protects them from double taxation. In reality, without proof of tax residency, the benefits do not apply.

Solution:
Obtain a tax residency certificate in advance from the State Tax Service (Serviciul Fiscal de Stat) and submit it to your foreign partners or tax authorities before income is paid. The certificate is usually valid for one calendar year.

Mistake #2. No Proof of Tax Paid Abroad

If the tax has already been withheld or paid in another country, it must be documented and confirmed. Without supporting documents, the Moldovan Tax Authority will not credit the payment and will assess the tax again.

Solution:
Keep all certificates, payment receipts, contracts, and declarations issued by the foreign tax authority. Translate them into Romanian or Russian if needed and attach them to your Moldovan tax return.

Mistake #3. Incorrect Determination of Tax Residency

A person living abroad may wrongly assume they are no longer a Moldovan tax resident. However, if they still own a home, business, or have family in Moldova, the tax authority may classify them as residents and impose additional tax.

Solution:
Before leaving the country or working abroad long-term, consult with an accountant — you may need to officially notify the tax authorities of your residency change.

Mistake #4. Applying the Wrong Method

Taxpayers often confuse which method applies — exemption or credit. This leads to incorrect filings and overpayments.

Solution:
Check the specific treaty between Moldova and the country where the income was earned. The applicable method is usually stated in Articles 21–24 of the agreement.

Mistake #5. Missing the Filing Deadline

Even if you are entitled to an exemption or credit, if you file your return after the deadline, you lose the right to apply the benefit.

Solution:
In Moldova, the deadline for filing tax returns is April 30 of the year following the reporting period. Do not wait until the last day, especially if translations or notarized documents are required.

Mistake #6. Ignoring Professional Advice

Tax laws and international agreements are updated regularly. Trying to handle everything on your own can easily result in costly mistakes.

Solution:
Before filing your tax return or signing a contract with a foreign partner, consult tax experts or auditors who can review the agreement’s compliance and help optimize your taxation.

💡 Conclusion:
The main rule — always confirm everything with documentation and verify the terms of each treaty in advance. This will save both money and time when dealing with tax authorities.

What Companies Earning Foreign Income Should Do

Moldovan companies increasingly operate internationally — providing services to EU clients, receiving dividends from foreign subsidiaries, and investing in overseas assets. All of this raises an important question: how to avoid double taxation and report taxes correctly under international standards.

1. Determine the Source of Income

The first step for any business is to identify where the income is considered earned.
For example:

• If a Moldovan company provides services to a client in France, the source of income is Moldova (if the work is performed locally and there is no branch in France);
• If the company has a branch or permanent establishment abroad — the tax is payable there.

Under international treaties (DTAAs), company profits are taxed only if there is a permanent establishment in the foreign country.

2. Use Treaty Benefits

Moldova’s double taxation agreements provide reduced withholding tax rates for certain income types:

• Dividends — between 5% and 10%;
• Interest and royalties — between 0% and 10%.

This allows businesses to reduce their tax burden and increase net profits.

💡 Example:
A Moldovan company receives dividends from a partner in Poland.
Under the treaty between the two countries, the withholding rate is only 5% instead of 15%.
To apply the benefit, the Polish partner must be provided with a Moldovan tax residency certificate.

3. Avoid Creating a “Permanent Establishment” Unintentionally

If a company has an office, employee, or agent abroad who regularly signs contracts on its behalf, the foreign tax authority may classify this as a permanent establishment (PE).
In that case, profits attributable to the PE will be taxed in that country, not in Moldova.

Solution:

Before opening a branch or appointing a representative abroad, consult a tax expert. In some cases, it’s more efficient to sign a service agreement with a local company rather than creating a legal presence.

4. Maintain Proper International Accounting

Errors in cross-border accounting can lead to fines and the loss of tax credit rights.
Recommendations:

• Document all transactions in accordance with International Financial Reporting Standards (IFRS);
• Keep contracts, invoices, and payment documents;
• Maintain separate accounting records for each country.

This is especially important for companies earning income from multiple jurisdictions.

5. Plan Your Tax Burden in Advance

Tax optimization does not mean tax evasion.
A skilled accountant can calculate where and how it’s most beneficial to structure contracts — legally and efficiently avoiding double taxation.

Example:

• A company provides services to clients in Romania, France, and Germany.
• The tax treaty rates differ among these countries.
• With proper planning, the company can choose the best cooperation model (e.g., service contract vs. permanent establishment), reducing the tax burden by 10–15%.

6. Seek Help from Auditors and Tax Consultants

Even with an in-house accounting team, international taxation requires expertise.
A professional auditor can help you:

• Verify compliance with the DTAA requirements;
• Apply the correct tax credit for foreign tax paid;
• Prepare documentation for tax audits.

