VAT on real estate transactions in Romania

For any real estate investor it becomes mandatory to understand the standard terms and conditions related to VAT regulations.

Charging VAT on property transactions is subject to exception when dealing with a rental or leasing procedure. This is a case of VAT exemption in Romania but there are some options for the lessor to submit a report to designated authorities in order to apply taxation regulations. For this situation, a standard 24% VAT is to be taken into account. Another case when a standard VAT procedure is not a matter of concern regards the sale of properties others than those defined as new establishments or the land on which the building was built. But it is allowed to apply for taxation if the situation requires it. New buildings sale and building land sale are subject to taxation and a standard percentage of 24% applies in this case. The term “new buildings” also includes establishments which were rehabilitated and the costs of all these adjustments exceed 50% of the entire building value on the market. The VAT rate is modified to 5% if the buildings taken into consideration are intended to serve for seniors or as children homes, as well those which are provided to city halls to be used for social purposes. Starting with February 2013 the usage right over a real property can be assigned as usufruct or superficies right.

A particular instance is represented by the adjustment of input VAT which occurs when the lessor opts for not taxing the fees for rent or the sale transaction. The standard period which applies in this case is of 20 years and it begins with the first day of the year when the acquisition takes place. There are special conditions to be fulfilled in order to conclude these procedures. The transfer of assets which is generally involved when transferring a business is not considered as taxable only if the beneficiary is a taxable person and the transferred asset can be nominated as an independent unit.

VAT on property transactions in Romania - refunds

VAT returns are also a specific matter that deserves to be brought into discussion. The Romanian VAT registered entities will have their requests processed within 45 days since submission but this term can be extended to 90 days provided that some supplementary audits are to be performed by authorities. On special conditions, for those entities that manage to be labeled as particular cases (such as those with a clean tax record) procedures can be accelerated. For companies which are incorporated within EU perimeter, the reimbursement procedures are administered through the 9^th Directive. Requests will be submitted to authorities in the state where the company was registered and thereafter transferred to Romanian authorities. The 13^th Directive controls VAT reimbursements for non-EU entities. As details above state it, the VAT on real estate transactions in Romania is of 24% for new buildings and building land, taking into consideration as well all exceptions mentioned in this article. For any further information related to this topic, you can contact our lawyers.