EY Romania:Local taxes in Romania will increase significantly from next year

Local taxes in Romania will increase, significantly, starting next year, on the basis of delayed measure but included in assumed commitments by the Romanian state through the National Relaunch and Resilience Plan (PNRR) – the fiscal reform part which is more ample, says Alex Milcev, partner, the leader of the department for Fiscal and Legal Assistance, EY Romania.“It is certain at this moment that, next year the local taxes in Romania will increase, significantly, on the basis of a delayed measure, but included in the assumed commitments by the Romanian state through PNRR – the fiscal reform part. The European Union imposes the increase of local budgetary revenues, including through the updating of the taxable value of properties, so that taxation better reflects the real market value, bring higher revenues at  the local level, generally speaking, the need for financing from the central budget and related fiscal distortions”, explained Alex Milcev in a viewpoint sent on Monday.According to him, the measure, estimated to be applied starting with 1 January 2026 was postponed since the summer of 2022 in the context of inflation, of post-pandemic economic instability and later electoral years 2024 – 2025.' The form of the new legislation is not yet final but, according to official statements, by the end of August all the details regarding technical procedures, applicable percentages, (re)definition of the tax base, etc. should be finalized. On the one hand, it changes the tax brackets by eliminating the maximum ceiling and setting only a minimum - 0.1% for residential, 0.5% for non-residential and 0.4% for buildings used for agricultural activities. Local authorities will be able to adjust the levy flexibly, without asking for more from the national budget. On the other hand, the definition of the base will be changed to better reflect the market value of real estate', said Alex Milcev. He mentions that, at present, tax on residential buildings owned by natural persons is calculated by applying a bracket between 0.08% and 0.2% on the taxable value of the building, which could be adjusted depending on the locality and the region. For legal persons, the brackets are between 0.08% and 0.2% applicable to the taxable value of the building and for non-residential the bracket is between 0.2% and 1.3% to the taxable value of the building. The tax assessment rule is based on the valuation report issued by a certified appraiser every five years.In case of legal persons there will be higher costs for owning and using real estate and an indirect impact will be felt on the rents to be increased.‘Possibly the increase of local taxes starting with 1January 2026 will not be only a momentary economic decisions but a step into changing the mentality and behavior of the Romanian owner and will define what a real estate investments means’ Alex Milcev said.Present in Romania since 1992, EY supplies with the help of the over 1,000 employees in Romania and the Republic of Moldova integrated audit services, fiscal and legal assistance, strategy and transactions, consultancy to multinational and local companies. The company has offices in Bucharest, Cluj-Napoca, Timisoara, Iasi and Kishinev. (Photo:https://www.facebook.com/eyromanianews/)