Tax rules for property transactions reach their final form at last

The long-awaited enforcement guidelines for the tax on real estate transactions, the absence of which has frozen the market, have reached the Finance Ministry in their final version. The decision draft is to be endorsed during the governmental session next week.

After transactions resume, it remains to be seen in which direction prices will go, considering the temptation to include the value of the tax directly in prices.

Income from transactions made between June and the end of December 31 this year will be taxed at a rate of 10%, which will then increase to 16% as of January 1, 2006. Transactions with buildings and any adjoining land, as well as with any kind of land free of buildings, either inside or outside cities, which were acquired after 1990 are also to be subject to taxation. For buildings and their adjoining land, only sales made within three years of acquisition will be taxed.

These three years will be counted from the date on the acquisition papers, while for new buildings counting begins from the date on the final document attesting that the building was passed over to the beneficiary.

The tax will be collected by the notary public when authenticating the sales documents and must be transferred to the state budget by the 25th day of the next month. This means that in exchange for performing this service, notaries will have this money available for use until payment to the budget is due. Collection will be possible either by issuing receipts that fall under a special fiscal regime or by issuing fiscal cash receipts via fiscal cash registers.

The methodological norms stipulate that every related expense will be treated as deductible as far as notaries are concerned. One of the most complicated aspects is establishing the amount of income subject to taxation.

According to the Fiscal Code this is calculated to be the difference between “the base value” of the property and the sale price stated by the parties in the contract.

The base value for property is equal to the acquisition price plus 5%. The value for new buildings is calculated as “the value set by expertisation.” If, for various reasons, the base value cannot be established, it will be calculated based on the expertisation sets used by the Chambers of Notaries Public.

Notary chambers are obliged to update expertisation sets at least once a year, depending on the development of the real estate market, which also requires endorsement by the Finance Ministry.

The norms recommend the setting of single values, based on technical criteria, without minimum and maximum values.

“This introduction of tax to the resale of a building or plot of land within three years from buying it will not lead to a decline in transactions on the real estate market, though the asking price may change as a result,” commented Mircea Sterpu, a consultant with real estate company CB Richard Ellis Romania. He says this will not necessarily entail a rise in prices to include the tax, but only an extension of the time spent negotiating for an adjustment of the price. razvan.voican@zf.ro ; alexandru.cerchez@zf.ro