Investing in Romania, is it a good idea?

[zackn]

Hi there,

I wonder if VAT is applied to bare land when i have a compnay and resell the land to private individuals.

Do I have to charge VAT - if yes this is very bad as I have to be less competative than other private sellers.

thank you

Originally Posted by Transylvania Investment

I've heard many foreign investors saying they need to set up company in order to buy land in Romania. Most of the advisers in Romania teach them this is the only way to purchase land here. However there are serious reasons NOT TO form a company in Romania.
Reasons not to set up a company to buy residential property in Romania.

1. Rates/Council tax whatever you want to call them are 0.5% per year if you buy land in your own name. If you buy through a company they are 1.5%. This will equate to 1% of any gross rental income and probably close to 1.5% net rental income.

2. Costs for doing the accounts for a company will cost you in the region or in excess of 100 EUR per month.

3. Company formation is about 500 EUR and terminating the company will run you into into another 1500-2000 EUR.

4. When you sell as an individual you will be subject to 2% tax on the selling price, this is also applicable to a company. However, as an individual this is all you pay.

5. Additionally as a company you will have to pay 19% VAT on the sale price.

6. As a company you then pay an additional 16% on any profit made on your investment.

7. Then as a company you pay a further 16% on your dividends when you go to take your own money out of your own company.

More to what I've said before:
Buying residential property by setting up a LTD company is economic suicide. The idea is: set up company here ONLY if you consider doing business in Romania.
If you buy a property just to rent it or resell it when its value is rising, don't create a company here just to get the land under the building or if you buy land, the land itself. It's simply too much hassle. The last thing you want is to have to deal with accountants (here the accounting system is very complicated and good accountants are very important, rather hard to find and don't come cheap). Besides, to get over with the company takes a loooong time, so the costs are not only in terms of money, but also in terms of time.

I can tell you the ways on which you CAN buy in your own name.

The regions you want to invest in are around Bucharest, however your budget might prevent you to invest there, or Transylvania.

You can also ask for credit in Romania even as a non-resident citizen.

[David howe]

Originally Posted by zackn

Hi there,

I wonder if VAT is applied to bare land when i have a compnay and resell the land to private individuals.

Do I have to charge VAT - if yes this is very bad as I have to be less competative than other private sellers.

thank you

Zack I wonder are you asking the question for sympathy or do you not understand what is written By Diana. I think she clearly outlines the repercussions applicable for you.

David Howe LLB. LLM

INVESTMENT ROMANIA - Investment in Romanaia, Property management, Due diligence, Renting in Romania

[Karl Wilkinson]

Zack...did you finally get your head around the financial and legal issues involved in purchasing land in Romania....I was just wondering if you or your fellow investors have decided to invest after your several due dilligence and fact finding visits? If you are still interest to discuss you can still contact contact me.