The VAT regime for the purchase of new homes has changed again this year. Compared to the scheme in 2022, this year there is a single limit – 600,000 lei – and a single purchase limit using the reduced rate of 5%.
Moreover, in order to avoid different interpretations, the notion of a dwelling that can be, at the time of delivery, inhabited as such, has also been detailed.
Unlike in 2022, when there were two applicable limits, one with an unlimited number of purchases and another valid for a single purchase, this year the Government decided to change the rules again, through OG 16/2022, thus resulting in a single limit and a single set of rules.
According to the amendments made by OG 16/2022 article 291 paragraph (3) letter c) point 3 of the Fiscal Code, starting from January 1st 2023 the reduced rate 5% VAT is applied for the supply of dwellings having 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 600.000 lei, excluding value added tax, purchased by individuals individually or jointly with another individual/other individuals. The useful surface of the dwelling is the one defined by the Law no.114/1996, republished, with subsequent amendments and additions.
Household annexes are those defined by Law no. 50/1991, 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. Any natural person may purchase, starting from 1 January 2023, individually or jointly with another natural person/other natural persons, a single dwelling the value of which does not exceed 600,000 lei, excluding VAT, at the reduced rate of 5%.
Article III of GC 16 establishes exceptions to these provisions, i.e. in 2023 the reduced VAT rate of 5% applies to:
a) the supply of dwellings with a useful surface area not exceeding 120 square meters, 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, if they have concluded by 1 January 2023 legal acts between living persons concerning the advance payment for the purchase of such dwellings;
b) the supply of dwellings having a useful surface of not more than 120 sq.m, excluding household annexes, whose value, including the land on which they are built, exceeds the amount of 600,000 lei, but does not exceed the amount of 700,000 lei, excluding value added tax, purchased by natural persons individually or jointly with another natural person/other natural persons, if they have concluded before 1 January 2023 legal acts between living persons having as object advance payment for the purchase of such a dwelling.
The natural person may purchase, as from 1 January 2023, individually or jointly with another natural person/other natural persons, a single dwelling at the reduced rate of 5%, except for the situation provided for in point a).
The reduced VAT rate of 5% for the transactions referred to in the previous paragraph applies only to dwellings which at the time of supply can be occupied as such. The useful surface area of the dwelling is that defined by the Housing Law no. 114/1996, republished, with subsequent amendments and additions. Household annexes are those defined by the Law no.50/1991 on the authorization of construction works, republished, with subsequent amendments and additions.
In the “Register of housing acquisitions with a reduced VAT rate of 5%, starting from 1 January 2023” the information from the legal acts between living persons concerning the transfer of ownership rights for the dwellings referred to in letter b), authenticated in 2023, is also entered.
It is important to note that notaries public have the obligation:
a) to verify the fulfilment of the condition relating to the purchase of a single dwelling at the reduced VAT rate of 5%, by consulting the “Register of purchases of dwellings at the reduced VAT rate of 5%, starting from 1 January 2023”, before authenticating legal acts between living persons concerning the transfer of ownership or payment in advance for the purchase of such a dwelling and, if it finds that this condition is not fulfilled, to authenticate them only if the supply is made at the standard VAT rate;
b) to complete the “Register of purchases of dwellings with a reduced VAT rate of 5%, starting from 1 January 2023” on the date of authentication of legal acts between living persons concerning the transfer of ownership of the dwellings referred to in paragraph 1(b);
c) to include in legal acts between living persons concerning the transfer of ownership or the payment on account of the purchase of such a dwelling at the reduced VAT rate of 5%, details of compliance with the obligations laid down in point (a) and, where applicable, point (b);
d) to include in legal acts between living persons concerning the transfer of ownership or payment on account of housing as referred to in paragraph 1(b) the VAT rate applied, whether VAT is applied to the price or included in the price.
Thus, taking into account the aspects mentioned above, the reduced VAT rate (5%) applies under the following conditions:
- the dwelling must have a useful surface of maximum 120 sq.m, excluding household annexes; the useful surface of the dwelling is the one defined by the Housing Law no. 114/1996 – it is the developed surface, less the surface of the walls, of all the rooms from which the dwelling is formed (balconies and loggias are not included); we also have a definition for household annexes in Law no. 50/1991 (“In the category of household annexes, as a rule in rural areas, are included: summer kitchens, stables for large animals, cots, sheds, warehouses and the like. Similarly, garages, greenhouses, swimming pools and the like are also assimilated to the notion of household annexes”);
- the limit of 600,000 lei includes the land on which the dwelling is built;
- the purchase is made by an individual (alone or jointly with others), not by a company;
- reduced VAT rate applies only to dwellings which at the time of delivery can be lived in as such; this condition was also made explicit last year, so, habitability means dwellings which at the time of delivery can be lived in as such means 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;
- have access to electricity and drinking water, controlled disposal of waste water and domestic waste;
- consist of at least a sleeping area, a food preparation area and a sanitary unit, regardless of the existing facilities and the degree of finishing at the time of delivery.
The reduced rate of 5% can be applied to a single purchase: “Any natural person may purchase, as from 1 January 2023, individually or jointly with another natural person/other natural persons, a single dwelling whose value does not exceed 600,000 lei, excluding VAT, at the reduced rate of 5%”.
Legal basis:
-Fiscal Code (approved by Law no.227/2015, published in MO no.688 of 10.09.2015), as amended and supplemented;
-Government Ordinance (OG) 16/2022 for amending and supplementing Law no. 227/2015 on the Fiscal Code, repealing some normative acts and other financial-fiscal measures;
-Law 114/1996 Housing Law – Republicalization, with subsequent amendments and additions;
-Methodological Norms for the application of the Tax Code (approved by GOVERNMENT DECISION no.1/2016).