Submitting an evaluation report for taxation to the Local Tax and Taxation Directorates to which the evaluated building belongs territorially and administratively is a taxpayer option in order to apply reduced tax rates related to buildings revalued in the terms provided by the tax code – for individuals who own buildings with non-residential/mixed use, the tax rate is between 0.2-1.3% in case of submitting an evaluation report versus a rate of 2% in case of not submitting an evaluation report. For legal entities, the tax rate reaches 5% in case the building has not been evaluated in the last 3 years prior to the reference year versus a rate of 0.2-1.3% applied in case of submitting an evaluation report.

For reasons of fairness towards legal entity taxpayers, as a result of the application of European legislation to reduce discrimination between natural and legal persons, the establishment of differentiated building tax for natural persons depending on the purpose of the building was introduced with the entry into force of Law 227/2015 on the new tax code (01.01.2016).

The assessment for taxation is carried out for non-residential/mixed buildings owned by individuals and legal entities as well as residential buildings owned by legal entities. The building tax is paid depending on the destination declared by the taxpayer - residential, non-residential, mixed, not depending on the quality of the owner (individual or legal entity).

Is the period for submitting evaluation reports the same for individuals and legal entities?

The revaluation of buildings for taxation is done from 3 in 3 years to legal entities and 5 in 5 years for individuals. The evaluation reports can be prepared in the first part of the year, January-March. After March 31, the evaluation reports can no longer be registered in the ANEVAR Fiscal Information Database (BIF). This period can be exceptionally extended by Government decisions or other normative acts as happened this year, the period being extended until June 30, 2020 by GEO no. 29/2020.

Mandatory elements of a valuation report for taxation: to be prepared by an ANEVAR authorized appraiser with the EPI (Real Estate Appraisal) specialization, to contain the receipt generated by the ANEVAR website (BIF - Fiscal Information Database), the taxpayer's declaration (annex 1) based on which the report is prepared, 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 – Taxable value calculation methodology

The taxable value is different from the “market value” or “fair value”. The valuation report cannot be used to secure the loan or for other purposes where an estimate of the market value is necessary and is not recorded in the financial statements of the taxpayers. The Valuation Standards highlight the methodology for determining the taxable value for non-residential buildings owned by individuals and legal entities, the application of a single approach in conditions where there is insufficient information to apply the other approaches, but it is mandatory that this be the cost approach for the taxable value (with the justification for not applying one or the other two approaches in the valuation). The cost approach for the taxable value consists of estimating the new cost from which physical depreciation and/or functional depreciation will be deducted, as the case may be. No economic/external depreciation will be applied.

The ANEVAR valuation standards through 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.

Taxation assessment costs versus benefits

If you are still wondering how financially feasible it is to request an evaluation report, we offer you the example of a client who purchased an office space with a usable area of ​​29 sq m in April 2015, since no evaluation report was submitted, the owner paid a tax of 3562 RON in 2019, in 2020, following the submission of the evaluation report, he paid a tax of 1559 RON, and the fee for preparing the evaluation report was 600 RON + VAT. `

Is it financially feasible to submit a valuation report for taxation within the deadline provided by law? Of course, yes. The costs incurred in preparing 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 yearsDivide the cost of the assessment by three years and subtract the tax difference to find the benefit.

Useful tips:

– Schedule the preparation of the valuation report for taxation in advance, contact the appraiser in December, inform yourself about the necessary documents, request the preparation of the reports in the first part of the period (January-February) to avoid congestion at the Local Taxes and Fees Department;

– Submit the evaluation reports to the Tax Directorates as soon as possible after obtaining them. Keep in mind that once the documents are submitted, tax advisors must calculate the tax and issue the tax returns, operations that are not usually done on the spot, upon submission of the documents;

– In the case of the acquisition of a non-residential property by a legal entity, the preparation of an evaluation report may reduce your tax as the tax rate is applied to the cost value. In the event of failure to submit an evaluation report in the first 3 years, the rate will be applied to the value recorded in the sales contract, according to Art. 460 (5) Fiscal Code, a value which for old buildings may be substantially higher compared to the value resulting from the cost approach;

– In the case of owning industrial spaces with large areas, where the documents show the usable area and you do not have information regarding the developed built area, be interested in the costs of drawing up plans showing the developed area (drawn up by persons authorized to perform measurements). In the case of knowing exclusively the usable area, it will be multiplied by a transformation coefficient of 1.4 to obtain the developed area (according to the Fiscal Code);

– Regarding the "Taxpayer Declaration" (Annex 1) on the basis of which the evaluation report is drawn up, complete it correctly and with full knowledge of the facts. It is the evaluator's working hypothesis that determines the calculation methodology.