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The right of foreigners to buy land

Until the amendment of the Romanian constitution by national referendum vote in October 2003, foreign citizens were not allowed to buy property in Romania. But because of this amendment, foreign citizens will be able to acquire the right to privately own land in Romania, after its accession to the EU and pursuant to other mutual international treaties to which Romania is a party.

Under the provisions of the new property law (Law No. 247/2005 concerning reform in the property and justice fields and other ancillary measures), foreign individuals and legal entities will be able to own land under the terms and conditions set forth in special laws.

Law No. 312/2005, concerning acquisition of private property rights over land by foreign citizens, stateless persons and foreign legal entities, was published in the Romanian Official Gazette on November 14, 2005. This law will enter into force on the date Romania joins the EU (planned for January 1 2007).

The right of foreign citizens to own land in Romania varies depending on whether these foreigners are EU citizens or not.

The right of non-Romanians to own property

EU citizens, EU domiciling stateless persons and Romanian domiciling stateless persons will be able to own agricultural and forest lands in Romania only seven years after Romania's accession to the EU (in 2014 if Romania accedes in 2007).

If EU citizens, EU domiciling stateless persons and Romanian domiciling stateless persons want to acquire land to establish business branches or representative offices in Romania, they will be able to do so only five years after Romania's accession to the EU (in 2012 if Romania accedes in 2007).

It should be noted that the seven-year term will not apply to: (i) stateless persons that are domiciled in Romania; or (ii) stateless persons that are domiciled in the EU and resident in Romania; or (iii) EU citizens, if these EU citizens or stateless persons mentioned above qualify as farmers under EU guidelines. Therefore, farmers falling within one of the categories (i) to (iii) will be able to own agricultural or forest lands in Romania as soon as it joins the EU.

If the farmer is a citizen of the EU or a stateless person domiciled in the EU, the individual's status as a farmer must be proven based on documents issued by the competent authorities from the member states. However, if the farmer is a stateless person domiciled in Romania, his status must be substantiated by documents issued by the Ministry of Agriculture, Forests and Rural Development of Romania.

The right of non-EU citizens to own Romanian land

As a general rule, non-EU citizens can own land in Romania if their country of citizenship has an appropriate mutual recognition treaty with Romania.

However, according to Law 312/2005, the terms and conditions for non-EU citizens "cannot be more favourable" than those applied to citizens of EU member states.

Thus, non-EU citizens would not be able to own land in Romania until the respective seven- and five-year terms following Romania's accession to the EU have expired.

Romanian legal entities can directly own Romanian agricultural and forest lands even if they are 100% owned by foreign natural persons or legal entities.

Financial issues

To acquire land in Romania, non-residents (whether EU or non-EU citizens) are allowed to pay the land acquisition price in any foreign or domestic currency (such as RON). Moreover, non-residents can open and maintain bank accounts in both foreign and RON currencies in Romania with authorized credit institutions and can freely perform capital transactions without restriction.

Non-residents are allowed to sell foreign currency freely for all operations that are performed in compliance with the relevant Romanian regulations governing foreign currency exchange. Purchasing or selling foreign currency or RON can be done on a foreign exchange market through authorized intermediaries.

However, for statistical purposes, capital transactions that would cause external obligations arising out of commitments longer than one year (other than those involving external public debt) must be registered with the National Bank of Romania in a register known as Romania's Register of External Private Debt.

A recent anti-speculation law provides that if the land was acquired after January 1 1990, the seller must pay a tax of 10% applicable to the tax base which is computed by subtracting the base value of the subject land from the sale price. The base value of the land is calculated as the acquisition price multiplied by 5%.

Pursuant to the draft law amending the fiscal code, the tax rates and tax basis for real estate transactions will be adjusted accordingly. The tax rate will be set at 2% applicable to the tax base, which is determined as the transfer price in the case of a sale-purchase agreement involving land.

However, the amendment of the code is now the subject of public debate, so it is unclear if these proposed amendments will enter into force and in the form addressed in this article.

Alexandru Neagu and Bryan W Jardine

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