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Moldova: Review of Real Estate Regulations

Moldova: Review of Real Estate Regulations

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Recent reforms in Moldovan legislation will promote the real estate industry and simplify the country’s tax regime. The strong commitment that Moldovan authorities have recently demonstrated to attracting foreign investment has led to significant reform. In addition, the country’s geopolitical position and its attractive labor force make Moldova of new interest on the world’s tax map. 

Moldova has signed Double Taxation Conventions with 36 countries, as well as Free Trade Agreements with CIS countries, on the one side, and with the WTO, CEFTA (Central European Free Trade Agreement) and EU, on the other. In this respect, it is also worth noting the Association Agreement between Moldova and the European Union.

In reference to real estate it is important to mention that several modifications of the Moldovan Civil Code that are very important for the development of the agricultural sector entered into force on March 1, 2019.

Moldovan laws currently prohibit foreign investors (both individuals and legal entities) from buying agricultural and forest lands. As a result, foreign investors who wish to make use of such property generally do so via Moldovan companies that are under their control or enter into rent or servitude agreements for 99 years. There are no limitations on purchases of other kinds of real estate.

There is no VAT on purchases of land plots and residential properties.

The following tax rates on real estate apply at the beginning of 2021: a) for housing real estate (flats and individual houses, fields relating to the property), the maximum rate is 0.3% of the taxable base, and the minimum rate is 0.05% of the taxable base; b) for agriculture land with buildings located on it, the maximum rate is 0.3 % of the taxable base, and the minimum rate is 0.1 % of the taxable base; and c) real estate designated as other than housing or agricultural is taxed at 0.1% of the taxable base.

The tax reporting period is one year.

Current Moldovan legislation provides a good level of protection to real estate owners. Ownership of real estate, like other rights on immovable property such as mortgages, servitudes, leases, etc., should be registered at the Public Services Agency. Information in the registry is public.

Purchasing or mortgage transactions of real estate should be concluded in written form and authenticated by a local Moldovan notary.

Leases may be concluded in simple written form as well. Contracts concluded for a term more than three years should be registered at the Registry.

These modifications to the Civil Code brought new options to mortgage and development market.

The average price of real estate in Chisinau – the Moldovan capital – is EUR 600-700 EUR per square meter. Many lots are available for sale at lower prices (between EUR 300- 500 EUR per square meter) but require capital reparation.

In summary, Moldovan legislation in general and in real estate in particular have evolved significantly during last 20 years. The implementation of the best European practices in the field has provided additional protection to the owners and investors and has created a significantly transparent real estate market.

The last five to seven years have seen increased interest from investors from neighboring Romania and Ukraine, often purchasing land in order to use it for growing crops, especially for biofuels or for various oils. 

Regarding the construction of real estate, we note that this sector has significant reserves for development.

By Ivan Turcan, Partner, Brodsky Uskov Looper Reed & Partners

This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.