Renting without a contract is risky business

People who lease or rent flats, without signing a contract, are willingly accepting some amount of risk. By trying to avoid paying taxes for such transactions, the tenants may end up on the streets with no rent refund and no explanations given; the lessors, on the other hand, may find the content of their flats damaged or, worse, may even lose their apartments. Contacted by Info-Prim Neo, head of Parliament’s Economy, Budget and Finance Commission Veaceslav Ionita said that the State wanted to help individuals who lease their apartments. The latter do not have to register as entrepreneurs, i.e. they don’t have to register a company. “However, people in the attempt to avoid taxes do not declare their economic activity and choose to become part of the uncontrolled, underground economy, with all the ensuing consequences. They don’t sign contracts, so that there is no trace of economic activity, and thus the consequences: uncertainty in the relation between the lessor and the tenant, possibility to lose the apartment. In the attempt to save a few lei, the individual accepts all this bouquet of risks”, mentioned Veaceslav Ionita. The MP added that there are about 270,000 flats in Chisinau, and fiscal inspectors cannot nock on every door and ask whether the residents are tenants or not. “It is impossible to control it, because it is a silent agreement between two people who want to deceive the State; in reality, however, they are deceiving themselves”, pointed out Veaceslav Ionita. The MP says that the situation will change only when people start understanding the risks they undergo. “When people will start understanding that working under normal conditions is safer, they will start doing so. For now, money is more important than personal safety. Individuals are not willing to pay for safety and security. Our citizens, having lived in poverty, did not yet reach the level of more expensive living in exchange for certainty and safety”, the MP added. Alexandru Fala, economic expert at IDIS “Viitorul”, told Info-Prim Neo that Moldovans don’t practice leasing/renting on a contractual basis, precisely because they don’t want to pay more; thus, the state has no control, because it is impossible to inspect every situation separately. Due to the lack of lease contracts, fiscal bodies have no way of assuring that the money from lease taxes reach the State Budget. According to the State Fiscal Service, in 2011 incomes of 1.7 million lei were registered from lease/rent taxes. These apply only for the basic transactions stipulated in the contract, and the tax comprises 5% of the value of the contract. People who lease their apartment are must register the contract at their local fiscal inspectorate branch, within 3 days from the signing of the contract. The tax is paid monthly, in advance or, at the latest, on the 2nd of the reference month. Paying the tax exempts the beneficiary of the income from including, and declaring, it in the gross income statement.