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VAT on new homes up to 140,000 euros drops to 5%

22-10-2020

The legal provisions regarding the application of the value added tax (VAT) rate of 5% on the sale of homes will change, officially, from January 1, 2020, after a law amending the Fiscal Code appeared in the Official Gazette on Friday. Mainly, the new provisions will considerably increase the ceiling up to which this reduced rate applies. The change would be the second increase in this ceiling since the introduction of the reduced VAT rate on the sale of homes in 2008.

Specifically, as provided by Law no. 248/2020, the ceiling up to which 5% VAT is applied will reach, from 450,000 lei, as it is currently, to approximately 680,000 lei (the equivalent in lei of the amount of 140,000 euros). The changes, however, will apply only from January 1, 2021. The reduced VAT rate of 5% is an exception to the standard rate of this tax (19%) and applies to homes that, at the time of sale, can be inhabited. as such and have a usable area of ​​maximum 120 sqm, excluding household annexes.

The usable area is, according to Law 114/1996 on housing, the developed area, less the one related to the walls. The change introduced by Law no. 248/2020 represents the second modification of the ceiling for the application of 5% VAT for homes from 2008 until now, the first taking place in 2016, when the ceiling was increased from 380,000 lei to the current value, respectively 450,000 of lei.

Careful! The law does NOT apply yet. The actual changes will take place only from January 1, 2020.

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