Moldova may cancel the preferential VAT and increase the overall tax burden on many sectors of the economy. NM talked to businessmen and explains why, in their opinion, this could have the opposite effect and negatively affect business, citizens and the economy.
From 2027, tax legislation in Moldova may change significantly. The Ministry of Finance proposed to abandon the preferential VAT (0% and 8%) and increase it to the standard 20%, including on medicines, real estate, agricultural products, HoReCa and energy. In parallel, businesses were offered zero income tax when investing it, while the income tax and dividends themselves will be increased (you can read more about what the draft fiscal policy (NBP) for 2027 provides for Here And Here).
And we tell you what business representatives think about it.
Agriculture
Head of the Association of Agricultural Producers Forța Fermierilor Alexandru Slusari on tax innovations affecting farmers:
We are strongly opposed to tax reform affecting farmers. The only compromise is if (the authorities) insist on a VAT of 20%, then we offer this option: we will transfer 8% to the budget, and 12% will remain in the account of farmers as a subsidy.
There are many more innovations in the project, but they all pale in comparison with the 20% VAT. There is also the problem of day laborers (zilieri). Currently, farmers pay 12% income tax from their salaries and 6% to the social fund. It is proposed to increase the contribution to the social fund to 21%. The day laborers have just been brought out of the shadows and are now being driven back there.
Also, according to the draft NBP, the exemption for the import of tractors and equipment will be cancelled. This means another 20% VAT on imports for those who can still afford to import equipment.
There is a problem of peasant farms. Now they pay a profit tax of 7%, and the new edition of the NBP offers 7% for income up to 1 million lei and 15% for more than 1 million lei. At the same time, farmers will not have zero income tax, like a JSC or LLC. But they cannot switch to these forms of business because they are expensive.
Currently, the farmer pays an 18% employee contribution to the social fund (6% is subsidized by the state budget) and a 9% contribution to the health insurance fund. It is proposed to cancel this benefit and leave 21% for the social fund and 7% for medicine.
For farmers (in the NBP project) everything is negative, except perhaps a zero rate on reinvested profits. But in general, this is a blow for the population and small and medium-sized businesses. The rich don’t care how much food costs. The poor are compensated for something, but what will happen to the middle class?
In Romania, VAT on agriculture was raised from 9% to 11%, after which demand fell by 25%.
HoReCa (cafes, restaurants, hotels)
Restaurateur, founder of the National Association of Restaurants and Recreation (MĂR) Dumitru Cebotarescu:
I think that the proposed tax innovations will have a negative impact on both HoReCa and clients. In fact, this is simply an increase in prices with a decrease in the purchasing power of Moldovan citizens.
Let us turn to the history of this issue in our country and in other countries. We had a period of VAT reduction. This led to an increase in the volume of taxes collected. Now, I think, there will be the opposite effect, and large companies that work honestly will suffer the most. Some companies will go into the gray zone, others will simply close because they will not be able to stay afloat.
In Germany, VAT was also increased, and after one or two years, 30-40% of catering establishments closed. After that, they returned to the VAT rate of 7%.
HoReCa, among other things, is an integral part of the tourism industry. If we raise prices, we become uncompetitive with other countries, with Romania, for example. Our VAT is higher than in Romania. Tourists count their money and see where it is cheaper. Moldova will become more expensive than Romania, and this will not lead to an increase in tourism in our country. We will lose from this internationally.
As for our citizens, taking into account the proposed innovations, a family who visited a cafe-restaurant once a week will have to pay 200-300 lei more for the bill, but they may not have such an opportunity. Food prices will also increase for students and office workers who use canteens.
I think prices will rise even more than the difference in VAT. There should be an analysis of the consequences, but there is none. We know that sales will fall, but some costs will remain stable, which need to be transferred to added value.
All these tax changes will lead to an increase in the tax burden on enterprises: dividends, VAT on premises, on land. As a result, tax revenues will decline as the economy contracts.
Real estate
Acces Imobil real estate agency expert Viktor Chernomorchenko:
If the NBP draft in its current version is adopted, that is, with VAT on the sale of apartments in new buildings, then prices (for apartments) will rise even more. How much is still difficult to say. We need to see how construction companies will behave if they have buyers. Because builders are now charging inflated prices. But I think the growth will be about 10%.
If prices on the primary market rise, then the secondary market always becomes more expensive. We are talking about buyers who live in an old building, but want to improve their conditions by buying an apartment in a new building. They want to sell their home, but they understand that if they don’t raise the price, they won’t have enough to buy a new home.
