Overview

Romania has a structured taxation system for real estate transactions, covering rental income, corporate ownership, capital gains, and VAT. The primary taxes include rental income tax, corporate profit tax, capital gains tax, and value-added tax (VAT) on certain transactions.

Rental Income Tax Description

Net rental income is taxed at 10% after a 40% deemed expense deduction. If total personal yearly income (excluding salaries) exceeds 26,760 RON (12 minimum gross salaries), an additional 10% health contribution is also required. If an individual earns income from more than five rental contracts per year, the income is treated as business income.

<table>
    <tbody>
        <tr class="blue-row" >
            <td colspan="3"><strong>Monthly income, €</strong></td>
        </tr>
        <tr>
            <td>1500</td>
            <td>6000</td>
            <td>1200</td>
        </tr>
    </tbody>
    <tbody>
        <tr class="blue-row" >
            <td colspan="3"><strong>Tax rate, %</strong></td>
        </tr>
        <tr>
            <td>10.00</td>
            <td>10.00</td>
            <td>10.00</td>
        </tr>
    </tbody>
</table>

Corporate Taxation

Romanian companies are subject to a 16% profit tax on net income, including revenue from real estate transactions. If a foreign entity owns real estate in Romania, any profit related to the real estate (including capital gains) is also taxed at 16%. Certain tax treaties may exempt foreign corporate entities from this tax if they meet conditions such as holding at least 10% of the shares for more than one year.

Capital Gains Tax

In Romania, capital gains tax applies to real estate sales. If a property is sold for more than RON 450,000 (~92,000 EUR), a 3% tax is levied on the excess amount. However, certain exemptions exist. If a property is inherited and sold within two years, no tax is required. After this period, a 1% tax is imposed on the property's value.

Value Added Tax (VAT)

The VAT treatment of real estate transactions varies: Exempt from VAT: Rental income and sales of certain old properties or non-buildable land. 5% VAT rate: Applied to the sale of new residential properties with a maximum useful surface of 120 sqm and a value below 450,000 RON. 19% standard VAT rate: Applied to the sale of new buildings or plots of land designated for construction. Reverse Charge VAT: If both the buyer and seller are VAT-registered in Romania, the buyer accounts for VAT under the reverse charge mechanism.

Transaction Costs

<table>
    <tbody>
        <tr class="blue-row" >
            <td><strong>Description</strong></td>
            <td><strong>Cost Range</strong></td>
            <td><strong>Who Pays</strong></td>
        </tr>
        <tr>
            <td>Property Transfer Tax</td>
            <td>0%-3%</td>
            <td>Seller</td>
        </tr>
        <tr>
            <td>Legal Fees</td>
            <td>1%-3%</td>
            <td>Buyer</td>
        </tr>
        <tr>
            <td>Real Estate Agent Fee</td>
            <td>2%-6%</td>
            <td>Buyer/Seller</td>
        </tr>
        <tr>
            <td>Notary Fee</td>
            <td>0.5%</td>
            <td>Buyer</td>
        </tr>
    </tbody>
</table>

Building Tax

Romania imposes an annual tax on buildings, with rates varying based on the property's classification (residential or non-residential) and ownership (individual or legal entity).

Tax Rates:

Residential Buildings:
- Owned by Individuals: 0.1% to 0.2% of the taxable value.
- Owned by Legal Entities: 0.1% to 0.2% of the taxable value.
Non-Residential Buildings:
- Owned by Individuals: 0.5% to 1.3% of the taxable value.
- Owned by Legal Entities: 0.5% to 1.3% of the taxable value.

Taxable Value Determination:

Individuals: Based on the notional value assigned by local tax authorities.
Legal Entities: Based on the accounting value of the building. If the building has not been revalued in the last five years, a higher tax rate of 5% may apply.

Note: The implementation of a new method for calculating the taxable value of buildings, based on market studies, has been postponed until January 1, 2026. Therefore, the current calculation method remains in effect for 2025.

Land Tax

Landowners in Romania are subject to an annual land tax, with rates depending on the land's location, category, and size.

Tax Rates:

The tax is a fixed amount per square meter, varying based on:
- Location: Urban or rural areas, with urban areas typically having higher rates.
- Land Category: Residential, commercial, agricultural, etc.
- Specific Zone within the Municipality: Central, peripheral, etc.

Calculation Example:

For urban land designated for residential use, the tax might range up to €0.46 per square meter.

Payment Schedule:

Both building and land taxes are typically paid in two equal installments:
- First Installment: Due by March 31.
- Second Installment: Due by September 30.

Note: Specific rates and regulations can vary by municipality. Property owners are advised to consult local tax authorities or a tax professional for precise information regarding their obligations.

Property Taxes in Romania

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