Situation:
A micro-enterprise (ABC SRL), a VAT payer, intends to sell a piece of land from its patrimony. What is the tax treatment of the sale and what documents should be drawn up for this transaction?
Solution:
To begin with, in the case of a transfer of ownership of real estate, the company must apply to a notary.
Tax treatment – building land:
At the time of its sale by the owner, the town planning certificate is the document that qualifies a plot of land as buildable land or land for another use.
The sale of building land is a taxable transaction by operation of law as the exemption under Article 292(2) paragraph (f) of the Tax Code does not apply to such real estate.
If a company registered for VAT purposes sells a building plot, the tax regime differs according to the status of the buyer (registered or not registered for VAT purposes according to Article 316 of the Tax Code):
- If the purchaser is a person registered for VAT purposes under Article 316 of the Tax Code, the simplification measures provided for in Article 331 paragraph (2) paragraph (g) of the Tax Code apply. The invoice is issued without VAT with the mention “Reverse charge” to the beneficiary of Article 331 paragraph (2) letter g) of the Fiscal Code and is reported in the VAT return on line 13 and in D394.
- If the purchaser is a person not registered for VAT according to Article 316 of the Fiscal Code, the simplification measures provided for in Article 331 paragraph (2) paragraph (g) of the Fiscal Code do not apply. The invoice is issued with 19% VAT and is reported in the VAT return on line 9 and in D394.
Tax treatment – the land is not buildable:
Under Article 292(2) paragraph (f) of the Tax Code, the sale of unbuildable land is an exempt transaction. This is an exemption without right of deduction under Article 268 paragraph (9) letter c) of the Tax Code.
Please note that, according to Article 305 of the Tax Code, land is a capital good for which the obligation to adjust VAT may be incurred for a period of 20 years.
Thus, if the land was acquired after January 1, 2007 and the company deducted VAT on acquisition (including through reverse charge), it must make the adjustment of the deducted tax for the remaining adjustment period on the sale of the land with the application of the VAT exemption.
The invoice is issued without VAT with the mention “Exempt from VAT according to Article 292 paragraph (2) (f) of the Fiscal Code” and is reported in the VAT statement on line 15 without reporting in D394.
If the land was acquired after January 1, 2007 and the company deducted VAT at the time of acquisition, in order not to adjust the tax, the company may opt to tax the operation according to Article 292 paragraph (3) of the Tax Code by submitting the notification provided for in the implementing rules of this article. In this case, no adjustments are made, the operation is taxable by option and the tax regime, depending on the status of the purchaser (registered or non-registered for VAT purposes according to Article 316 of the Tax Code) is as follows:
- If the purchaser is a person registered for VAT purposes according to Article 316 of the Tax Code, the simplification measures provided for in Article 331 paragraph (2) letter g) of the Tax Code apply. The invoice is issued without VAT with the mention Reverse charge to beneficiary Article 331 paragraph (2) letter g) of the Tax Code and is reported in the VAT return on line 13 and in the 394 declaration;
- If the purchaser is a person not registered for VAT purposes according to article 316 of the Fiscal Code, the simplification measures provided for in article 331 paragraph (2) letter g) of the Fiscal Code do not apply. The invoice is issued with 19% VAT and is reported in the VAT return on line 9 and in the 394 declaration.
Legal basis:
– Fiscal Code (approved by Law no. 227/2015, published in the Official Gazette no. 688 of 10.09.2015), with subsequent amendments and completions;
– Methodological Norms for the application of the Fiscal Code (approved by Government Decision no. 1/2016).