Now about the proposed 15% tax on capital gains on home sales. Now this tax is 6% (in Moldova there is a tax of 12%, but half the amount of capital gains is taxed, that is, in fact the tax is 6%). There are no such (low) taxes anywhere, and they actively took advantage of this in the real estate market, paid low taxes and earned a lot. We assumed that the state would remove this 50% of the amount, and the tax would be 12%, but 15% is a lot. This may lead to tax evasion.
Even with a 6% tax, there are many entrepreneurs who are inclined to evade taxes by asking: “What did the state give me?” And with a 15% tax, there will be more such people, or they will include the tax amount in the price. The main shock is the 15 percent capital gains tax on primary residences.
Let’s say a person bought a two- or three-room apartment when housing prices were lower, and now wants to buy a house. In any case, he must pay this income tax (in the case of the main residence, capital gains over 1 million lei are taxed). All sales of two- or three-room apartments will in any case be subject to this tax. But this should not apply to these transactions. Because people who sell their homes will not understand why they have to pay this tax.
Now there are very few sales on the market, while the price is €1,720 per 1 sq. m. meter. If we had sat for another six months with low sales, the price would have had to be adjusted. But with the introduction of new taxes, people will not want to sell apartments, and prices will not fall. I think prices may even go up by 5%-10%. There will be no such growth in wages, so there will be very, very few transactions.
The property tax after the revaluation of housing will also hit citizens. Currently in Chisinau the property tax is 0.185% of the cadastral value. In order for the city to receive more money, but at the same time people do not really feel the increase (for example, the tax would increase by no more than 100-200 lei), the tax should be at the level of 0.07%-0.08%. And the minimum tax level of 0.01%, included in the NBP project, will lead to an increase in the amount of tax by 500-700 lei.
They are also introducing a real estate register. This will lead to a decrease in the number of agents, that is, those who promote the real estate market.
Retail
A retailer who insisted on anonymity:
I believe that VAT on energy resources (electricity, coolant, gas) should be increased. But at the same time, we would like transparency in the price at which we buy these resources. Because the introduction of VAT with non-transparent purchases and prices will not be very clear to the population.
Zero tax on invested profits is the right thing to do and is overdue. We will use this, we will invest, this is a plus for us.
It would be good if the authorities paid attention to the development of non-resource-intensive industries, such as microelectronics.
Now about increasing taxes on profits and dividends. I understand that this measure is forced, it compensates for lost profits. The high rate for withdrawing capital (from circulation) does not greatly attract foreign investors. The Moldovan investor is structured in such a way that he has earned money and continues to invest. And the foreign investor wants to withdraw further. This will be a deterrent.
As for VAT on commercial land and VAT on apartments, this is the wrong decision, because you cannot milk a dead cow. I know that people started buying apartments in panic, but this is temporary. VAT will raise prices, this measure can be introduced, but first the market must recover, and given the stagnation of the market, this is wrong.
Why is this dangerous? There is no need to immediately enter VAT. Some people will buy apartments in panic, but after the new year the market will simply calm down. The stagnation of this market will lead to the stagnation of related markets: building materials, furniture, household appliances. Plus, there is a risk of highly qualified specialists leaving.
And if they gave it three years (VAT was introduced after three years), then the person would know that the price would rise, and would plan to buy a home during this time.
About the preferential VAT rate (on products, which is currently in effect). It is proposed to increase VAT to the standard 20%. I will now express a strange position from the point of view of a retailer. Why do we need preferential VAT on products? To protect the poor? I’m not low-income, but I buy products with reduced VAT. A system of targeted compensation should work here.
I understand that the state has no money, but the country must exist and work. Low VAT (8%) is incorrect, since people with low incomes receive the same benefit as me. In addition, we do not have preferential VAT on all milk and agricultural products.
But as for medicines, I would not touch the reduced VAT. This is a vital thing. And we must understand that a person cannot always get to a doctor and receive reimbursed medicine. It happens that someone urgently needs it and just goes to the pharmacy (the Ministry of Finance justifies the increase in VAT on medicines by expanding the system of compensation for medicines within the insurance program – NM). In general, I agree with the Ministry of Health (which gave a negative opinion on increasing VAT on medicines).
VAT on cars is possible, but if we talk so much about the environment, it’s strange to introduce VAT on electric cars. They should be exempt from VAT for several years and allowed to travel on public transport lanes.
Another mystery to me is the increase in excise taxes on diesel fuel, given that the main consumers of diesel fuel are agricultural producers, transport workers and the army.
But when it comes to fiscal policy, it is clear that compromises are needed. I understand that they (the authorities) need to plug budget holes. The budget deficit is growing; we cannot live on grants all the time. And we need to replenish the budget from somewhere.
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