Filing a valuation report for taxation with the Local Tax and Fees Directorates to which the assessed building belongs is an option of taxpayers to apply the reduced tax rate for buildings revalued under the terms stipulated by the tax code – for individuals who own buildings with non-residential/mixed destination the tax rate is between 0.2-1.3% in case of filing a valuation report versus the 2% rate if a valuation report is not filed. For legal entities the tax rate reaches 5% if the building has not been evaluated in the last 3 years prior to the reference year versus the 0.2-1.3% rate applied in the case of filing a valuation report.
For reasons of fairness towards legal entities taxpayers, as a result of the application of the European legislation to reduce discrimination between natural and legal persons, the determination of the tax on buildings differentiated according to the destination of the building was introduced with the entry into force of Law 227/2015 on the new tax code (01.01.2016).
The valuation for taxation is carried out for non-residential/mixed buildings owned by natural and legal persons as well as residential buildings owned by legal persons. The tax on buildings shall be paid according to the destination declared by the taxpayer – residential, non-residential, mixed, not according to the quality of the owner (individual or legal person).
Is the period for filing valuation reports the same for individuals and legal entities?
The revaluation of buildings for taxation is done every 3 years for legal entities and every5 years for individuals. Valuation reports can be prepared in the first part of the year January-March. After March 31st, valuation reports can no longer be registered in the ANEVAR Tax Information Base (BIF). This period can be extended exceptionally by Government decisions or other normative acts as happened this year, the period being extended until June 30th 2020 by GEO no. 29/2020.
Mandatory elementsof a valuation report for taxation: to be prepared by an ANEVAR authorized valuator with EPI (Valuation of Real Estate Properties) specialization , to contain the receipt generated by the ANEVAR website (BIF – Tax Information Base), the taxpayer's statement (Annex 1) on the basis of which the report is drawn up, the evaluation summary (Annex 4) but also the description of the building and the methodology for calculating the taxable value.
Taxable value is different from other types of value - Methodology of calculating the taxable value
The taxable value is different from the "market value" or the "fair value". The valuation report cannot be used to guarantee the loan or for other purposes for which it is necessary to estimate the market value and it shall not be registered in the financial statements of the taxpayers. The Valuation Standards highlight in the methodology for determining the taxable value for non-residential buildings owned by natural and legal persons, the application of a single approach when there is no sufficient information for the application of the other approaches, but it is mandatory that this be the cost approach for the taxable value (with the arguments of not applying one or the other two approaches in the valuation). The approach through cost for taxable value consists in estimating the cost of the new from which physical depreciation and/or functional depreciation will be deducted, as appropriate. No economic/external depreciation will apply.
ANEVAR valuation standards under GEV 500 regulate the methodology for calculating the taxable value.
The non-application of external depreciation has led to an increase in the taxable value for buildings located in peripheral areas, in secondary cities and localities in underdeveloped areas. In fact, a building in Bucharest will have the same taxable value as a similar building in a village in the country side.
Valuation costs for taxation versus benefits
If you are still wondering about how financially feasible it is to request a valuation report, we offer the example of a client who purchased in April 2015 an office space with a usable area of 29 sqm, since no valuation report was filed the owner paid in 2019 a tax of 3562 RON, in 2020 following the filing of the valuation report he paid a tax of 1559 RON , and the fee for drawing up the valuation report was RON 600+VAT. `
Is it financially feasible to file a valuation report for taxation within the time limit stipulated by law? Of course it is. The costs of drawing up these reports are much lower compared to the benefits of submitting valuation reports. The valuation report will be used to calculate the tax for a period of 3 years. Divide the cost of the valuation by three years and subtract the tax difference to find out the benefit.
Useful tips:
- Schedule in advance the preparation of the valuation report for taxation, contact the valuerin December, inform yourself of the necessary documents, request the preparation of the reports in the first part of the period (January-February) to avoid the congestion of the Directorate of Local Taxes and Fees;
- Submit your valuation reports as soon as possible from getting them to the Tax Directorates. Bear in mind that from the filing of documents, tax advisors must calculate the tax and issue the tax returns, operations that are not usually done on the spot, when filing documents;
- In the case of the acquisition of a property with a non-residential destination by a legal person, the preparation of a valuation report may reduce your tax as the tax rate applies to the cost value. In case of failure to submit a valuation report in the first 3 years the quota will be applied to the value entered in the sales contract, according to Art. 460 (5) of the Tax Code, which for old buildings can be substantially higher compared to the value resulting from the approach through cost;
- In case of holding some industrial spaces with large areas, where the documents show the useful area and you do not have information about the built surface, find out the costs of drawing up plans from which the unfolded area results (made by persons authorized to carry out measurements). In the situation of exclusive knowledge of the useful area, it will be multiplied by a conversion coefficient of 1,4 for obtaining the unfolded area (according to the Tax Code);
- Regarding the "Taxpayer's Declaration" (Annex 1) on the basis of which the valuation report is drawn up, fill it out correctly and knowingly. It is the evaluator's working hypothesis that determines the calculation methodology.
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