Real estate tax changes - everything you need to know in the coming period

Sursa: REIMAX

Whether you are a real estate agent, agency owner, developer, investor or an individual looking to close a transaction in the field, it is important to be aware of market trends and legislative changes. Keeping abreast of the latest developments can help you make informed decisions, make successful investments and provide informed advice. In the coming period, there will be a number of tax changes impacting on house prices and taxation. Let's find out what they are and what information you need to know.

Modification of the reduced VAT rate for housing

From 1 January 2024, the reduced rate of VAT for housing will be changed from 5% to 9%. Any natural person will be able to purchase, individually or jointly with another natural person(s), a single dwelling whose value does not exceed 600,000 lei, excluding VAT, at the reduced rate of 9%. The amendment applies also to the land on which the dwellings are built. 

Dwellings qualifying for the 9% VAT rate are those with a useful surface area of up to 120 sq.m, excluding household annexes, and whose value does not exceed 600,000 lei (dwelling + land), excluding VAT. The useful surface of the dwelling is defined by the Housing Act No 114/1996 and the household annexes are defined by Act No 50/1991 on the authorisation of construction works.

However, to qualify for the 9% rate, the dwellings must be habitable as such at the time of delivery and must meet all the conditions below:

• Provide free individual access to the habitable space, without disturbing the possession and exclusive use of the space owned by another person or family
• Have access to electricity and potable water, controlled sewage and domestic waste disposal/ have in the compound 
• consist of at least a resting area, a space for food preparation and a toilet.
• Have sanitary facilities and sanitary ware, i.e. toilet bowl, washbasin and washbasin with basin and associated batteries, and electrical installations, including switchboard, sockets, switches/switches and plugs.
• The external finishes must include at least: roof, if, depending on the type of construction, this construction element is foreseen, glazing, entrance door.
• Interior finishes must include at least: walls finished with paint, wallpaper, tiles or other elements used for finishing, floors finished with tiles, parquet or other elements used for finishing, interior doors, depending on the design.

It is good to know that newly built properties can only be sold with reduced VAT if they meet the conditions listed above. Therefore, if you are a developer, pay attention to every detail so that your clients can buy the apartments with 9% VAT. If you are an estate agent, check that your recommended properties meet these conditions so that they qualify for the reduced VAT rate.

If you want to sell a property in 2024 at the old VAT rate of 5%, you should make sure that you have already concluded a promise to purchase and a down payment has been made by 31 December 2023.

Access to the register of purchases of housing at reduced VAT rates

In order to make transactions as transparent and organised as possible, the ''Register of purchases of dwellings at reduced VAT rates'' will be organised in electronic format. It is based on information from legal acts concerning the transfer of ownership of dwellings authenticated as from 1 January 2024, as well as information from the ''Register of purchases of dwellings with a reduced VAT rate of 5% as from 1 January 2023''. 

Before legalising sale-purchase transactions, notaries public have some important obligations:

• To check that the condition relating to the purchase of a single dwelling whose value does not exceed the sum of 600,000 lei, excluding VAT, at the reduced VAT rate has been met. They can do this by consulting the ''Register of purchases of dwellings at the reduced VAT rate'', before authenticating legal acts relating to the transfer of ownership or the down payment for the purchase of the dwelling. If this condition is not met, notaries can only authenticate documents if the supply is made at the standard rate of VAT.
• Complete the ''Register of purchases of dwellings with reduced VAT rate'' at the time of authentication of legal acts concerning the transfer of ownership of dwellings with reduced VAT rate.
• To enter in the legal acts concerning the transfer of ownership or advance payment for the purchase of a dwelling with reduced VAT the details of compliance with legal obligations.

To include in the legal documents the VAT rate applied, regardless of whether VAT is applied to the price or included in the price.

Special taxation on immovable and movable property of increased value

In addition to the change in the reduced VAT rate, it is important to know that the taxation of housing and cars also changes from 1 January 2024. This time, the measure is aimed at owners of immovable and movable property of high value, so the special tax will not be paid by all owners of dwellings and cars. 

Here are the taxpayers who will be obliged to pay the special tax:

• Individuals who, on 31 December of the previous tax year, own/jointly own residential buildings located in Romania, if the taxable value of the building exceeds RON 2,500,000.
• Individuals and legal entities who own cars registered or recorded in Romania, whose individual purchase value exceeds 375,000 lei. The tax is due for a period of 5 years, starting from the tax year in which the transfer of the car takes place or for the remaining period until the end of the 5-year period from this date, for cases in which the transfer of the car took place earlier.

The special tax is calculated as follows:

• In the case of residential buildings, a rate of 0.3% is applied to the difference between the taxable value of the building and the ceiling of 2,500,000 lei.
• In the case of cars, a rate of 0.3% is applied to the difference between the acquisition value and the ceiling of 375,000 lei.

We hope that this information will be useful to you and help you in your future decisions to make the most inspired real estate transactions or to successfully advise your clients.