I. Property Investments in Romania
 Where is Romania ?
 Romania lies between the Ukraine and the Balkans in Eastern Europe. Hungary is to the west, Serbia and Bulgaria to the south & Ukraine to the north. The capital, Bucharest is located in the south east 60 km, north of Bulgaria and 180 km from Black Sea coast. More information you can find on Romania Market review page.
How do I fly to Romania?
Since 1990 the air transport has developed very good. Right now in Romania operates all big Flight Companies, and some Low Cost operators such as: Blue Air, MyAir, Wizz Air, SkyEurope and Germanwings, but expects also several European companies, like EasyJet and Ryanair .
Why consider a property investment in Romania?
You should consider in buying a property in Romania because:
- Property prices are below other European levels (circa 50% of property prices in Bulgaria )
- Property prices aregrowing at an average of 25% since 2003
- Romania possesses a low and decreasing inflationary regime, stable currency (fully denominated after 1st July 2005), liberalised financial markets stimulating a trend in western companies to relocate to Romania. In 2005 ,Standard and Poor increased the sovereign debt rating of Romania to BB+ (from BB). Romania is the EU newest member from January 2007.
- Growth in Tourism - the World Travel and Tourism Council (WTTC) predicts Romania to be the 4th fastest growing tourism sector in the world with a growth projection of 7.9% per year from 2007-2016
- Romania is a beautiful country of dramatic mountains and rolling hills, fertile plains, rivers and lakes
- Romania ’s Black Sea coast, stretching over 200 km provides clean sandy beaches with minimal tides – ideal for young children
- Th e climate is temperate with four distinct seasons. Temperatures in the summer average over 70°F with July & August peaking at 79 °F
Where should I invest?
The main areas experiencing investor demand are the capital, Bucharest, the resorts along the Black SeaCoast and the mountains regions of Banat andTransylvania.
How is the politcial and economic situation?
Since the downfall of communism in 1989, Romania has built a democratic government.The current government is a coalition formed around the Justice and Truth (DA) alliance under Prime Minister Calin Popescu-Tariceanu and the Democratic Party (PD) under Emil Boc. Successive recent governments have worked the international community to produce respectable macro indicators (see table right). Please note - the fall in GDP growth in 2005 was largely due to devasting floods causing damage in agriculture.
What do the analysts say?
Romania is set to be the rising star of 2006.Its fledgling property market is well worth investigating, before it really takes off.’- A Place in the Sun, Channel 4
What taxes do I pay during purchase, rental and sale?
See below for the information about:
1. Foreign Ownership
2. Costs of Purchase
3. Income Tax from rental income
4. Property Tax
5. Capital Gains Tax
II. Buying Property in Romania
What restictions exist on Foreign Ownership ?
Currently, foreigners may directly own buildings but they may not directly own land. However, it is an accepted and common practice on the Romanian real estate market for foreigners to own land indirectly through legal entities incorporated in Romania, even if such entities are wholly owned by a foreign entity or individual.
All acquisitions of real property must be registered in the real estate registry (Land Registry) Registration of a change in ownership normally takes at least one week.
For more information we are more than glad to offer you more details.
What costs do I incur during the property purchase ?
A stamp duty, including a fixed amount and percentage calculated on the value of the real property ranging from 0.5% to 3% (subject to 50% discount for transfers of undeveloped land), must be paid for notarisation of sale-purchase contracts involving real estate.
Mortgages and transfers of real property must be certified by a notary . The fee is negotiable but normally ranges from 0.5% to 1.5% .
Payments of commissions and fees for services performed in Romania (e.g. consultancy and management services) are subject to a withholding tax of 15% irrespective of the location where they are performed.
What income tax do I pay on rental income ?
If the landlord is an individual, the net rental income for buildings (i.e. after a deemed expenses deduction of 25%) is subject to individual income tax at a flat rate of 16% (rate as of 1 January 2005). If the landlord is a company, the net rental income is taxed at 16% profit tax (rate as of 1 January 2005).Expenses incurred for deriving rental income are tax deductible. In their Articles of Association companies should have “rental activity”listed as their object of business in order to be allowed to let real estate property
What property tax do I pay ?
Owners of buildings and special constructions are subject to building tax, irrespective of their location or function. For individuals, 0.2% is applicable on the value of buildings located in urban areas, and 0.1% elsewhere.For companies, building tax ranges between 0.5% and 1% of the accounting value. This percentage is increased to between 5% and 10% if the building has not been revaluated in the last three years. Owners of land are subject to land tax which is established at a fixed amount per square metre, depending on location.
What capital gains tax do I incur on sale ?
Sale of property may also necessitate the payment of capital gains tax of 16% or 10% if the property is owned for at least two years. The buyer as owner of property is subject to property tax(0.5% to 1%of the book value of the building). |