Government to increase personal tax exemption for employees to 40,000 lei

The personal tax exemption for employees will be increased by 35 percent, from the current amount of 29,700 to 40,000 lei. This means that every person who works legally will not pay income tax on the first 40,000 lei earned annually. The measure is included in the draft tax policy for next year, presented today by Prime Minister Vasile Tofan. The official noted that this change will allow 800 million lei to remain in people’s pockets.

The Prime Minister explained that the measure is proposed to stimulate legal work and to discourage paying salaries “in envelopes.”

“The best form of compliance is when the system is built in such a way that people want to be honest and not avoid taxes. If the tax burden on labor is too high, the temptation to avoid it increases. If the burden becomes more reasonable, formal employment becomes more attractive. That is why we are increasing the personal exemption by 35%, a very ambitious step. Today, the personal exemption is 29,700 lei. We propose to raise it to 40,000 lei. This means that every person who works legally will not pay income tax on the first 40,000 lei earned annually. It is an increase of 10,300 lei per year in the amount protected from taxation. It is a measure that helps especially people with low and middle incomes. It is a measure that leaves more money in the pockets of those who work. And it is a measure that sends a clear message: the state must start by respecting legal work,” said Vasile Tofan.

According to the official, this measure, combined with the increase in the minimum wage, which will enter into force on January 1, will further reduce under‑the‑table payments, when employees have a formal minimum wage but receive the rest in cash.

“The budgetary cost is significant – almost 800 million lei, money that we are leaving to the people. We prefer to leave more money to people who work legally and to offset this reduction by broadening the tax base, by taxing vices more fairly, by reducing exemptions and through better administration. This is the right direction: not to suffocate work, but to encourage it,” the Prime Minister argued.

The official stressed that the changes are necessary given that “the Republic of Moldova has a structural problem: too few people are economically active, too many work informally, and the ratio between people who work and pensioners is already critically low. 1.1 workers support one pensioner.”

“In the government program, we have committed to increase the employment rate from 57% to 62% by 2029 and to integrate at least 100,000 people into work through the National Employment Agency (ANOFM). This means more women returning to the labor market. Young people entering their first legal job instead of going abroad. People returning from the diaspora. People who today work occasionally, informally or partially declared. Elderly people who want and are able to continue working. People with disabilities who must have real access to the labor market. For this we need employment services, nurseries, vocational training, more modern labor rules. But we also need fair taxation to support these programs. Because legal work must make sense,” Vasile Tofan concluded.

The draft tax policy is to be submitted for public consultation.