At the end of 2020, the real estate market in Romania was taken by surprise by the introduction of an additional tax amounting to 80% in case of sale, even indirectly, through the so-called share deal (the sale of the controlling stake in a company), of extra-muros agricultural lands (the „Tax”).
For the past two years the practice revealed that the calculation and collection of the Tax was impossible in lack of specific regulations. However, by mid-2022 some general principles regarding the Tax were clarified and the intention of the Ministry of Finance and the Ministry of Agriculture and Rural Development to elaborate and approve a common order to regulate the calculation, collection and the payment of the Tax, with the consultative endorsement of the National Union of the Public Notaries in Romania was announced.
In this context, starting from 2 February 2023, Order no. 396/2022 of the Minister of Agriculture and Rural Development, respectively no. 883/2023 of the Minister of Finances for the approval of the procedure regarding the calculation, collection and payment of the tax, as well as the declaration obligations established as per article 42 of Law no. 17/2014 („Procedure”) entered into force.
Besides establishing the actual procedure regarding the declaration and payment of the Tax, the Procedure also clarifies certain aspects regarding its field of application.
Tax application field
As per article 42 of Law no. 17/2014, the Tax becomes incident in case of:
- direct sale of extra-muros agricultural lands before the lapse of an 8-year period since the moment the land was bought; and
- indirect sale, by transfer of the controlling stake in a company that has the ownership right over one or more extra-muros agricultural lands which consist of more than 25% of the total number of its real estate assets (any land, building or construction erected or incorporated in the land, registered according to the applicable accounting regulations) before the lapse of an 8-year period since the moment the land was acquired.
In addition to the guidelines set out by Law 17/2014, the Procedure expressly states that the Tax will not be due in case of sale of the extra-muros agricultural lands which were previously acquired by the seller pursuant to any acquisition deed other than a sale-purchase agreement. For example, the Tax will not be applicable to the sellers which have previously acquired the ownership right over the respective plot pursuant to an inheritance or partition deed. However, in case of indirect sale, by transferring the controlling stake in a company, it seems that the intention of the legislator was for the Tax to be applicable irrespective of the way the ownership right over the land was acquired by the company.
Calculation, collection and payment method
Further, regarding the payment method, as a general rule, the Tax will be calculated and collected by the notary public before the authentication of the notarial deed for the sale of the extra-muros agricultural land. The notary public will file the declaration regarding the payment obligations to the state budget, which will be submitted to the competent central fiscal authority together with the summary detailing the distribution to the administrative units.
In case of transfer of the controlling stake, the seller bears the obligation to declare the income to the competent central fiscal authority within maximum 10 days as of the date of the transfer, based on the substantiating deed. In such case, the Tax must be paid within 60 days from the date the tax decision is sent by the fiscal authority. However, for the cases where the seller is a company that does not have its fiscal residence in Romania, the legislator seems to condition the transfer upon the fiscal registration of the company in Romania; this can be done by filing the form 015 before the execution of the shares sale-purchase agreement.
In case the transfer of the ownership right over the land or over the controlling stake in a company according to art. 42 para. (1) and (2) of Law no. 17/2014 occurs pursuant to a court decision, the court that issues the decision must send it to the central fiscal authority from its area of territorial competence within 30 days as of the moment the decision becomes definitive. The latter will further send the decision to the competent central fiscal authority, which will determine the Tax and will issue the tax decision within 60 days as of receiving the documentation.
Last but not least, the Procedure states that in case the transaction pursuant to which the seller paid the Tax to the notary public is subsequently terminated, the seller has the right to request the reimbursement of the Tax according to the common applicable procedure.
