Barriers to Trade and Investment Attraction in the Republic of Moldova

1. Barriers to Trade and Investment Attraction in the Republic of Moldova

2. Barriers to Doing Business and Investment Attraction • Tax policy • Labour market regulation • Competition • Justice • Administrative issues • Customs

3. Tax Policy Issues • Advance payment of income tax and penalty for the forecast gap • Correlation of the Tax Policy with the operation of businesses under market economy principles • Tax penalties disproportionate to violations • Incentives for major investors to recover VAT on capital investments

4. Labour Market Regulation • Create incentives for employers to increase salaries by adjusting social insurance rates • Review the share of contribution to NSIO/NHIC to motivate businesses to pay official salaries and taxes • Streamline and automate the procedure of obtaining work permits for foreigners (due to shortage of skilled labour) • Amending Article 20 of Chapter 2 of the Tax Code to provide that lunches are treated as an incentive granted by the employer, not to be treated as a taxable income of the employee

5. Competition • Lack of a single and universal methodology for determining market dominance • Lack of a legal framework to regulate the procedure of initiation, conduct, review and issuance of sanctioning decisions by the NACP • Uncertainty about accountability of businesses violating competition protection rules • Counter unethical businesses and ensure a level playing field for competitors (avoid unofficial wages, prevent tax evasion) • Review and economic justification of the list of social goods and the profit margin

6. Administrative Barriers • Streamline administrative procedures, enforcement of the one-stop shop concept (e.g. simplify accounting laws, in particular, for small businesses) • Eliminate deficiencies in procedures for registration and liquidation of businesses (e.g. proof of registered address, enforcement of the one-stop shop concept, return of tax invoices upon change of partners ....) • Superfluous limitations to corporate governance and economic operation of businesses in Moldova (e.g. prohibition to make payments through intermediaries, duplication of procedures for technical authorisation and certification, limitation of cash payments between businesses) • Unreasonable barriers to flexible transactions relating to mergers and acquisitions • Short-term licensing of entrepreneurial activity hinders medium and long term business planning • Superfluous certification of products imported from countries that ensure high quality standards

7. Customs Issues • Discretionary treatment by customs authorities • Increase predictability and transparency of customs procedures which would enable businesses to estimate by themselves amounts to be paid • Simplify export procedures • Develop guidelines / regulatory framework to avoid ambiguous interpretation of the Customs Code • Cumbersome/delayed implementation of the VAT refund procedures for export • Publish all customs procedures on the website of the Customs Service