Individuals who own non-residential buildings – such as buildings rented for various economic activities – will pay local taxes as much as the companies. The tax rate is 0.1% of the value for residential buildings and between 0.25 and 1.5% for nonresidential buildings. Therefore, the amounts payable by the individuals could increase tenfold.
Attention! The tax rate will be applied to the building resulting from an evaluation report prepared by a licensed assessor. Without evaluation, the rate rises to 2%.
The draft of Tax Code, which is still under discussion and will come into effect next year, has a completely different approach of the taxation on buildings. There are concerned, in particular, the individuals who own buildings used as office spaces or shops.
What means non-residential buildings?
Currently, the tax rate differs on the type of owner: person or company. The project takes into account the destination of the building: residential or nonresidential.
The project doesn’t give details about the extended definition of the nonresidential buildings, showing just that any building that is not for housing is treated automatically as nonresidential building.
The residential building is, according to the draft, a construction consisting of one or more rooms used for living, with outbuildings, facilities and utilities necessary to meet the requirements for the necessities of a person or family.
Framing buildings in each category will be declared on the affidavit of the owners, according to the representatives of the Ministry of Finance.
The impact of tax rate
The tax rate for non-residential buildings will be the same for both individuals and companies, between 0.25% and 1.5% of the value resulting from an assessment report prepared by an independent assessor.
The tax rate increases to 2% if the building is not valued by an authorized evaluator.
If the purpose of the building is residential the rate is 0.1% of the taxable value regardless of the nature of the owner.
The taxable value is determined by the type of construction and the utilities and adjusted by a correction factor determined according to the rank of the village and the location of the building. Regarding the taxable value for residential buildings, the project increases the taxable values and reduces the correction factor. The effective tax rate is to be determined by the Local Council.
Mixed use buildings. What happens to the offices registered in the apartments?
The draft of the Tax Code also includes the mixt taxation. The final tax is calculated by summing up the tax for the area used for residential purposes with the tax for non-residential purposes.
If destinations are highlighted in distinct areas, the tax will be calculated according to the formula applied to individuals. If the expenditures for using the building are registered on the person who has an economic activity in the building the tax will be calculated as for nonresidential buildings.
Note The draft eliminates the increased tax for two or more buildings owned by the same individual. Now, the tax increases by 65% for the second building, and up to 300% for more than four properties.
In conclusion
The new approach will significantly increase the tax burden for individuals who own buildings. Contexpert points out that the evaluation report is essential as long as the taxes will be paid next year on the valued buildings. According to Contexpert a good preparation of the report can prevent the eventual financial difficulties.
Therefore we offer an example regarding the reevaluation of the companies’ buildings. Since 2012, local councils may establish a tax of 10% -20% for the buildings that are not revalued in the last 3 years prior and a tax of 30% -40% for the buildings not revalued in the last 5 years prior. The impact of local taxes on investment is huge and the intentions of the draft of the Tax Code continue the same approach.
Another issue noticed by Contexpert is the problem of registering of the companies in apartments. Registering the company headquarter at home is likely to increase the tax on buildings dozens of times. In this case, our advice is to opt for change of registered office in a nonresidential building.
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