​The pattern that lasted two and a half years at the level of operations with agricultural lands purchased less than 8 years ago outside the village seems to have come to an end. On February 2, 2023, a new regulatory act came into force, which eliminates a number of legislative gaps that made it impossible for notaries to certify contracts for the sale of certain agricultural lands outside the city.

How did it get here? The winding path of relevant legislative changes

As we noted in a previous article (published here), a number of legislative amendments to Law No. 2010 entered into force on October 13, 2020. 17/2014 on some measures to regulate the sale of agricultural land located outside the village and to amend Law No. 268/2001 on the privatization of companies that manage state and private agricultural land and the creation of the State Agency of Domains (“Law 17″), introduced by Law 175/2020 to amend Law 17 (“Law 175″). The lack of normative acts that would shed light on the process of interpretation and application of Law 175 gave rise to the aforementioned blockage.

In June 2022, the Government issued Emergency Resolution No. 104/2022 on amendments to Law 17 (“GEO 104“). GEO 104 made a number of positive additions and clarifications regarding the taxation of transactions with non-rural land, but the procedure for calculating, processing and paying the tax remained unsettled, without which the application of the law was impossible. Although this procedure was supposed to be approved at the end of August 2022, only 2 in February 2023, a joint order of MADR and the Ministry of Finance No. 396/2022/883/2023 was issued (“Order″), which regulates the procedure for calculating, processing and paying the tax, as well as the declaration obligations established in accordance with Art. 42 of Law 17.

What operations are covered?

After the approval of the Order, deeds regarding agricultural land located outside the city limits, acquired less than 8 years ago, provided for in Article 42 of Law 17 as amended by Law 175, should be unblocked, namely:

1. sale of non-rural agricultural land according to a notarial deed, certified by a real notary, before the end of 8 years from the moment of land purchase – classic sale;
2. the sale of a controlling stake of a legal entity that owns one or more agricultural land plots located outside the city and constitutes more than 25% of its assets, in the part that the alienation takes place before the end of 8 years from the moment of acquisition of any of these lands. We clarify that the verification of the condition related to alienation before the end of 8 years from the moment of land acquisition also applies to the period of ownership by the shareholder/participant who contributed the land as a contribution in kind to the social capital of the legal entity that is the owner of the land, depending on circumstances; and
3. completion of the transactions specified in the points above, based on a court decision, which replaces the sales contract.

tax 80%. When is it paid and how is it calculated, collected and disbursed?

For the transactions mentioned above, the tax in the amount of 80% of the positive difference between (i) the value of the agricultural land from the date of sale/alienation of the controlling stake and (ii) the value from the date of purchase/acquisition of the land, determined at the established indicative value, is carried out through examination/market research , compiled by notary chambers for the relevant periods.

Regarding the sale of non-rural agricultural land acquired less than 8 years ago, the 80% tax is paid by the owner only in cases where the relevant land was acquired by purchase and not by other means of acquisition (e.g. exchange, gift, inheritance). , usufruct, dacha in payment).

On the other hand, in the case of the sale of a controlling stake, a tax of 80% is paid in all cases where the legal entity whose shares are sold owns non-rural agricultural land acquired in any form, not only by purchase, less than 8 years ago .

Of classic sale, The procedure resolves the issue of interpretation of Law 17 and clarifies the procedure for calculating, processing and paying tax by public notaries. The latter must calculate and collect the sales tax and declare it in full as income to the state budget every month by the 25th of the month following the month in which they collected it.

However, what remains to be found out?

If, as regards classic salethe procedure for collecting and paying the tax is now clear, which cannot be said for the other two sales situations mentioned above.

Thus, in the case of the sale of a control package, the seller is obliged to calculate the tax and declare the received income to the authorized central fiscal authority within a maximum of 10 days from the date of transfer. For implementation, it is still necessary to accept the order of the president of the National Agency of Fiscal Administration (NAFA), which approves the model and content of the declaration that must be filled out in this regard, respectively, the model and content of the tax decision on the basis of tax payment (within 60 days from the date of notification of this decision).

In addition, in the case of a sale made under judgments that supersede a contract of sale, the courts that render these final judgments transmit the judgment and related documentation to the central fiscal authority, and the fiscal authority determines the tax to be paid within 60 days. obtaining documentation by making a decision on imposition, the model and content of which still need to be agreed.

Double taxation? A look at the Fiscal Code

The 80% tax is an additional tax compared to those normally payable under the Fiscal Code on the transfer of ownership of land or an interest (i.e. income tax on the transfer of assets from personal property/ investment income tax, depending on the method of sale, for individuals, respectively, income tax/microenterprise income tax, in the case of legal entities).

Moreover, despite this classic sale orthe sale of a controlling stake, if the seller is a taxpayer of income tax, the expenses with this tax of 80% are expenses that are not attributable when calculating the fiscal result. At the same time, regardless of the method of sale, if the seller is a non-resident tax resident of Romania, the 80% tax is not included in the scope of the Double Taxation Convention concluded by Romania with the country of tax residence of the seller, if any.

It is interesting to note that in the case of the sale of a controlling stake, the calculation of 80% of the tax is carried out by the competent central tax authority. Given that the SFS some time ago abandoned the obligation to calculate taxes on the basis of income declared by individual taxpayers, we now see that this obligation extends even to legal entities. It remains to be seen how the competent central fiscal authority will make this calculation, given that the seller of the controlling stake is required to declare the income received from the sale of participation rights, and not the value on the basis of which the 80% tax is calculated.

It also remains to be seen who must declare the income received and pay the 80% tax if there is a sale of a controlling stake, but none of the sellers individually owns this stake.

Conclusion

The clarifications introduced by the Order, which allow to remove the impasse in some relevant real estate transactions, are welcome. At the same time, in order to completely unblock all relevant situations, it is necessary to quickly adopt the mentioned order of the President of ANAF.

The article was written by Mădălina Mitan (managing attorney, real estate and construction), Steliana Stroe (attorney, real estate and construction), Adriana Stojan (head of the tax department) – Schoenherr and SCA Associates