The new postponement of the increase in the taxation of real estate is not a gesture of goodwill on the part of the Executive, but a decision taken because the system by which the taxation of buildings is done according to the market value and not according to the area has not been set up, as it is now. The document shows that the tax change is conditional on the development of a structured system for collecting property data. For the implementation of the new taxation model, the Executive benefits from the support of World Bank experts.
System reform, coordinated by a special structure
Also, the project provides that a special structure is to be established at the level of the Ministry of Finance that will be responsible for the implementation of the property tax reform. The structure will mainly have duties regarding the management of a comprehensive national database with real estate properties, collaboration with administrative-territorial units, as well as with other entities in terms of data and information about properties, the creation and implementation of specific models regarding taxation real estate, the methodological coordination of the local fiscal bodies regarding the specific procedures carried out within the administration activity regarding the taxation of the real estate property, the elaboration of the specific forms for the administration activity of the tax claims related to the taxation of the real estate property. The National Agency for Cadastre and Real Estate Advertising will provide the Ministry of Finance with the access and resources needed to connect to the computer systems and hardware and software platforms that it manages. “These include, but are not limited to: Integrated Land Registry and Cadastre System, National Electronic Register of Street Nomenclatures, e-Terra Centralized Spatial Database System (Cadastral Sectors). Depending on the needs identified in the process of implementing real estate taxation, other systems and databases managed by the National Agency for Cadastre and Real Estate Advertising may be included, relevant for the activities carried out and, respectively, depending on the responsibilities of the Ministry of Finance regarding the implementation of taxation real estate”, the document also states.
9.8 million homes are registered in Romania
How the tax will be calculated
According to Law 370/2022, with the change in the taxation system, it would be calculated by applying a minimum rate of 0.1% on the value of the residential building, regardless of whether the owner is a natural or legal person. Through the new regulations, the tax base will be established according to the value of the buildings and the land on which they are located, which will be included in the market studies regarding the indicative values for real estate in the country, administered by the National Union of Notaries Public in Romania (UNNR). Currently, property tax is calculated by applying a rate of between 0.08% and 0.2% on the taxable value of the building. This is established by multiplying the built-up area of the building (expressed in square meters) with its value (expressed in lei/square meter) established in the Fiscal Code (article 457 – Calculation of tax on residential buildings owned by natural persons). Also, the taxable value of the building is adjusted according to the rank of the locality and the location area. As regards the tax on non-residential buildings, it is calculated by applying a rate between 0.2% and 1.3% on the taxable value of the building, and for mixed buildings, the tax is calculated by adding the tax for the residential part with the tax for the non-residential part, based on an evaluation report drawn up by an authorized appraiser every five years, according to the provisions of Law no. 370/2022.
“Since the fulfillment of the commitment in the PNRR regarding property taxation also requires the development of an IT system that allows the implementation of specific models, in conjunction with the fact that the technical assistance from the World Bank is underway, it is proposed to extend the term of application of the provisions of Government Ordinance no. 16/2022 regarding the amendment of Title IX – Local taxes and fees of the Fiscal Code, from January 1, 2025 to January 1, 2026”.
The draft GEO prepared by the Ministry of Finance
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The increase in property taxation has been on the agenda of the Government’s discussions with IMF representatives for some time.
Property taxes, incomes below the EU average
The change in the real estate taxation system is a measure that was undertaken through the National Recovery and Resilience Plan. In addition, raising property taxes is seen as a solution to increase local government revenues. Current property taxes are lower compared to the European average. They generate revenues in Romania about three times lower than the average of OECD economies and almost half of the EU average, the International Monetary Fund (IMF) showed in 2022 on this subject.
Source: jurnalul.ro
