Romania

Details

  • Type: Video
  • Date: 1/17/2014
  • Length: 04:31 Minutes

Perspectives on Taxation - January 2014 Conference 

Introducing the tax on constructions

 

Niculae Done, Tax Partner, talks about the introduction of the tax on constructions is one of the less popular of the measures which were introduced with effect from 1 January 2014, in comparison with the other changes made to the Fiscal Code.

This tax will affect the majority of constructions in the Romanian economy, and the rate of 1.5% of their value represents a significant amount, which considerably exceeds the estimates made by the authorities in relation to income which needs to be raised for state budget.  In the first instance, we need to understand the area of applicability of this tax, taking into account the definition of constructions both according to the provisions of the Fiscal Code and under the laws which regulate the activity of this sector. More complex issues arise for sectors like the petrochemical, energy and telecommunications industries, as in these cases a whole chain of production, distribution and sales is affected, with the end consequences being felt in the final price paid by the consumer.

 

Bearing in mind the consequences of the introduction of this tax, careful attention should be given to its introduction/implementation so that there will be a correlation between tax on property, such as the constructions tax, and tax on income generated from property. The latter should not be prohibitive, in the sense of making the sale of the property necessary to pay the property tax, because the source of the income deteriorates until its disappearance.

 

At the same time, as we have discussed, the rate of 1.5% of the value of the construction is significant, because these constructions have an extended life, and if this tax remains in force in the long term, this could mean paying the cost of the construction again. It remains to be seen, however, whether the tax authorities will rethink the methods of implementation of the tax and will introduce appropriate adjustment measures. 


The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. The information presented in this video was last updated at 20 January 2014. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.