Social Enterprise or Integration Social Enterprise.
A Social Enterprise (SE) is an enterprise established by public associations, foundations, religious organizations, private institutions and/or individuals, which carries out activities in the field of social entrepreneurship in order to solve social problems in the interests of the community. Targeted areas of activity include social services, ecology, local historical heritage, and related fields.
An Integration Social Enterprise (ISE) is a social enterprise whose primary aim is to create jobs and employment mainly for persons from socially vulnerable communities.
In both cases, it is necessary to first register as a Limited Liability Company (LLC) and subsequently obtain the status of a SE or ISE.
Conditions for Obtaining SE and ISE Status
According to Law No. LP845/1992, Limited Liability Companies and Production Cooperatives established by non-profit organizations, public associations, foundations, religious organizations, private institutions and/or natural persons may obtain SE or ISE status, provided they cumulatively meet the following conditions: they operate in at least one of the areas on the list of permitted activities; they provide their members with equal voting rights, regardless of participation in the authorized capital; they reinvest at least 90% of their profits to achieve the objectives prescribed by law and clearly stated in the founding document; they apply the principle of social justice to employees, ensuring fair wages with a maximum ratio of 1 to 5 between the lowest and highest wage; they are free from arrears to the national public budget; and they clearly set forth in the Memorandum of Association the fields of activity to be performed, along with the conditions that property acquired after obtaining SE status shall not be distributed to members and founders beyond 10% of profits, and that in the event of liquidation, remaining assets shall be transferred to one or more social or integrative social enterprises or non-profit organizations.
To additionally obtain ISE status, the entity must meet the following supplementary conditions: at least 30% of permanently employed personnel must be from socially vulnerable groups, with the total working hours of these employees constituting at least 30% of the total working hours of all employees; and the Memorandum of Association must explicitly state the aim of creating jobs mainly for persons from socially vulnerable groups.
According to Law No. 60, societies and public associations for persons with disabilities may create specialized enterprises and/or integrative social enterprises employing persons with disabilities. The state partially subsidizes integrative social enterprises in which 100% of the capital is owned by societies and public associations of persons with disabilities and in which persons with disabilities constitute 50% or more of the total number of employees.
The status of SE or ISE is conferred or withdrawn by the National Commission for Social Entrepreneurship, which consists of 11 members — six from ministries, one from the Primar Association, and four from non-profit organizations active in social entrepreneurship.
The legal basis is provided by Law No. LP845/1992 of January 3, 1992 on Entrepreneurship and Enterprises (Chapter VI¹ on Social Enterprise), the Tax Code of the Republic of Moldova, Law No. LP86/2020 of June 11, 2020 on Non-Profit Organizations, Law No. 547 of December 25, 2003 on Social Assistance, Law No. LP60/2012 of March 30, 2012 on Social Integration of Persons with Disabilities, and Law No. LP105/2018 of June 14, 2018 on Employment Promotion and Unemployment Insurance.
Financial Support
The state provides tax incentives for the development of social entrepreneurship in accordance with the Tax Code, although at present no such incentives are in effect. Integration Social Enterprises may benefit from free counseling by public authorities in the establishment and development of their business, the right to participate in public procurement procedures, and state aid through approved public programs.
From local public administration authorities, ISEs may additionally benefit from the allocation of premises and/or land in public ownership for the purpose of carrying out their activities, support for the promotion of goods and services in the community, assistance in finding markets, assistance in promoting tourism and related activities by exploiting local historical and cultural heritage, and other benefits and exemptions from duties and taxes as granted by local authorities.
Under Law No. LP60/2012, the state partially subsidizes the purchase of equipment and raw materials, the creation of jobs, and partially compensates mandatory state social insurance contributions for integrative social enterprises in which 100% of the capital is owned by societies and public associations of persons with disabilities. Specialized enterprises and integrative social enterprises are exempt from taxes and duties in accordance with current legislation.
Under Law No. LP105/2018, employers who hire unemployed persons from vulnerable categories for a period of at least 18 months receive a monthly subsidy equal to 30% of the average monthly wage in the economy for the previous year, for a period of six months per employed person. Employers who create or adapt jobs for persons with disabilities receive compensation of 50% of costs incurred for moderate disabilities and 75% for severe and profound disabilities, with the subsidy not exceeding ten average monthly wages per job created or adapted.
Young SEs and ISEs may also receive grants from the Small and Medium Enterprise Development Organization as part of various development programs. International donors provide additional grants and project funding for NGOs and LLCs engaged in social entrepreneurship.
Tax Relief
At present, a Limited Liability Company holding SE or ISE status is subject to taxation as an ordinary LLC. Although Law No. 60 stipulates that specialized enterprises and integrative social enterprises are exempt from taxes and duties in accordance with current legislation, this provision has not yet been fully implemented in practice.
Social Security Contributions
The general regulatory order applies to social security contributions. Although Law No. 60 provides for partial state compensation of mandatory social insurance contributions paid by SEs and ISEs, in practice, since SE and ISE status is merely assigned to an LLC, all insurance payments are made on general terms.
Public Procurement
Integration Social Enterprises have the right to participate in public procurement and contract award procedures in accordance with public procurement legislation. However, participation is on general terms without specific advantages, except in the case of social contracting, where certain privileges apply. Under Law No. LP105/2018, the National Agency may conclude contracts with SEs, ISEs, NPOs, or other specialized entities for the implementation of employment measures financed from the state budget or other financial sources.
Educational and Informational Support
SEs and ISEs may receive informational support from government bodies or non-profit institutions, such as the Small and Medium Enterprises Development Organization, through seminars, training sessions, and experience exchange trips organized by NGOs and sponsors.
