Population and companies to pay similar tax on property

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Gov?t ? not aware why local arrears grow and changes Finance Law again.

The target to reduce arrears of local administrations was by far missed in Q1 this year and the debt has actually started growing, which is an indication of serious shortcomings in respect of the monitoring and enforcement of the Law on Local Public Finance, says the latest letter sent to the International Monetary Fund (IMF), Mediafax informs.?Although they allocated extra funds from the state budget to reduce existing arrears, Government officials do not know the causes or even the entities to which the debt is owed. The target to diminish state budget arrears was also completely missed in the first quarter and the failure in that respect cancelled all decreases operated in the course of last year, the reason invoked being the need to allocate resources to hospitals. ?In this situation, the Government will ask for technical assistance to operate a new change to the Law on Local Public Finance, including in what regards the distribution of funds among the various local entities and the system of broken-down quotas.?On a distinct note now, the Executive will change the way in which property taxes are calculated. As of next year, local council taxes will be different in keeping with the occupancy of the building, unlike the current system that sets different rates for natural persons and companies.??We will revise the taxation base for property taxes, which will vary in keeping with the occupancy of the property and not with the tax-payer (natural vs. legal person),? reads the letter of intent the Government sent to the IMF. Under the new conditions, the local council tax paid by an individual or by a company could be similar if the buildings are used for the same purpose.?Under the current law, the property tax is subject to distinct regimes according to the nature of the owner and is regularly smaller if the owner is a natural person and higher if the owner is a company. As a matter of fact, the calculation formula is different. In the case of natural persons, a rate of 0.1 per cent is applied to the taxable value, calculated according to the quality of the building material used, amenities and location.In the case of companies, the tax rate is established by the local council and may be from 0.25 per cent to 1.5 per cent of the market value of the property. In the case of a building that has not been reappraised, the tax rate is set by the local council (the General Council if we speak about Bucharest) between 10 per cent and 20 per cent for buildings that have not been reappraised in the three years prior to the fiscal year of reference and between 30 per cent and 40 per cent for buildings not reappraised during the five years prior to the fiscal year of reference.?Next year, local council taxes and dues will grow by 16.05 per cent (the 2010-2012 added inflation rates). Under the Tax Code, local taxes and dues are amended every three years in keeping with the inflation rate since the previous change. Local council taxes were last amended in 2010. Following the increase, the tax value of a building made of reinforces concrete fames or with exterior walls made of brick will grow from RON 806/sq m to RON 935/sq m for properties equipped with electric installations and sewerage and from RON 478/sq m to RON 555/sq m for properties that are not connected to such utilities. The tax value of buildings with wooden walls will grow from RON 219/ sq m to RON 254/sq m ? with utilities ? and from RON 137/ sq m to RON 159/sq m ? no utilities.

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