New property tax rules. What changes from 2023 and how much more will we pay?

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The property tax will increase as of 2023, both for individuals and legal entities, according to an analysis conducted by Deloitte.

Starting next year, the taxation of real estate properties changes radically: the tax rate is increased, both for residential and non-residential buildings, and the taxable value to which these rates are applied changes.

Although there are still unclear elements regarding the method of application, it seems to be a certainty that there will be an increase or, at best, in exceptional situations, the same tax as in 2022 will be applied.

Thus, the differentiation of the tax depending on the type of owner – natural or legal person – is eliminated. In fact, the revision of the building tax regime is one of the main objectives in the fiscal policy area assumed by Romania through the National Recovery and Resilience Plan (PNRR).

For instance, for a three-room residential apartment in Bucharest, built after 2011, in the Politehnica metro station area, if the same rate of 0.1%, valid this year, is applied, the tax will increase by at least 50 %, from 250 lei per year, to approximately 375 lei, using the value from the notary grids. But a correct estimate will be possible only after the applicable tax rate for 2023 is announced.

According to PNRR, the tax reform in Romania must include measures regarding the alignment of the taxable value with the market value. In addition, through a report published in June this year, the International Monetary Fund has sent to the Romanian authorities a set of recommendations for improving property tax revenues. These include the application of the tax rate on the market value, both for residential and non-residential buildings, and for non-residential buildings also the inclusion of the land price in the taxable value of the building – an otherwise logical measure, since the value of the construction is only artificially separated from the value of the land.

Starting from this goal and from the recommendations of the IMF report, the Government has introduced in the Ordinance amending the Fiscal Code, adopted in the summer of 2022, the new calculation methods for the building tax, applicable from 2023.

Although there are still unclear elements regarding the way of application, it seems to be a certainty that there will be an increase or, at best, in exceptional situations, the same tax will be applied as in 2022,” says Ana Petrescu-Mujdei, Senior Manager, Direct Taxation, Deloitte Romania.

Currently, tax rates have maximum values – 0.2% for residential buildings and 1.3% for non-residential buildings – local authorities having the possibility to apply higher tax rates, but which cannot exceed the maximum limit by more than 50%.

Starting next year, the tax on buildings will be differentiated only depending on the nature of the building, and the minimum rates will increase, without there being a maximum threshold. For residential buildings, the minimum rate will be 0.1%, and for non-residential buildings, 0.5%. Therefore, it will be up to the local authorities the value of the tax rates, each local administration in the country being able to choose a tax rate according to its own needs.

For now, the taxable value of a building is determined differently depending on the type of owner and the nature of the building. More specifically, in the case of a residential building owned by a natural person, this value is calculated according to the area in which it is located, the type of construction and certain coefficients provided for in the legislation. For a legal person, regardless of the type of building, the value is determined according to the final estimate of the construction works, the purchase price or the value of the last valuation report prepared by an authorized assessor.

Starting with 2023, regardless of the type of owner or the nature of the building, the taxable value of a building will be determined according to the data contained in the market studies administered by the National Union of Notaries Public in Romania, also known as “notary grids”. In addition, to the value of the building will be added that of the land on which it is built, taken from the same studies.

By exception, if the values in these studies are lower than the current ones, from the database of local authorities, respectively those determined according to the rules in force on December 31, 2022 for residential buildings, the tax for 2023 will be calculated taking into account the highest value.

Thus, in principle, the tax on buildings will increase from next year, both for individuals and for legal entities, and, only in certain exceptional cases, it will remain unchanged from 2022.

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