Application of VAT to the services of a non-resident lawyer rendered to a resident entity of the Republic of Moldova

At present, more and more entities resort to the legal services of non-resident lawyers of the Republic of Moldova. Whether these are necessary in the context of certain international or national law relationships, it is important for accountants and auditors to properly apply tax value in these cases.

As a rule, several factors are to be taken into account in assessing the correctness of VAT.  It is important to take into account the following basic principles covered by the Fiscal Code:

- determination of the place of the provision of legal services for fiscal purposes;

- the VAT rate and, if there are any exemptions for legal services provided by a non-resident lawyer.

In order to determine the place of performance of the above-mentioned services, we will see the provisions of art. (1) (e), third indent of the Fiscal Code, which establishes that the place of supply of the services is the place of business or, if it is missing, the domicile or residence of the beneficiary of services of consultants, engineers, consultants, lawyers, accountants and marketing (market research), text translations, and information provision services, including through fixed and mobile public mobile telephone intermediation centers.

Thus, regardless of whether the lawyer's de facto service will be delivered on the territory of Moldova or outside the country, for tax purposes it will be considered to be provided in Moldova because the beneficiary is a resident of RM.

If regarding the VAT rate for lawyers' services The Fiscal Code does not set exceptions, then in the chapter on exemptions according to art. 103 par. (1) (6) of the Fiscal Code exempts the right to deduct the professional activity in the justice sector. According to the definition in Art. 5, item 36² of the Fiscal Code, professional activity in the justice sector is a permanent activity carried out in the forms of organization of the activity provided by law by lawyer, trainee lawyer, notary public, bailiff, authorized administrator, mediator, judicial expert in Office of the Judicial Expert Office.

In conclusion, it can be concluded that the lawyer's professional services, acting in the forms of organizing the activity established by the law, will be considered as import of services, but VAT will not be calculated and paid for the import of the services in question, because the exemption provided by art. 103 paragraph (1) point 6 of the Fiscal Code.

However, a recommendation would be that prior to the use of the above exemption, all the documents available to the lawyer should be thoroughly analyzed in order to ensure full compliance with the legal rules of the Tax Code and other national and / or international acts regulating the work of lawyers.