The PSD-PNL coalition changes the definition of residential housing as such to a reduced VAT rate, which increases from 5% to 9% (in a package of fiscal measures). The problem is a bit more complicated, which would lead ANAF to abuse.

See: OFFICIAL What tax increase the PSD-PNL coalition envisages. What the DOCUMENT project looks like

The Chamber of Tax Consultants (CCF) has sent a letter to Finance Minister Marcel Bolosh in which he essentially explains what the problem is.

“Given that the definition of habitable accommodation as such, which was just promoted a year ago, will be changed, this will affect contracts already in place, which are based on the current definition, which will include transitional measures that are quite difficult to explain to business environment,” the Chamber of Tax Consultants notes.

According to the consultants, one of the measures concerns the transition from a 5% VAT rate to a 9% rate for houses rented out under the social policy (worth up to 600,000 lei). This provision has already undergone important changes at the beginning of this year (2023) regarding the number of houses and the conditions necessary for the application of the reduced VAT rate, transitional measures are also being established.

This time, the CCF shows, the VAT rate also changes from 5% to 9%, with two types of transitional measures in place for both contracts concluded before 2023 and those concluded during 2023 to maintain current rates and conditions. on the date of conclusion of short-term contracts (2023).

“We remind you that since 2020, these provisions have systematically undergone changes that affect both the business environment and potential beneficiaries, being one of the measures that, in our opinion, destabilizes the business environment and the population due to the lack of predictability “, reports the cited source.

Another change that will affect houses that are supplied at a reduced VAT rate is the redefinition in Art. 266 par. (1) clause 161 of the draft ordinance, houses that can be lived in as such at the time of delivery and can be delivered with a reduced VAT rate, added new conditions regarding interior and exterior finishing, sanitary and electrical installations, compared to the definition that was included in the Fiscal Code following a legislative initiative (Law No. 301/2022) aimed at introducing clarifications to avoid offensive interpretations regarding the concept of habitable housing “as such”, which was not clearly defined in the Fiscal Code.

• “Law No. 301/2022 closed the legislative vacuum, since before its adoption by the Romanian Parliament there was no definition of “livable housing as such”, for which the only rational solution was the decision chosen by the Parliament to introduce explanatory provisions with an explanatory role into the law , precisely in order for this definition to be applied, including to situations that arose before 2022.”

Will ANAF be abused?

The Chamber of Fiscal Advisers states that if the definition is changed we will be back in the same situation, namely for tax audits targeting financial periods and actual situations up to 2022, there are no longer criteria to qualify a house as a residential dwelling as such, as the new definition according to its content, it can no longer be qualified as an explanatory provision with the role of clarification and uniform application of the law, and this will lead to the restoration of abuses by tax authorities.

“Even the new requirements proposed for definition in the draft regulation, which, as we show below, take a significantly different approach than the previous requirements, will affect and contribute to this abusive behavior for fiscal periods up to 2022“, the consultants say.

• On the other hand, we find no strong motivation to radically change the definition of residential accommodation as such, which is diametrically opposed to the current definition, with implications for all current contracts as well as past ones, as I have already mentioned.

“According to the current definition of residential housing as such, it is necessary to have access to electricity and drinking water, controlled evacuation of sewage and household waste. But new conditions are added to the draft order, namely electrical installations, including switchboards, boxes, switches/switches and sockets,” the document sent to Bolos said.

• “If the current definition states that the house must consist of at least a space for recreation, a room for cooking and a bathroom, regardless of the available amenities and the degree of finishing on the date of delivery, then the draft amendments exclude the possibility of houses being delivered with different degrees of finishing, with a reduced quota, a fairly high standard of equipment and processing”

“The new definition of a residential building as such contains restrictive conditions regarding objects, in particular: external decoration, which includes at least: a roof, if depending on the type of construction this structural element is foreseen, windows, entrance doors; interior decoration, which includes at least: walls decorated with paint, wallpaper, tiles or other elements used for decoration, floors finished with tiles, parquet or other elements used for decoration, interior doors, depending on the project; plumbing fixtures and plumbing fixtures, respectively, a toilet, a sink and a washing machine with a bathtub, with the appropriate batteries,” CCF reports.

• “From this point of view, it is clear that this residential character of buildings must be determined in accordance with European jurisprudence, including from the point of view of VAT, from the point of view of the purpose and expectations of the average consumer or with average requirements at the level at which the analysis is carried out.”

• “Therefore, strict consideration should be given to the elements that may hinder the proper arrangement of the space, not the absence of certain objects/facilities/accessories/decorations (as proposed in the proposed modification project) which can only create a lot of possible discomfort at the highest level of demand possible buyer, but not representing the corresponding interest for the majority of buyers in the market.

See the full appeal sent by the Chamber of Fiscal Consultants to Minister Marcel Bolosh

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