VAT on a property sale: questions to settle before signing

The VAT treatment of a property sale depends on the seller’s position, the asset and the transaction’s history. Agree the price and contractual terms after clarifying these factors, rather than relying on an assumption about VAT.

Three different questions about the same sale

The first concerns the seller and the context of its activity. The second concerns what is transferred: land, a building, parts of it or several elements together. The third concerns timing: advance payments, completion of works, use of the asset and the transfer itself. Consider these answers together before calculating the consequences.

The Romanian Fiscal Code, particularly Article 292, draws relevant distinctions for supplies of buildings and land. Terms such as a new building or building land have a tax meaning that needs to be checked against the actual documentation. A description in a sales listing or the impression that a property is “old” is insufficient.

In a hypothetical example, premises purchased years earlier underwent substantial works before sale. The assessment needs to consider those changes, rather than only the original purchase date. Technical records and the history of use may be essential to classification.

Separate classification from the payment mechanism

An exemption, an option to tax and reverse-charge treatment are separate questions, each with its own conditions. Reverse charge concerns how VAT is accounted for and should not be confused with a tax exemption.

Review the history of VAT deducted on acquisition or investment too. A change of use or a particular sale treatment may require consideration of adjustments. The Romanian Accounting Law underlines the importance of supporting documents. For this project, bring them together with the tax rationale and property records.

The contract should clearly state the pricing assumption and how the parties address any differences arising from classification. Agree the wording with the legal team after the tax assessment. A contractual clause cannot replace statutory obligations or establish a treatment that the facts do not support.

A checklist for the transaction file

• Confirm the parties’ identities and tax positions.
• Collect title records, planning information and documentation of building works.
• Document use of the asset and the history of purchases and investments.
• Check advance payments, invoices and relevant transaction dates.
• Assess exemption, an option to tax, reverse charge and adjustments separately.
• Align the tax conclusion with the price, contract and invoicing responsibilities.

For a discussion of your circumstances, prepare the asset description, history of use and draft contract before finalising the pricing terms. This helps focus the review on the facts that may change the result.

This article provides general information, not individual advice. VAT treatment requires a transaction-specific assessment using the facts, evidence and legislation applicable at the relevant time.