lease. The parties may freely agree upon:
- the initial rent (which can be fixed or variable);
- the duration of the lease agreement;
- the right to sublease.
Commercial leases must comply with some specific mandatory
rules, such as:
- the lessee must respect and maintain the destination of
the leased property and must use it accordingly;
- the lease agreements concluded under private signature
(înscris sub semnatura privata)
that were registered with
the competent tax authorities, as well as the lease agree-
ments concluded in notarised form, represent enforceable
titles for the payment of the agreed rent.
Î
Duration : initial term of the lease
•
The duration of the lease agreement may not be longer than 49
years. If longer the term will be reduced by law.
•
Perpetual leases are prohibited.
•
If the lease agreement did not mention a specific duration, but
the parties did not intend to conclude it for an unlimited period,
the lease duration will be considered to be one year.
•
A commercial lease may only be terminated by notice of
termination delivered by the lessor. Also, the lessee may issue
a request for renewal. Failing that, the lease will be extended
beyond its contractual term for an unspecified term, each of the
parties having the right to request the termination at any time
with a 60-day prior notice.
Î
The renewed lease
•
When the initial lease is tacitly renewed
(tacita relocatiune)
it will
provide the same terms and conditions as the previous lease if
there are no contrary provisions in the initial agreement, with the
exception of the duration which will be, in principle, unlimited. If
the parties decide to extend the term of the agreement before
its termination a new agreement
(express renewal)
will be
concluded.
•
For the conclusion of a new lease agreement, the lessee has,
under equal conditions with any other person, a preference right
for leasing the property, if he/she has performed the obligations
arising from the previous lease agreement.
Î
Transfer of leased property
•
If the leased property (immovable) is transferred by its owner, the
lease will be opposable to the new owner if it was registered with
the Land Registry, unless expressly provided otherwise in the
lease agreement.
•
The lease will remain opposable to the new owner even after
the lessee was notified about the transfer, for an at least double
duration than the prior notice term requested for terminating
the lease agreement (ie. at least 120 days).
TaX
Î
Direct acquisition of a property
•
The acquisition of a property may give rise to value added tax
(VAT) and gives rise to notary public fees and Land Registry fees.
•
The sale of land and buildings (and parts thereof) is VAT exempt
with an option available to the seller to charge 24% VAT. As an
Investor Guide to Europe 2014
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exception to this rule,
the sale of new buildings
(buildings sold by 31st December
of the year following the year when they
were first occupied), parts thereof and building
land (land on which constructions may be erected in
accordance to the law) is always subject to 24% VAT.
•
Corporate sellers of real estate who are not required by law to
charge VAT often opt to do so in order to avoid the repayment
to the Romanian state budget of the input VAT credit they had
claimed upon the acquisition, construction or upgrade of the
respective property.
•
Corporate buyers of real-estate who buy properties with VAT will
find themselves, more often than not, in a position to claim ex-
cess input VAT credit from the Romanian state budget. Because
of the long time it takes to settle VAT refund claims in Romania,
corporate buyers often have to finance the input VAT they pay to
the sellers over a long period of time and at a high financing cost.
•
Real estate assets are subject to property taxes, due by the
owner as of the next month following the acquisition. For buil-
dings, the tax rate commonly applicable to corporate owners is
1.5% computed ad valorem whereas the land tax is in the form
of a lump sum/ sqm, which varies depending on factors such as
location, category of land, etc.
•
Notary public fees may be paid by either of the parties (however
they are generally paid in practice by the purchaser) and amount
to various percentages depending on the value of the transfer-
red property, varying between 2.2% but not less than lei 150
(approx. equivalent of EUR 35) for properties with a value less
than lei 15,000 (approx. equivalent of EUR 3,350), and lei 5,080
(approx. equivalent of EUR 1,130) plus 0.44% for the sum that is
over lei 600,001 (approx. equivalent of EUR 133,350) for proper-
ties with a value higher than lei 600,001 (approx. equivalent of
EUR 133,350).
•
Land Registry fees amount to 0.5% of the value declared within
the sale-purchase agreement, if the purchaser is a legal person,
and 0.15% of the value declared within the sale-purchase agree-
ment, if the purchaser is a natural person.
Î
acquisition of shares in a company
holding a property
•
The acquisition of shares in a Romanian real estate company
does not trigger any particular tax implications. If the shares are
acquired from a natural person, the buyer will likely have some
tax compliance obligations in connection to the capital gain tax
due by the seller.
Î
asset deal vs. share deal
•
The asset deal could ensure a step-up in the value of the building
which could be beneficial for corporate tax purposes and may
generate additional local taxes in the short term. The decision as
to the appropriateness of having an asset deal vs. a share deal
depends essentially on the purpose of the acquisition and overall
investment structure. VAT may also have an impact on an inves-
tor’s option between an asset deal and a share deal.