Intelcont assists clients working with international partners and helps them apply international treaties to minimize tax risks.

💡 Conclusion:
Companies engaged in international business must implement an effective tax planning system — monitoring treaties, ensuring proper documentation and residency compliance, and using all available tax incentives under Moldovan and partner-country legislation.

Case Study: How to Avoid Double Taxation in Practice

To better understand how international treaties work and how they can be applied in Moldova, let’s look at three practical examples — for individuals and companies.

Example 1. Individual — Working Abroad

Situation:

Alina, a Moldovan citizen, works in Germany under a one-year contract. Her German employer withholds 20% income tax from her salary. Meanwhile, Alina remains a Moldovan tax resident, as she spends more than 183 days per year in Moldova and owns property there.

Problem:

If Alina files her tax return in Moldova without supporting documents, the tax authority will impose the income tax again — resulting in double taxation.

Solution:

1. Alina obtains a Tax Residency Certificate from the Moldovan State Tax Service.
2. She provides it to the German tax authority, confirming her Moldovan residency.
3. Germany, under the Double Taxation Avoidance Agreement between Moldova and Germany, applies the tax credit method.
4. In Moldova, Alina declares the income, attaches the German tax certificates, and receives a credit for the tax paid abroad.

As a result — the income tax is paid only once, without additional taxation in Moldova.

Example 2. Company — Exporting IT Services

Situation:

TechMol SRL, a company from Chișinău, provides software development services to a French client.

Problem:

Under French law, the client must withhold tax at source unless there is proof that the contractor is a resident of another country. This reduces TechMol’s net profit.

Solution:

1. TechMol obtains a Moldovan Tax Residency Certificate.
2. It provides the certificate to the French client.
3. According to the Double Taxation Avoidance Agreement between Moldova and France (2022), profits are taxed only in the country of residence if the company has no permanent establishment in France.
4. The French client stops withholding tax at source.

TechMol pays tax only in Moldova and remains competitive in international markets.

Example 3. Investments and Dividends

Situation:
A Moldovan company invests in a Romanian firm and receives dividends. Under Romanian law, the standard withholding tax rate is 15%.

Solution:
According to the treaty between Moldova and Romania, the withholding rate is reduced to 5% if the investor is a Moldovan resident and holds at least 10% of the shares.

Result:
The company saves 10% of the dividend amount and legally optimizes its taxation.

💡 Conclusion:
Double taxation treaties are not a mere formality — they are a practical tool that helps companies and individuals pay tax once while maintaining transparency and trust with both jurisdictions. The key is to prepare documents properly and confirm your tax residency.

Main Double Taxation Avoidance Agreements of Moldova

The Republic of Moldova actively develops international tax cooperation and has signed dozens of treaties regulating the taxation of income earned by individuals and companies engaged in cross-border activities.

These agreements help avoid double taxation, reduce withholding tax rates, and increase transparency in financial operations.
Below is a table with key examples of active agreements and a brief summary of their main features.

Source: Ministry of Finance of the Republic of Moldova, “Double Taxation Avoidance Agreements” section.

💡 Tip:
When working with a foreign partner, always verify the most recent version of the treaty, as Moldova has updated many agreements in recent years to align with BEPS and OECD standards (anti-offshore initiatives).

Conclusion and Recommendations

Double taxation is one of the most common challenges faced by individuals and companies working abroad. However, with proper planning and accurate documentation, it can be completely avoided.

The key rule is not to postpone tax planning “for later.”
The international treaties signed by the Republic of Moldova provide a real mechanism to protect your income and business from double taxation.

Key points to remember:

1. Determine your tax residency and confirm it with official documentation.
2. Check whether a double taxation avoidance agreement exists between the countries.
3. Obtain a tax residency certificate in time and confirm foreign tax payments.
4. Apply the exemption or tax credit method according to the specific treaty.
5. Consult experts — documentation errors can cost you thousands of lei.

Intelcont’s Advice:

If you earn income abroad, plan to invest internationally, or work with foreign partners — schedule a tax consultation. Our specialists will help you verify your residency status, calculate optimal taxes, and prepare all required documents to benefit from international agreements.

📞 Intelcont — your trusted partner for accounting and tax advisory services in Moldova.

💬 If you have specific tax-related questions, contact Intelcont experts — we’ll help you calculate taxes, prepare documents, and avoid overpayments.

Conclusion

Proper application of international agreements is not just a formality — it’s a tool for financial protection and business optimization.
Double taxation can be legally avoided if you understand the rules, act on time, and rely on professional support.

🧾 Intelcont helps Moldovan companies and individuals establish transparent tax systems that comply with international standards and reduce unnecessary costs.