Proposal for VAT reduction to 5% for dwellings with a value of up to EUR 140,000 scheduled to enter into force on 1 January 2021

In order to encourage the economic prosperity of the construction sector, as well as to offer support for young families intending to purchase a dwelling, a legislative proposal has been made to increase the dwelling value for which the reduced amount of 5% VAT is applicable. The proposal was adopted by the Romanian Chamber of Deputies on 20 October 2020 and sent for promulgation.

The proposal states that the reduced amount of 5% VAT shall be applicable on dwellings purchased by individuals which have a total value, including the value of the land on which the dwelling stands, not exceeding EUR 140,000 or the RON equivalent (as opposed to the current limit of RON 450,000 or approximately EUR 93,000) and which have a usable maximum area of 120 sq.m., excluding any household annexes (such as warehouses, depots, garages, greenhouses, swimming pools and the like).

Entry into force of this measure will also lead to the revision of prices for dwellings that exceeded the current limit of RON 450,000, and for which promissory sale-purchase agreements have already been executed. Thus, buyers will be able to benefit from the reduction of the applicable VAT rate on the execution date of the sale-purchase agreement, effectively implying a reduction in the sale price.

The legislative proposal is scheduled to enter into force on 1 January 2021, but the final adopted form will only be available following promulgation.