Area income earned by an individual (case)

Situation: A natural person in Romania, owner of a 5 ha plot of land, signs a surface contract with a company that will develop a photovoltaic panel field.

The value of the contract is 5000 euro/year, i.e. 60,000 euro payable annually, the duration of the contract is 25 years.

What are the tax and reporting obligations of the individual?

 

Solution:

According to the Civil Code, article 693, paragraph (1), superficies is the right to have or to build a construction on the land of another, above or below that land, over which the superficiary acquires a right of use.

The right of superficies is acquired by virtue of a legal act. Superficies may also be registered by virtue of a legal act by which the owner of the entire property has transferred the building exclusively or has transferred the land and the building separately to two persons, even if the constitution of superficies has not been expressly stipulated.

In the case of construction on another person’s land, the superficies may be registered on the basis of the waiver by the owner of the land of the right to invoke the right of access in favour of the builder.

It may also be registered in favour of a third party on the basis of an assignment of the right to invoke access.

According to Article 702 of the Civil Code, the provisions are also applicable to planting and other autonomous works of a lasting nature carried out on land owned by another person.

 

According to Article 111, paragraph (1) of the Tax Code, on the transfer of the right of ownership and its dismemberments, by legal acts between living persons, on buildings of any kind and land related to them, as well as on land of any kind without buildings, taxpayers owe a tax which is calculated on the value of the transaction by applying the following rates:

 

a) 3% on buildings of any kind and land relating thereto, and on land of any kind without buildings, held for a period of up to 3 years inclusive;

b) 1% for buildings described in point a), held for a period of more than 3 years

 

The tax is calculated at the value declared by the parties in the deed transferring the right of ownership or its dismemberments. If the declared value is lower than the minimum value established by the market study carried out by the chambers of notaries public with experts authorized by law, the tax is calculated at the value established by the market study.

 

The tax is calculated and collected by the notary public before the authentication of the deed or, as the case may be, the drawing up of the deed of completion of the succession. The tax calculated and collected is payable on or before the 25th of the month following the month in which it was collected.

 

Thus, taking into account the regulations mentioned above, the natural person, owner of the land on which the surface is constituted, has the quality of taxpayer owing for the amounts of money received under the surface contract income tax on the transfer of the right of ownership and its dismemberments from personal property.

 

Regarding the declaration of the tax, according to the MFP Order 1022/2016, it will be declared by the notary through D100. The notary will also submit the information statement 208.

 

The natural person shall submit the D209 if he/she makes income from the transfer of ownership and its dismemberments on buildings of any kind and their related land, as well as on land of any kind without buildings, if the transfer of ownership or its dismemberments is carried out through a procedure other than notarial or judicial, within 10 days after the transaction.

On the basis of this declaration, the tax authority will determine the tax due.

 

Thus, taking into account the mentioned regulations, for the years following the execution of the surface contract, the tax is established by the competent tax authority according to the MFP/MJ Order no. 1022/2016 on the approval of the procedures for the establishment, payment and rectification of the tax on income from the transfer of real estate from personal property and the model and content of some forms used in the administration of income tax.

Therefore, a tax will be paid which is calculated by applying the rate of 3% or 1% as the case may be on the taxable income. The taxable income is determined by deducting the non-taxable amount of 450,000 lei from the transaction value. The taxable income is that declared, but if the value declared by the parties is lower than the value established by the Chamber of Notaries Public through expert valuers, the tax will be set at the value established by the valuers.

 

The owner of the land owes income tax on the transfer of ownership and its dismemberment from the personal assets, which is calculated for the first year by the notary public and then by ANAF.

 

Thus, the tax can be 0 for the value up to 450.000 lei and 1% or 3% for the value exceeding 450.000 lei.

 

Legal basis:

– MFP Order 1022/2016 on the approval of the procedures for the establishment, payment and rectification of the tax on income from the transfer of real estate from personal assets and the model and content of some forms used in the administration of income tax;

– Tax Code (approved by Law no. 227/2015, published in the Official Gazette no. 688 of 10.09.2015), as amended and supplemented;

– Civil Code of 2009, as amended and supplemented (Law No. 287/2009) – republication.