Republic of Moldova Recalibrates Its Fiscal Policy for 2027: Investment, Employment and Budget Revenues at the Heart of the Reform

Republic of Moldova prepares comprehensive tax reform: lower taxes on labor, higher taxes on banks and excisable products

The Government of the Republic of Moldova, led by Vasile Tofan, has presented the draft tax policy for 2027, proposing a series of significant changes to the taxation system. The reform aims to reduce the tax burden on labor, stimulate investment and simplify the tax system, while increasing budget revenues through the reduction of certain tax incentives and higher taxation of specific activities and products.

The draft has been launched for public consultation and represents the second version of the tax policy for the coming year, after the version prepared by the previous government was withdrawn following criticism from the business community and experts.

Lower labor taxation and incentives for profit reinvestment

One of the main directions of the reform is to reduce the tax burden on employed individuals. The Government proposes increasing the annual personal allowance from MDL 29,700 to MDL 40,000, a measure presented as an instrument to encourage formal employment and reduce undeclared work.

At the same time, the authorities intend to expand the 0% tax incentive applicable to reinvested profits. The eligibility threshold for companies would be increased from MDL 100 million to MDL 200 million in terms of assets or turnover.

At the same time, the dividend tax could increase from 6% to 8%, with the aim of encouraging companies to retain and reinvest a larger share of their profits.

Additional taxes on banks and financial institutions

An important component of the fiscal package is the introduction of a “solidarity” tax for the banking sector. In addition, for the 2027 fiscal year, the income tax applied to banks and financial institutions would temporarily increase from 12% to 18%.

The authorities justify the measure by the need to increase the contribution of sectors that have the capacity to bear additional taxation, thereby generating additional revenues for the public budget.

Higher excise duties on tobacco, vaping products and other products considered harmful

The reform also includes higher taxation of excisable products. Excise duties on vaping products would increase by 50%, while taxation of tobacco products would also be increased.

The Government proposes introducing excise duties on sugary and energy drinks, as well as a 25% excise duty on pyrotechnic articles.

At the same time, higher taxes are envisaged for the gambling sector, including the introduction of a 6% tax on this activity.

Changes to the VAT regime

The draft also provides for changes to the VAT system. The reduced 8% rate would be maintained for basic food products and medicines.

For other categories, including certain food products, agricultural activities, HoReCa and tourism, a 12% VAT rate is proposed.

For electricity and gas consumption exceeding certain thresholds, the 20% VAT rate would apply starting from April 1, 2027.

Taxation of parcels ordered from foreign platforms

Another proposed measure concerns orders placed by consumers through commercial platforms based outside the country. The Government intends to introduce VAT on these goods, as well as a fixed fee of MDL 12 for each parcel.

The Executive argues that the measure is necessary to create fairer competitive conditions between foreign platforms and local retailers, which are already subject to tax obligations.

Higher taxation of investment income

The fiscal package also provides for changes to the taxation of capital gains. The tax applied to such gains would increase from 6% to 12%.

Through this measure, the authorities aim to increase the contribution of investment income to the public budget and achieve a more balanced distribution of the tax burden.

The second version of the tax reform

The current draft represents the second attempt to advance the tax policy for 2027. The first version, prepared by the former government led by Alexandru Munteanu, did not move beyond the public consultation stage amid criticism from business representatives and experts.

Following these consultations, the Ministry of Finance dropped several controversial proposals, including the new wage taxation system.

However, the new version retains the reform’s main objectives: reducing the tax burden on labor, stimulating investment and identifying additional sources of revenue for the state budget.

Maia Sandu: the new version is more balanced

President of the Republic of Moldova Maia Sandu considers the new version of the tax reform to be more balanced than the previous proposal. The head of state argues that the proposed mechanisms are less restrictive and could contribute to a fairer distribution of the tax burden.

According to Maia Sandu, the reform should reduce taxation on labor while also generating additional budget revenues, including to finance the promised salary increases.

The President also emphasized the need for clear explanations from the Government and an extensive public consultation process. She acknowledged that the proposed tax changes may involve certain risks, but said she did not believe they would fundamentally alter the budgetary balance.

The reform enters the public consultation stage

Through the new draft, the Government is seeking to strike a balance between reducing taxation on labor and increasing public revenues. The focus is on stimulating investment and profit reinvestment, alongside higher taxation of certain sectors and products.

The draft will be examined as part of the public consultation process, and the final form of the 2027 tax policy could be adjusted based on proposals and feedback received from the business community, experts and civil society.