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23-Feb-2010

Confidence in real estate as an investment vehicle is high this year, particularly from institutional investors.

Romania Actively Combats the Crisis

19 December 2008

In their attempt to maintain buoyancy in the real estate market and ensure continued liquidity, the Romanian government recently introduced a number of measures to counter the current global economic downturn.

The plan is a comprehensive one and involves taxes for anyone with interest in Romania. For companies, the government has moved to lower the contribution employers pay for employees’ social insurance by 2%, from 39.5% to 37.5%. Employers and individual taxpayers who pay their taxes to the government at least 10 days early will receive a 5% discount and from 1st of January, there will be no taxes on interest earned from deposits.

However, the policy that will most affect the overseas investor is a tax cut on purchases of residential properties. In order to spark more sales, the VAT rate of 19% will be slashed to 5%. This only applies to the sale of houses under 120 square metres and valued under €100,000 but even with these restrictions, many investors will benefit. This move will make Romanian transaction costs among the lowest in all of Europe.

The news comes as Romania is celebrating the formation of an historic coalition between the Democratic Liberal Party (PD-L) and the Social Democratic Party (PSD). The PD-L won the November elections by a slim margin and President Basescu has since nominated the president of the PD-L party and mayor of Cluj-Napoca , Emil Boc, to become the country’s next prime minister. Boc is expected to be confirmed by the Romanian parliament on December 22.

James Gonzalez, Market Analyst at Obelisk , believes that Romania is displaying a great deal of initiative in finding ways to combat difficult economic times. “Romania is actively working to implement useful policies that will help fight any negative effects that the current economic climate might bring. Even more importantly, the formation of a stable coalition government by two rival political parties demonstrates the dedication of its political leaders to put aside differences and work together for the best of the country. Everyone involved deserves congratulations.”

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