In line with the best practices of Grata International, we come to offer you a short presentation on the opportunities offered by the Free Economic Zones of Moldova. The framework law was adopted in 2001. On the basis of its provisions, local and foreign investors have obtained numerous facilities and opportunities: the basic condition for becoming a resident of a free zone is that the investor, that he either a natural or legal person or registered as an entrepreneur. The investor is free to choose the Zone in which he wishes to operate. After choosing it, the investor will apply for resident status. The selection of residents is made by the administration of the free zone through a competition, on the basis of several criteria, such as the type of activity; the volume of investments; the availability of the area for new residents, the labor market and the existing infrastructure.
After selection, the administration of Free Zone will sign a contract with the resident. The contract is valid for the duration of activity of the Free Zone. Each free zone is established on the basis of a special law. The main provisions of these laws refer to the location of the Zone, its area and the duration of activity. Currently, seven zones are active in the republic, and they have received $453 million in investments since the beginning of their establishment.
Incentives provided by the law on free economic zones
Free economic zones are clearly defined and fenced territories that guarantee the security of residents’ assets. The administration of Free Zone provides residents with the necessary infrastructure for the activity and oversees its adjustment and/or development. This relieves the resident of bureaucracy and other organizational costs. Residents have the right to make mutual settlements in foreign currencies. This reduces currency exchange risks and banking costs.
Each zone has a dedicated customs point which operates 24 hours a day. This installation offers increased comfort and security for logistics operations. This saves a lot of time and effort for import and/or export operations. In addition to the operational advantage, a simplified procedure is also applied.
Goods and services inside the zone will have the status of free circulation and can be transmitted from one resident to another without completing the customs declaration. Foreign investors and employees of residents are exempt from paying consular fees when issuing service visas and moreover to obtain a residence and work permit for a period of 5 years, it is enough to apply to the Zone administrator.
The law also provides for state guarantees for investments made in free zones. It is a question of maintaining the conditions of the operations carried out at the time of the conclusion of the contract with the Free Zones concerned. The guarantees provide residents with the right to work for 10 years from the date of the appearance of legislative changes under the law until the change.
Incentives provided by the Fiscal Code
Residents of free zones are taxed at 75% of the quota established from the income derived from the activity carried out in the free zone if the activity is not related to the export of goods and services, and at 50% in the case of income derived from the export of goods and services outside the customs territory of the Republic of Moldova.
Residents of free zones who invest in fixed assets with a capital of at least one million US dollars are exempt from income tax for a period of three years, and in the case of a similar investment of at least 5 million US dollars, they are exempt from income tax for 5 years.
In addition, they are exempt from VAT for goods delivered and services rendered to other residents in the free zone, as well as in case of export of goods and services outside the customs territory of the Republic of Moldova. Another relief concerns the exemption from excise duties on goods imported into the free zones as well as in the case of deliveries of these goods between different zones and between residents.
Incentives provided by the customs code
The Customs Code provides for exemption from import duties for the import of goods from the rest of the customs territory of Moldova as well as from abroad.
Thus, we can conclude that the status of resident of the free zone offers the advantage of substantially reducing the costs related to an economic activity compared to the costs of a similar activity carried out in the customs territory of the Republic of Moldova as well as the possibility of permanent increase in production volume thanks to export opportunities.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.