Moldova: Overview

RENTAL YIELDS

Yields are high in Chisinau

Gross rental yields are around 12% to 18% in Chisinau. Property can be bought in Chisinau for a wide range of sales prices, from €700 to €973 per square metre.

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TAXES AND COSTS

Low income tax

Rental Income: Gross rental income is taxed at 5%, withheld by the tenant.

Capital Gains: Capital gains realized from sales of real estate properties are no longer taxable.

Inheritance: There are no inheritance taxes in Moldova.

Residents: Residents are taxed on their worldwide income, at progressive rates of 7%, 10% and 20%.

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BUYING GUIDE

High transaction costs with long process in Moldova

The maximum cost of registering property is only 2% of the property's value. However, the 20% VAT on property purchase significantly increases transaction costs. The process takes about 81 days for the five procedures, according to the World Bank. Note that transactions are done in cash.

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LANDLORD AND TENANT

Moldova's conflicting tenancy law

Moldovan rental market law and practice is generally pro-landlord.

Tenancy Laws: There is some conflict between the Law on Rent of 1992 and the Civil Code of 2003. Even though the Civil Code takes precedence over the Law on Rent, the contradictions between the two creates confusion, especially in litigation.

Tenant Security: Contracts are automatically terminated upon the expiration of the fixed term.

There are no special tribunals for resolving landlord tenant disputes. On average such disputes are settled in six months' time.

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ECONOMIC GROWTH

A poor country with secessionist problems

Moldova is the second smallest country to emerge from the former USSR; with a population of 4.3 million in 2005. It is the second poorest country in Europe, after Albania, and is heavily indebted. It is one of the former Soviet Union’s most densely populated countries, with 127 inhabitants per square kilometer.

More than a decade after independence from the USSR, only 34% of the population is employed and more than a third of the economy is agricultural. Over 75% of the population lives below the poverty line. A remarkable portion of the population works overseas, about 25% of the working age population.

To address the huge demand for housing, the government built around 2,300 apartments in the past two years. But by far the greater portion of the houses in Chisinau still lack central hot water.

The country lacks natural resources and relies on imports of fuel and raw materials. The government is ridden with corruption and bureaucratic red tape.

Nevertheless, average annual GDP growth from 2001 to 2005 was 6.76% per annum. This is a dramatic turnaround after the economic decline experienced for the entire nineties. Real GDP per capita is back to its pre-independence level, after falling by 40% from 1992 to 1999.

The country’s major political predicament is the strength of the pro-Russian Slavic secessionist forces in the Eastern region of Transnistria, who wish to be annexed by Russia.

The separatists have their own government, their own currency, media, army and police force, although Transnistria is not yet internationally recognized. The southern region of Gagauz also wants autonomy. It is inhabited by Christian Turks who fear “Romanization” by the centre, and even possible union with Romania.

A bloody civil war was fought against the Transnistrian forces in 1992. A three way peacekeeping force (Russian-Transnistrian-Moldovan) facilitated a fragile peace accord between the two factions. Autonomous territories were established in Transnistria and Gagauz by the 1994 constitution, and no armed conflict has occurred since, but relations between the central government and Transnistria remain