How Moldova's new law impacts real estate transactions
Real estate transactions between individuals in Moldova could soon be carried out in foreign currency once every three years.
This legislative initiative was proposed to Parliament by PAS deputies Radu Marian and Victor Spînu. According to Radu Marian, the author of the project, the measure aims to facilitate the home-buying process, reduce currency exchange costs, and eliminate fees that might be charged by banks.
One major issue highlighted by this new provision is that the majority of individuals, when conducting a real estate transaction, typically do so in cash and foreign currency. With the upcoming requirement for electronic or bank transfers, which will mandate transactions in Moldovan lei, the problem of exchange rates arises. As a result, additional fees apply when converting from Moldovan lei to dollars or euros and vice versa.
Cashless payments are considered safer and more straightforward for citizens, reducing the risk of money laundering and the use of cash in illegal activities, argues Radu Marian, the Chairman of the Parliamentary Committee on Economy, Budget, and Finance. He also stated that the justification for the origin of funds for real estate purchases will remain unchanged.
In such cases, citizens will only need to declare to the bank that the amount involved is a loan, which is legally permissible. When a real estate transaction takes place, the buyer fills out a self-declaration stating the source of the funds.
The legislative initiative could help address issues related to the shadow economy and tax evasion, as the authorities intend, says economic expert Viorel Gîrbu in an interview on Radio Moldova's "Zi de zi" show. However, he warns that the practice of "envelope payments" will not be eliminated.
He believes that when payments are made through the banking sector, individuals must justify the source of their funds and provide supporting documents. It becomes much harder for citizens to make payments through banks without proper documentation. If these payments increase within banking institutions, the size of the shadow economy will decrease, with transactions being handled by those who have the necessary character to comply.
Viorel Gîrbu also cautioned that this proposed initiative could lead to real estate being valued at lower prices to avoid using bank transfers. He noted that citizens may resort to this method.
There are certain consequences to this. If the actual amount is declared, individuals are protected by various state institutions. For instance, the sale-purchase contract is notarized, and both the buyer and the seller benefit from legal protection for the amount declared at the notary. However, if the declared amount is not the real one and issues arise, such as a part of the transaction not being paid in full, the individual will not be able to seek legal action through authorities.
Additionally, Viorel Gîrbu reiterated that this law will not have any effect on housing prices.
Salaries are low, while housing prices are very high. In European countries, a monthly salary should be equivalent to the cost of 1-2 square meters of housing. In Moldova, one square meter costs between 1,500 and 2,000 euros in Chișinău, while the average salary is below that value. Housing prices remain high due to demand and purchasing power.
It is important to note that the law limiting cash payments is set to come into effect on April 1. The value of cash transactions between individuals will be limited to 100 average monthly salaries, approximately 1.6 million lei or 80,000 euros for real estate transactions, and 50 average monthly salaries, or 42,000 euros, for automobile transactions. Any transaction exceeding these values must be conducted electronically.
Translation by Iurie Tataru
