Hello,

Could someone please help me from my state of ignorance?!

I am re-assigning (flipping) an apartment previously secured through PS in Romania.

As I recall I paid VAT on the deposit amount paid.

I am now looking to reassign the contract.

Can I:

a) Charge VAT on the sale price

b) Get to keep the VAT charged on the basis that I paid this on reservation

Also - are there any capital gains / income tax considerations I need to be aware of?

Thank you in advance
Andrew K

Hi Andrew,

The key to this is to know if you bought the apartment as a private individual or as a Romanian company.

If you went the company route you can claim back the VAT charged to you on purchase but will have to charge your buyer VAT on sale. Taxation will be subject to company law and you should have an accountant in Romania who will deal with this.

On the other hand if the transaction was on a private basis you have to grit your teeth and accept that you paid 19% VAT which cannot be claimed back, but there will be no VAT on sale. Tax will be paid at the point of sale and you should declare this as paid on your UK tax return and your UK advisor will tell you if you need to top up the tax payment or not to the IR.

It is clear that the answer to your question depends on your personal circumstances and so my advise is to employ the services of an accountant who is familiar with you and Romanian accountancy.

Hope this helps Alan R

HI Alan,

Thank you - thats very useful.

I also remember from a PS seminar last year that there was a capital gains loop hole between Romania and the UK. If a property was flipped in Romania there was no cap gains tax to pay locally or back in the UK.

Do you know if that is still the case?

Thanks again
Andrew

(I bought as an individual)

Hi Andrew,

Not aware of this loophole and can confirm that whenever I have sold in Romania the tax has been deducted by the notary at point of sale. The tax rate is around 2-3% on sale value (not capital gain) depending on value and various other factors.

Rgds Alan R

With respect to flipping, I am considering doing the same. However I bought as a company. Does anyone know if as a company you can reassign the contract to an individual?

It would really appreciate an answer on this as I am a bit concerned about not be able to get a company mortgage. I have the cash to complete on one, but two may be stretching it a bit due to other commitments.


Unless of course any of you would like a very attractively priced apartment due to complete in April 2009 - Rose Garden 7th floor 2 Bed? The growth has been great and if I had the cash would certainly complete on both.



Thanks...

Chris

Hi Chris,

Yes there is a way to reassign your apartment, but my advice to you is to get a good lawyer to look at your contract and an accountant to advise on the best way to minimise your tax liability. The exact route you take will depend on many factors and only a competant professional with all the facts can help you.

Someone at PS should have alerted you to the potential problems of buying as a company when you bought in initially

Rgds Alan Richards

"However I bought as a company. Does anyone know if as a company you can reassign the contract to an individual?"

Yes you can, if the company holds the ownership title and you want to flip it onto your own personal name you effectively have to sell it through a purchase agreement signed at a notary.

If you are the single shareholder you will have to write a 'decision' whereas you declare as the sole shareholder your approval on selling the property on behalf of your company. If you have more than 1 shareholder, a "general assembly" decision has to be taken (which does not take much time anyhow) also approving on the sale.

If you sell therefore as a company to an individual you will be charged 16% profit tax and you have to charge the buyer VAT. The actual transaction will take place in the currency LEI (you might decide to charge in EURO, but effectively the equivalent according to the exchange rate has to be paid since the company is invoicing in the Romanian currency)

But here comes the catch. You may decide (as a company) to sell the property (including VAT) to yourself as an individual at the same price (or lower!) your company purchased it for therefore preventing any profit tax due by the company.

VAT of course on this transaction (received by your company) is due to the state budget.

If you sell the actual appartment you can also sell the land included to yourself as an individual (whereas you have to simply apply for a temporary residence permit which can be obtained in 6-8 hours in Romania without having any personal tax implications or influence on your UK residence).

Therefore you will be able to own the land (since a foreigner can hold the property title over a construction accoring to the Romanian civil code legislation and not own land until 2012 if you do not have this Romanian residence permit)

You may decide to "buy-back" the property from your own company by applying for a mortgage credit (financing up to 90% Loan to Value but not more than 100% of the purchase price), whereas you will have your equity freed up again to invest your own personal money in any other property you might decide upon.

We always advice our clients to also ask for 3rd party (legal) advice just for your own safety.

Stefan
(Easy Credit ; mortgage broker)

Hello Chris is your apartment still available ? I am interested.

HI,

I have a beautiful 1 bedroom apartment that I am looking to flip. Situated in the Vitan Platinum Towers 2 project - voted the best project of the year by Eurisko - Bucharest's most respected estate agency. Completion is summer 2009.

Let me know if you're interested.

Best wishes
Andy