A centralized cadastre system was introduced in Moldova in 1998. This system includes the cadaster of real estate, which involves a collection of data by the Moldovan real estate authorities about rights (including easements), proprietors, and other persons in relation to real estate.
The Moldovan authorities responsible for storing information about real estate include the Cadastre Agency, the state enterprise “Cadastru”, and its territorial branch offices.
All real estate must be registered. Moldova’s Law 1543/1998 defines objects of registration as all land plots, buildings, and constructions tightly connected to land, apartments, and other isolated premises. Lakes, ponds, subsoil plots, and forests can also be registered separately.
Each piece of real estate is listed, separately, in a real estate register (registru al bunurilor imobile). Records in these registers are open for public access. Any person making a written request and presenting his or her identification document will receive the requested information. Access can also be obtained online (because online visual information from the local cadaster is not always accurate, we also recommend that parties procure geometrical plans of respective locations (including identifying the neighbors and access to a public road)). More detailed information (including historical online excerpts and preliminary evaluations) is also available on a contractual basis with the state enterprise Cadastru.
By law, information from a real estate register is deemed to be authentic until proved otherwise in court. As a consequence, third parties may rely on it.
A Brief Look at Transactions Involving Real Estate
All agreements involving real estate transactions must be concluded in writing and authenticated by a notary.
An ownership title over real estate is obtained by the purchaser once the transfer is recorded in the appropriate real estate register. As a rule, the agreement between parties represents the legal basis for the registration.
In practice, the mere authentication of a Moldovan real estate transaction by a foreign notary is not prohibited by the Moldovan legislation, but a party attempting to register foreign authentication may encounter opposition from the local. Our recommendation is to have a Moldovan lawyer on board to make sure that the transaction is accepted locally.
Can Foreigners Own Real Estate in Moldova?
Not much has changed in the last decade for foreigners wishing to purchase Moldovan real estate. No permits are required for foreign individuals or legal entities wishing to purchase real estate. Local laws guarantee the right of foreigners to own real estate (e.g., constructions, land plots, etc.) in Moldova. Legislation also allows foreigners to buy, own, and sell land plots obtained from the state (public or local authorities), for construction or any other purpose.
There is one exception to the above – a prohibition against purchasing agricultural land and forests by foreign persons (including stateless persons). Agricultural land and forests can only be sold to (and transacted between) Moldovan nationals. Local law goes even deeper and limits the right of Moldovan companies to purchase these objects if they have any foreign – even indirect – shareholders.
The issue of foreigners owning agriculture land in Moldova is extremely politicized. Governing political parties refrain from letting foreign capital come into this sphere, probably out of fear that such changes would be disapproved of by their constituents. As a result, although Moldova is an agricultural country, agriculture remains one of the economic areas with the least amount of foreign investment. No change is foreseeable in the near future.
1. Profit Tax
Profit generated from real estate transactions (including those involving rent) is subject to profit taxation and varies depending on whether the person profiting is an individual or company. Currently the profit tax for individuals is applied in a two-tier system: 7% for those with incomes under MDL 29,640 (about EUR 1,325) and 18% for those with incomes over MDL 29,640. Personal exemptions exist for natural persons residing in Moldova.
The current profit tax for companies in Moldova is 12%.
The standard VAT rate is 20%. Regardless of the nature of participants (entrepreneurs, natural persons, including foreigners, etc.), the following transactions are exempted from the application of Moldovan VAT: (a) sales of apartments; (b) sales of land plots; and (c) leases (renting) of objects falling under (a) and (b).
By Vladimir Iurkovski, Partner, Schoenherr Chisinau
This Article was originally published in Issue 3.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.