Property Sale Overseas: Romania Property Buyers Guide
Purchasing property in Romania is not
difficult – there can be a fair bit of bureaucracy to get through,
and red tape can frustrate, but the process is still relatively
straight forward. First and foremost, a local lawyer with a good
reputation in property law should be hired – this is not a
requirement of the purchase process, it is simply to make things a
lot easier and safer. Fluency in English is quite common with
Romanian professionals, so finding a bilingual lawyer should not
prove too difficult. All documentation relating to property
ownership or reclamation should be thoroughly checked by a number of
independent parties to be sure it is above-board. The law for
foreign Romanian property investment allows foreigners to buy
buildings in Romania but not land. This restriction is simple to
overcome, a Romania property investor needs only to set up a
Romanian company which then owns the land. This law will change
after Romania enters the EU.
Summarised process to buying a Property in Romania:
A Romanian Property buyer will need to check whether the property is
being sold with or without land, if the Property comes with land a
company formation will be necessary.
Agree a final price for the property with the current owners/vendor
Draw up and agree an initial contract allowing the property to be
removed from the market, often includes a payment of a refundable
deposit of around 10%.
Sign a Notary Act (purchase contract) in front of a Romanian Public
Notary and the Final Legal Contract
Company formation
Romanian companies are similar to most other European companies.
They require shareholders and directors and a registered office. The
‘Ltd company’ has the same meaning as in other European countries in
that the liability of the shareholders is Ltd to the amount of share
capital invested. This is protection for the shareholders, and at
the same time indicates to other investors and traders the substance
of the company. There are no restrictions for people residing
outside of Romania in acquiring a company in Romania, but all
companies must be registered with the National Trade Register
Office, organized by the Romanian Chamber of Commerce and Industry.
The National Trade Register Office is a public institution which has
the function to maintain statistical information on business
activities in Romania. Thus in Romania it is required that a company
specifies its main activity and is allocated a code number which
relates to that particular activity, such as ‘Property Investment’
when using the formation of the company to buy land in Romania. It
will take approximately 14 working days to incorporate a Romanian
company, the total costs you would expect to pay are around 750 to
1000 Euros, and this includes all legal fees and the opening of a
Romanian Company bank account. Most property agents and Developers
in Romania can point you in the right direction, if not arrange this
whole process for you.
VAT
If both the vendor and purchaser are VAT registered then VAT on
buying a property in Romania will be ‘reverse chargeable’ for both
vendor and purchaser, i.e. the net VAT cost for both parties will be
zero and no payment of VAT (usually 19%) needs to be made.
Corporation tax
Corporate income tax (CIT) is only relevant if you have gone through
the Romania company formation process and is charged at the standard
rate of 16%. This charge only applies to the purchasing of
properties in Romania that come with land. This tax liability is
reportable to the Romanian tax authorities on an accounting year
basis.
Capital Gains Tax
This is not payable should you own your property in Romania for more
than 3 years. Should you sell your Romanian property within 3 years
you will be liable to Capital Gains Tax at a rate of 16%.
