BR Analysis | Romania to see major shift in property taxation to reflect market value

Romanian authorities have initiated a legal process aimed at taxing properties based on their market value instead of their historical cost in a bid to align property taxes with economic reality and to increase revenue for local government budgets.

By Ovidiu Posirca

There are two important legislative changes taking place on the real estate market.

The first is the special tax on high-value immovable and movable assets, already introduced as of 1 January 2024, and the second is the legislation regarding the assessment of the taxable base of buildings and land starting in 2025, based on the indicative market values administered by the National Union of Notaries Public in Romania, according to Miruna Enache, Transaction Tax Partner at EY Romania and EY CESA Tax Markets Leader and Carmen Afanasenco, Senior Manager for Business Tax Services at EY Romania.

“Regarding the first change, towards the end of 2023, legislators announced the introduction of a new local tax called the special tax on high-value immovable and movable assets. Although this tax does not specifically target real estate investors—since it is meant to apply to residential buildings—it reflects legislators’ drive towards taxing at market value and certainly affects the real estate market. The tax is applicable to individuals who own (or jointly own) high-value residential buildings in Romania,” they explain.

Specifically, a tax rate of 0.3% applies to the amount by which the taxable value of the building, as communicated by the local tax office through the tax decision, exceeds the threshold of RON 2.5 million. As it is intended to tax wealth, this tax also applies to other high-value goods, such as cars.

The second change—the legislation concerning the assessment of the taxable base of buildings and land based on market values—was officially announced and introduced in mid-2022 through Government Ordinance 16/2022. Although initially meant to apply upon its introduction, its enforcement was postponed, with the current law stating that it would take effect starting in 2025.

“However, due to difficulties in implementing its provisions, there are already rumours on the market that the legislative provisions, in their current form, may be repealed. This does not mean that the authorities have abandoned the idea of taxing property closer to market value; rather, they will need to find more suitable means to implement such a property taxation system,” EY experts say.

In short, for the computation of building taxes for legal persons, tax authorities are to make use of indicative market values as administered by the National Union of Notaries Public in Romania. These values, listed in market studies by notaries public for real estate in Romania, serve purposes beyond the imposition of local taxes. The legislative provisions attempted to prescribe solutions for cases where such values were not available in certain local jurisdictions. Ultimately, it is the local tax authority that carries out this assessment and sends it to the taxpayer, who then has a 30-day window to respond. Debates about the fairness and future applicability of this law have been ongoing since its introduction.

Elsewhere, in the land sector, renewable energy investments are toned down by agricultural land restrictions.