VAT status upon the sale of buildings and land

According to art. 141, par. 2, point „f” of the Law 571/2003 (Fiscal Code), the following are exempt of VAT: delivery of buildings / parts of buildings and land on which they are built as well as any other types of land. As an exception, the exemption does not apply for the delivery of new buildings or buildable land.  

The buildable land represents any type of land, regardless of whether it has fittings or not, on which buildings can be erected according to the current legal framework. Any classification of land as buildable or having any other purpose upon sale results from the urbanism certificate.

The delivery of a new building or of a part of it implies that the delivery took place the latest until December 31st of the year following the first occupation or use of the building or of a part of it, as the case may be, as a result of its conversion.

A new building also includes any building or part of building that has been transformed, in case the cost of its transformation net of tax amounts to a minimum of 50% of the building (part) market value, as established by a survey excluding the land value after building conversion;

If a building and the land on which it is set up make up a single land unit, which is identified by a single land register number, then one must appeal to an independent expert who has to issue a survey report. This way, you can identify one of the following situations:

– The building shall follow the status of the land on which it is erected, if its value is lower than the value of land;

– The land on which the building was erected shall follow the status of the building, if its value is lower than the value of the building or

– If the land and the building have equal values, the status of the land shall be established based on which type of real estate has the largest surface; in case of the building, one must consider the built area.

In case the exemption stipulated under article 141 applies, according to art. 149, par. 2, point “a”, line 2, the company is bound to adjust the input VAT that has been deducted upon the date on which buildings and related land were purchased, as well as the VAT that is related to the modernisations made.

The amount of adjusted VAT must be paid to the State Budget until the 25th of the month following the one in which the sale takes place.

We kindly bring to your attention that companies are not bound to apply for an exemption of VAT for the delivery of real estate goods or any part of it. This is a facility that anyone can use; any taxable person can choose to tax such operations based on a notification filed with the competent tax organs, in which they have to mention the real estate assets for which they intend to apply VAT.

If a company decides to charge all goods by adding VAT, then the company is not bound anymore to adjust VAT as mentioned above.

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