An accurate evaluation for financial security
Real estate

The taxable value of buildings will increase. How to avoid paying an increased tax

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Anuța Stan

Under normal market conditions, extending the discount period of the taxable value (from 3 to 5 years) would be a benefit for companies.

However, as we are going through a period of sharp price increases, it is quite possible that building materials and workmanship will become even more expensive. This price increase will be directly reflected in the taxable value of the buildings because it is determined by the authorised valuers on the basis of cost catalogues that are updated regularly to reflect the actual level of costs.

As a result, I recommend members to order the valuation of heritage buildings on 31 December 2021, as the taxable value will take into account the prices of 2021, thus eliminating the risk of paying a much higher tax from 2024 onwards.

For example, in just one year, between June 2020 and June 2021, the price of concrete increased by 12.2%, that of rebar by 17.5%, that of cement by 11%, of copper by 33.2%, and of wood by 38.9%. The data is valid for the Romanian market.

The main advantages of the assessment for taxation as at 31 December 2021 are:

– Companies will benefit from a validity of the evaluation report of 5 years starting with 2022 and will have predictability on the budget allocated for the taxes and duties related to buildings for the next 5 years.

– The tax on buildings will remain at the same level for the 5 years, because it will take into account the current costs of building materials and labor. In determining the taxable value of a building, the greatest impact is given by the cost of new to build that building. From the experience of previous years, new costs have increased every year in an accelerated way amid inflation, rising costs of labor in construction and higher prices of building materials and utilities.

The valuation of buildings to determine the taxable value can be considered an element of additional cost, but the impact on a company's budget is incomparably lower than that of an annual tax increased due to the increase in prices in the construction sector.

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