Situation:
A company ABC SRL, which is building a block of flats, has signed in 2022 a sale promise in authentic form, with payment of a reservation guarantee.
The apartments in the block will be completed during 2023 and meet the conditions for the 5% VAT rate.
Can the company sell these apartments at the reduced VAT rate of 5%? What are the conditions?
Solution:
According to article 291 paragraph (3) letter c) point 3 of the Fiscal Code, a reduced VAT rate of 5% is applied to the supply of dwellings with a useful surface of maximum 120 sqm, excluding household annexes, whose value, including the land on which they are built, does not exceed the amount of 450.000 lei, excluding value added tax, purchased by individuals, provided that they have concluded by 1 January 2023 legal acts between living persons having as object advance payment for the purchase of such dwellings.
According to Article 291 paragraph (3) c) point 5 of the Fiscal Code, the reduced VAT rate (5%) is applicable to the supply of dwellings which are purchased by individuals individually or jointly with another individual/other individuals, including the land on which they are built, to be between 450,000 and 700,000 lei, excluding VAT, if they have concluded by 1 January 2023 legal acts between living persons having as object advance payment for the purchase of such dwellings (OG 16/2022).
Please note that, starting January 1, 2022, any natural person may purchase, individually or jointly with another natural person/other natural persons, a single dwelling whose value exceeds the amount of 450,000 lei, but does not exceed the amount of 700,000 lei, excluding VAT, at a reduced rate of 5%.
Housing Law no.114/1996, republished, with subsequent amendments and additions defines the useful surface of the dwelling. Household annexes are those defined by the Law no. 50/1991 on the authorization of construction works, republished, with subsequent amendments and additions. The reduced rate applies only in the case of dwellings which at the time of delivery can be inhabited as such.
Law 301/2022 defines a dwelling which at the time of delivery can be lived in as such as è “dwellings which at the time of delivery can be lived in as such are dwellings which at the time of delivery meet the following conditions: their owners have free individual access to the habitable space, without disturbing the possession and exclusive use of the space owned by another person or family; they have access to electricity and drinking water, controlled disposal of waste water and domestic waste; consist of at least a sleeping area, a space for the preparation of food and a sanitary unit, irrespective of the existing fittings and the state of completion at the time of supply, for the purposes of applying Article 291(3)(c) for the application of the reduced rate of VAT;”.
According to the Methodological Rules CF point 38 paragraph (5), taxable persons supplying dwellings will apply the 5% rate, including for the advance payments related to these supplies, if the contracts concluded show that the above conditions will be met at the time of supply. If the advances have been invoiced at the standard rate of VAT, the adjustments provided for in order to apply the 5% rate are made when the immovable property is delivered.
- 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 additions;
- OG 16/2022 for amending and supplementing Law no.227/2015 on the Fiscal Code, repealing some normative acts and other financial-fiscal measures;
- Methodological Norms for the application of the Tax Code (approved by HG no.1/2016);
- Law 301/2022 for the approval of OUG no.31/2019 on the granting of some tax facilities and for the amendment and completion of Law no.227/2015 on the Fiscal Code, for the completion of OUG no.11/2018 for the adoption of some budgetary measures and for the amendment of Framework Law no.153/2017 on the salary of staff paid from public funds;
- Law 114/1996 HOUSING LAW – republished, with subsequent amendments and additions.