2024-02-15 06:47:02
The VAT rate for the purchase of housing has increased from 1 January 2024 from 5% to 9%, but there are some transitional provisions according to which the reduced VAT is paid. In addition, the definition of habitable housing as such has also been modified. In the second part of the text, you also have two examples for certain specific situations.
Housing in BucharestPhoto: HotNews.ro / Victor Cozmei
First of all, when it comes to transitional provisions, a change that applies from 2023 must be considered.
“From January 1, 2023, we have an important change: the law provides that you can buy a single home with a value of up to 600,000 with a VAT rate of 5%, but the transitional provisions of OG 16/2022 allowed that for those who had contracts in progress concluded by December 31, 2022 to be able to buy homes with 5% VAT only in 2023, if they were delivered in 2023, regardless of their number. That is, houses worth up to 450,000 lei, you could buy even more, but a single one between 600,000 – 700,000 lei”, said Mariana Vizoli, tax expert and author of the book “VAT from A to Z. Practical Guide”.
From January 1, 2024, the rate increased from 5% to 9%. The conditions remain the same related to the area, the value of 600,000 lei, etc.
“However, we have another transitional provision that applies this time in the year 2024. For those who concluded contracts during 2023 and have also paid advances, but it is important that those contracts are concluded in that year, they will be able to buy with a 5% rate if the house is delivered in 2024”, said Mariana Vizoli, in the TaxEU Forum.
She reminded that the definition of habitable housing as such has changed since January 1, 2024 (by Law 296/2023 no.
“New conditions related to interior and exterior finishes, installations, sanitary items, electrical installations are included. Only homes that meet the minimum conditions can qualify for a reduced VAT rate. These conditions will only be valid for contracts concluded after January 1, 2024, because according to the transitional provisions, contracts concluded before this date will follow the definition that existed until this date”, explained the tax expert.
What goes into household attachments and how they should be treated
There are many questions related to household annexes, but the answer from the Ministry of Finance since the time she also worked in the ministry is that the household annex is included in the value of the home.
“The annex is not included in the 120 square meters, but it is included in the value of the home,” Vizoli said.
According to it, if the home together with the household annex (such as a box, garage, parking space) exceeds the value, the reduced VAT rate is no longer applicable. There is a provision regarding outbuildings from which it follows that garages or storage rooms are also outbuildings.
Two examples regarding reduced VAT, as well as a rate of 19% in some situations
Mariana Vizoli also came up with two examples regarding the application of VAT rates for housing:
1. A family has completed 4 purchase promises before December 31, 2022 for homes not exceeding 120 square meters. 3 homes have a maximum value of 450,000 lei and one of 650,000 lei.
Advances were paid for all these homes until December 31, 2022. They fell under the transitional provisions of Ordinance 16 valid in 2023.
As such, two of these homes are delivered in 2023 with a value of up to 450,000 lei, one with a value of 650,000 and it was possible to apply the 5% rate.
Instead, one of the homes is not delivered in 2023, but in 2024. As such, the transitional provisions of Ordinance 16 no longer apply. This home, even if it has a value of up to 450,000 lei, will be delivered with a rate of 19% because the conditions are no longer met: in the previous year the person in question bought homes with a reduced VAT rate.
2. A person who entered into a contract for the sale of a home in 2023. Pays 20% down payment by December 31, 2023. The home is eligible based on value and area. Advances were billed at 5%. On the date of delivery, the old definition of home is used. It will be delivered in 2024 with the share of 5%.
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