Romania: Great Interest In Romanian Agricultural And Forest Land

Further openings for individuals and legal persons from EU and EEA member states to own agricultural and forest land in Romania as of January 2014 stirs even more interest in Romanian land.

It is no secret that land prices for agricultural and forest lands are among the lowest in Romania.

At the same time the biggest gains with food production in the Eurozone were reported to have been made in Romania in the first half of 20131. The same phenomenon is noticeable with forests. With prices between EUR 2,000 and 3,800 per hectare, Romania has a considerable competitive advantage over western European countries. The price is attractive and the produce can be sold without difficulties. Companies from Europe, the Middle East, and even China are looking to Romania for wood.

Add to this the increasing legal security of the ownership title and it is no wonder Romania has become highly coveted by investors in agricultural and forest land.

Foreigners have been able to hold title to land via Romanian registered companies, while EU/EEA citizens resident in Romania have had direct access to land.

Further opening

Starting with 1 January 2014, legal and natural persons of the EU/EEA will be able to own agricultural and forest land in Romania whether or not they are resident in Romania and without the need to interpose a company.

Adjacent costs at purchasing

Title to land is transferred upon notarisation of the sale-purchase agreement. The minimum fee the notary has to charge is set out by law and is calculated applying a formula to the purchase price. It ranges between 0.65% and 1% of the purchase price.

Following a legally binding title transfer, the new owner is registered in the land books. The land registry fees are 0.5% of the purchase price if the purchaser is a company and 0.15% if the purchaser is an individual.

These costs, the notary's, and the land registry fees are usually borne by the buyer.

If the transaction is subject to VAT and the buyer is not allowed to claim input VAT credit (eg, being a natural person), the price may increase by the VAT rate of 24%.

Normally the sale of agricultural and forest land is exempt from VAT unless the seller opts to apply VAT. If the seller has claimed input VAT credit upon acquisition, the subsequent resale without VAT will trigger a VAT cost, the seller being obliged to repay to the state budget the input VAT initially claimed. Therefore, the seller is likely to opt to charge VAT on the transaction.

The land price would not translate into fiscal depreciation deductions in Romania, but companies may deduct transaction-related expenses. However, a tax deduction for the land price may be allowed in buyer's country of tax residence.

Exploitation of land

A company's taxable income from agricultural and forestry activities is revenue less deductible expenses.

For individuals, taxation is specifically regulated, similar to freelancers:

  • for certain activities, fixed income quotas are established and the individual pays 16% tax on the quota irrespective of the income actually derived. For reference, the highest income quota applicable for 2013 is for ornamental plants (RON 11,773/ha);
  • for other activities, income is computed based on actual revenue and expenses;
  • health social contribution may also be due.

For non-residents, the following general taxation rules should be considered:

  • income should qualify as taxable in Romania, being related to an immovable property located there, an approach confirmed also by the OECD Model Convention allowing the state where the immovable property is situated to tax income from such property (including income from agriculture and forestry);
  • the country of tax residency should allow for elimination of double taxation;
  • the non-resident may need to apply for a Romanian VAT number.

Transfer of land

If an individual sells land from private patrimony, the entire income from the sale is subject to taxation at a rate between 1% and 3% depending on the value and on the holding period. For companies, the capital gain from sale of land is taxed at 16%. Thus, if a significant increase of the land prices is expected, 1%-3% on the sale price could prove more beneficial compared to a 16% tax on the capital gain.

Certain transfers are tax exempt: donations between relatives up to the 3rd grade and between spouses, as well as inheritance, if succession is finalised within 2 years.

VAT is also an issue when selling land. Land acquired for private use may be sold without VAT, while with land acquired for business use (assuming non-building), the seller may opt to charge VAT.

This is the current legal and tax framework. But laws in Romania are undergoing continuous changes and it is to be seen how the market and practice develops in 2014, the first year when non-resident EU citizens and legal entities are allowed to own agricultural and forest land in Romania.

Quote: Irrespective of the structure chosen, buying directly or through a Romanian subsidiary, a thorough title check is highly advisable. A successful exit also depends on how transparent and well-documented the title history is.

Footnote

[1] Financial Times: http://www.ft.com/intl/cms/s/0/1e1126e8-34bc-11e3-8148-00144feab7de.html

This article was originally published in the schoenherr roadmap`14 - if you would like to receive a complimentary copy of this publication, please visit: pr.schoenherr.eu/roadmap.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions