Florian Ionescu, Wednesday, 22 January 2014
This article is part of a series of 8 articles about buying property in Romania. The other articles in the series cover the following topics:
The Costs Involved with Real Estate Investments in Romania
Right after its accession to the European Union in 2007, Romania became the most attractive destination for foreigners willing to invest in real
estate, ranking higher than countries with flourishing tourism sectors like Turkey or Greece. As expected, this continuous development of the real
estate sector has led to the improvement of the legislation regarding such transactions which is now much friendlier to investors than it used to be.
The buying process has been simplified, the funding opportunities have increased in number, the costs and taxes have been modified, all to create a
favorable environment for real estate investment and thus bring a contribution to the country’s economic advance. This article deals with the latter,
more precisely with the transaction costs associated with real estate investments in Romania.
The total transaction costs associated with real estate investment
The costs are probably the first thing one considers when planning to invest in real estate, whether in Romania or anywhere else, so they should know
what to expect. In Romania, for instance, they should expect a total cost value between 4.10% and 9% of the property value. Naturally, these costs
vary depending on the type of property they intend to purchase as well as on its surface. This is the buyer’s part. As for the seller, their cost
value rises to approximately 3%. Therefore, the roundtrip transaction costs can reach any percentage between 7.10% and 12% of the property value,
depending on the type of property to be purchased and its size.
Types of transaction costs
So what exactly are the transaction costs under the current Romanian legislation, how high are they and who are they borne by? The roundtrip
transaction costs calculated above include 5 different types of fees, 4 of which are to be borne by the buyer and 1 of which is to be borne by the
buyer and the seller alike. They are:
- The registration fees
- The stamp duty
- The VAT (Value Added Tax)
- The notary fee
- The real estate agent’s fee
The buyer has to cover the first 4 costs listed above by themselves, namely the registration fees, the stamp duty, the VAT and the notary fee, the
realtor’s fee also being paid by the seller.
1. The registration fees
According to the Romanian law, the registration fees can vary between 0.1% and 1% of the property value, are borne by the buyer and include the
2. The stamp duty
- The registration tax, which is calculated at 30% of the stamp duty;
- The stamp tax, which is set at 10 lei (2.25 EUR);
- The judicial stamp, which is set at 15 lei (3.38 EUR);
- Several certificate taxes
Also borne by the buyer, the value of the stamp duty is variable too, ranging from 0.5% to 3% of the property value, as follows:
2.2% or a minimum sum of 150 lei (33.8 EUR) on properties valued at less than 15,000 lei (3,381 EUR)
1.6% on properties valued between 15,000 and 30,000 lei (3,381 and 6,762 EUR)
1.3% on properties valued between 30,000 and 60,000 lei (6,762 and 13,524 EUR)
0.9% on properties valued between 60,000 and 300,000 lei (13,524 and 67,620 EUR)
0.65% on properties valued between 300,000 and 600,000 lei (67,620 and 135,240 EUR)
0.44% on properties valued over 600,000 lei (135,240 EUR)
3. The VAT
The Value Added Tax (VAT) is calculated as a fixed percentage of the total price in the case of legal entities selling real estate. According to the
current law, a 5% VAT is applicable to any property compliant with the following provisions:
- The net area does not exceed 120 square meters – appurtenances not included
- The property value does not exceed 380,000 lei (85,000 EUR) – no VAT included
- The property is habitable as such
- The additional land does not exceed 250 square meters
Payments in advance, however, are charged the standard VAT (24%) because the third of the abovementioned conditions cannot be fulfilled, but the
receives their refund upon the transfer of the property.
The VAT tax is borne by the buyer, but it is not charged on real estate transactions between two different VAT payers or business transactions based
on share sales.
4. The notary fee
In Romania, the notary fees are set by the National Union of the Notaries and range from 0.5% to 2% of the transaction value. They are also to be
borne by the buyer.
5. The real estate agent’s fee
Finally, the real estate agent’s fee sums up to 6% of the transaction value, but this total sum is divided between the two parties involved in the
transaction equally. In other words, both the buyer and the seller are subject to a 3% real estate agent’s fee.
All these transaction costs are supposed to give the investor an idea of whether they can afford making a real estate purchase on in Romania and what
their safety threshold should be from a financial point of view. Once the transaction has been completed, the Romanian law imposes a whole different
self-standing tax payment system on properties and land.