Situation
Company XYZ SRL, registered for VAT and corporate income tax purposes, purchases in 2025 a new apartment valued at €120,000 from another legal entity, using the reverse charge mechanism. The property is intended for rental purposes, and the company plans to sell it after 3 years to its sole shareholder, a natural person.
VAT regime at the time of sale
According to Article 292 para. (2) letter f) of the Fiscal Code, the supply of buildings and land is generally exempt from VAT. The exception applies to new constructions, parts of new constructions, and buildable land.
A construction is deemed “new” if it is sold no later than December 31st of the year following its first use or occupation.
Therefore, if the property is sold at least one year after its first use, it is no longer considered new, and the sale is VAT-exempt.
Adjustment of VAT deducted at acquisition
If the property was acquired under reverse charge and the company deducted the related VAT, it must adjust the deducted VAT when the sale is VAT-exempt, in accordance with Article 305 para. (2) letter b) of the Fiscal Code.
For buildings, the adjustment period is 20 years. If the sale occurs in year 6, the adjustment applies to the remaining years:
VAT to adjust = Deducted VAT × (remaining years / 20)
Example: 5 years remaining ⇒ adjust 5/20 of deducted VAT.
Accounting entry:
635 = 4426 (VAT adjustment expense)
Option to apply VAT on sale
According to Article 292 para. (3), the company can opt to apply VAT on the sale, even if the property is no longer new. In this case:
- The invoice includes 19% VAT;
- No VAT adjustment is required;
- The company must notify ANAF of its option to apply VAT.
Applicability of reverse charge
According to Article 331 of the Fiscal Code, the reverse charge mechanism only applies between VAT-registered entities. In this case:
- The buyer is a natural person not registered for VAT;
- Reverse charge is not applicable;
- If the VAT regime is applied, the seller must collect and report the VAT.
Market price between related parties
According to Article 11 para. (4) of the Fiscal Code, transactions between related parties (e.g., a company and its sole shareholder) must be carried out at market value.
To justify the price, it is recommended to:
- Prepare an ANEVAR valuation report;
- Set the sale price according to market value;
- Finalize the transaction via notarized contract.
Proper documentation is essential to avoid VAT base adjustments by the tax authority.