VAT 5% - HOW DO WE RESPOND TO THE NEW CHALLENGES?

Here we are in 2021. As we ended the year with great enthusiasm, we now begin it with a slightly more reserved enthusiasm, because in the meantime the 5% VAT for a ceiling of up to 140,000 euros has been extended to January 1, 2022. It was not repealed, but extended for budgetary reasons, as it seems that the current government cannot afford such a large impact as calculated.

President Iohannis promulgated this law on November 12 after it was voted on October 20 in the Chamber of Deputies by the former majority PSD Parliament, although the PNL Government opposed it, citing too great a budgetary impact at a time when the budget is very tight.

We have a month and two weeks in which pre-contracts could be signed, taking into account the moment the law was promulgated. Pre-contracts do not appear in the land book register, or they appear too little. Such statistics are not compiled by INS and it was too early to do such a statistic. We are probably talking about a few hundred customers who could be affected, in the sense that they managed to buy knowing that this law had passed and it was their only formula for buying, only with 5% VAT, for a price between 95,000 and 140,000 euros, with the completion of the home in 2021.

WHAT ARE THE SOLUTIONS FOR THOSE WHO ARE CAUGHT IN THE MIDDLE OF THIS EXTENSION?

For these few hundred people, we have tried to find some solutions that we will share here. These are solutions that developers can also apply, where possible. In this way, we want to eliminate speculation and talk about real problems. The debt that has been brought upon the country in recent years shows that we have all danced in a wave of confidence, when in fact the budget always had some limits that we failed to comply with. 2021 is a year of fiscal adjustment, it is the year when we need to get rid of the pandemic and therefore we need a budget allocated in this direction.

Giving up parking and storage. The first solution is to forget about parking and storage, as far as developers accept this. This would result in a price reduction of between 7,000 and 20,000 euros, or even more, for more expensive projects. If you have an apartment worth around 100,000 euros, this solution would solve your problem.

Buying parking separately, in installments. Another solution, if you are required to buy parking, is to separate it and pay for it in installments. You need to check if this can be done with a tax consultant.

Signing the final contract in 2022. A third solution for projects that could be completed in the second half of 2021 is to move the final contract signing to 2022. This is a major financial effort for developers, but it can be a solution where possible. Some of our partners already do this. This way they can help customers overcome this shock, so they don’t have to pay so much. If we are talking about a period of 3-4 months, it is probably possible, as long as this law remains in place at the beginning of 2022.

The fourth solution is to include a transfer clause in the pre-contract, so that you can transfer the contract to another beneficiary who would want this opportunity. Specifically, it’s about the opportunity to buy an apartment that was purchased at a lower price earlier, because you know that prices generally adjust upwards. You could transfer the pre-contract in case you cannot continue with the old 19% VAT.