Romanian Property Buyers Guide
Since EU membership, property purchase in Romania has become an increasingly investor-friendly process. Below is a general guide to the real estate buying procedure in Romania.
We will guide you through each step of the process to ensure you are fully informed and avoid any potential pitfalls.
A simple process
- The seller produces a “Certificat Fiscal” to prove that the property is correctly registered with the fiscal authorities and that all the relevant taxes have been paid. The seller also submits a “Certificat de Sarcini” to confirm that the property will be free from mortgages and other debts upon sale
- The notary draws up a deed of sale, “Drept de Proprietate”
- The deeds are signed in front of the notary to validate the transaction
- The real estate is recorded at the Land Registry
Total costs to the buyer range from 4.10% - 9.00% depending upon the type and size of the property to be purchased. Main costs include:
Stamp duty 0.5% - 3.0%
Notary fees 0.5% - 2.0%
Registration fees 0.1% - 1.0%
19% VAT is applied on the full price of the property and is charged if the seller is VAT registered (i.e. a company). However, with transfers from one VAT payer to another, or the transfer of a business by way of a share sale, VAT is not charged.
Individual Income Tax and Corporate Tax
Rates for both taxes in 2008 are flat at 16%.
Capital Gains Tax
For companies and individuals is charged at 16%. For individuals, the tax rate for gains from the sale of real estate is 2% - 3%.
If the inheritance procedure is finalised within two years from the death, no tax is due. If this is not the case, a 1% is payable on the total value of the inheritance. No tax exists on gifts or wealth.
Is set at 0.5% to 1% of the property value. In case of a building owned before 1 January 1998 and not revalued after this date, local taxes range from between 5% and 10% of the recorded cost of the building.
Is subject to a 16% flat tax rate; however, a 25% notional deduction is also available.
Romania is signed up to a Treaty for the Prevention of Double Taxation with many countries all over the world. A Double Taxation Prevention Treaty, in principle, enables you to offset tax paid in one of two countries against the tax payable in the other, thus preventing double taxation.
It is wise to appoint a lawyer who is fluent in your language so that you fully understand all the legalities and proceedings. The amount of red tape still associated with buying and selling property in Romania can be a headache even for local Romanian citizens, so finding a good lawyer who can take on this burden is essential.
Our advisors can recommend a good lawyer who will carry out all necessary checks on the property or land in Romania and fulfill the legal requirements of the sale.
Your lawyers will:
- Check the current owners have the correct title to the property
- Check for any charges and liabilities still owed on the property
- Check your contract and advise you on the obligations for both parties
- Help you through the payment/funds transfer
- Ensure the property is registered in your name
Public notaries must be present at the time of signing the Purchase Contract. They work as legal representatives of the State, checking the legal documents and witnessing the signatures. If you are unable to appear in person at the signing, you should give a Power of Attorney to your lawyer to act on your behalf.
Funds are sent directly from your own bank to the seller’s bank account in Romania. It is advisable to arrange transfer through a professional currency exchange bureau that will save you money and hassle by exchanging and transferring for you at the best possible rate. We will gladly put you in touch with reputable currency exchange professionals.
Capital and repayment mortgages, although a relatively new option for foreign buyers in Romania, are available locally for maximum periods of 35 years or until age 70. Typical interest rates are impressively low at around 4% fixed and 6.5% variable rates. Minimum loans are for 5,000 Euros, while maximum loans can reach 500,000 Euros to finance 75% LTV. In order to qualify, your total debt should not normally exceed 35% of your income. Meanwhile, the Central Bank’s (BNR) decision to reduce minimum down-payments for homebuyers is paving the way for 100% mortgages and increased affordability for both local and international buyers.
Some developers of new build and off-plan developments offer installment plans over between 12 to 60 months. The charges applicable vary according to developer and repayments are usually index linked.
If you possess property in your own country and would like to borrow against this in an equity release plan, we can introduce you to an independent financial advisor who will help you raise the necessary finance.
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