VAT in Real Estate: Applicable Rates, Conditions, and Calculation Examples for 2025–2026

VAT in real estate in 2025–2026: what has changed and how it affects you

The residential market, particularly the new-build housing segment, is going through a period of adjustment, as fiscal measures aimed at reducing the budget deficit directly target this real estate segment by eliminating the preferential regime involving a reduced VAT rate.

The reduced VAT rate for housing was initially introduced in Romania in 2008 at a rate of 5%, as a social policy measure designed to stimulate the real estate market.

The new fiscal measures increased the standard VAT rate from 19% to 21% for new homes, applicable from 1 August 2025, thus marking a turning point for the residential market. The preferential 5% regime was eliminated, while a reduced rate of 9% was retained until 1 August 2026, available to buyers only under very strict conditions: a preliminary sale agreement signed by 31 July 2025 and a minimum 20% down payment.

For buyers who do not meet the conditions required for a reduced VAT rate, this change means a higher cost when purchasing a new home, and the pressure could be even greater in the case of mortgage-financed purchases.

The measure also has implications for residential developers, who will need to rethink their investment plans and adjust projects to the new fiscal reality so that sales are not affected.

Overall, the measure affects the pace of transactions and may lead to a repositioning of the market over the next 12 months.

What is VAT in real estate and when does it apply?

Value Added Tax (VAT) is a consumption tax applied to most goods and services. VAT is one of the most important sources of government revenue, as it contributes to funding public services such as education, healthcare, public transportation, etc.

In the real estate sector, namely residential real estate, home buyers must pay VAT only when the property is new and sold directly by developers or legal entities registered for VAT. For this market segment, the standard VAT rate is 21%. Thus, for example, a new apartment with a price of RON 500,000 will cost RON 605,000 including VAT.

A reduced rate of 9% applies for a period of one year only to the purchase of a first home, provided that a number of criteria are cumulatively met, including the existence of a preliminary sale agreement concluded before 31 July 2025. At the same time, the purchased home must have a usable area of no more than 120 square meters, excluding household outbuildings, and a value, including the land on which it is built, not exceeding RON 600,000, excluding VAT.

For older homes, transacted between individuals or previously registered as properties, buyers do not pay VAT, but only the property transfer tax. In this case, an apartment priced at RON 500,000 is sold at that price, without VAT.

VAT rates applicable in 2025–2026

The standard 21% rate for new homes

The standard VAT rate applies to the taxable base for taxable transactions that are not exempt from tax or subject to the reduced rate, and is set at 21%. The new rate replaced the 19% tax starting on 1 August 2025, and the new fiscal measure applies to new homes sold by developers.

Thus, for purchases of homes with areas exceeding 120 square meters and prices above RON 600,000 (excluding VAT), buyers will pay the standard VAT rate of 21%, compared with the 19% rate applicable before 1 August 2025.

The VAT-inclusive price of a home sold for RON 500,000 excluding VAT will be RON 605,000 if the conditions for the reduced 9% rate are not met.

Before the VAT increase, the purchase of a new apartment that did not qualify for a reduced rate was made at a price of RON 595,000, meaning that in this case the increase in the final price is insignificant.

The reduced 9% rate – applicable only under special conditions

According to the new Tax Code, an individual may purchase, between 1 August 2025 and 31 July 2026 inclusive, only one home subject to the reduced 9% VAT rate, individually or jointly with another individual/other individuals, provided that all of the following requirements are cumulatively met:

• maximum 120 sq m usable area – the home has a usable area of no more than 120 sq m, excluding household outbuildings;
• maximum RON 600,000 excluding VAT – the value of the home, including the land on which it is built, does not exceed RON 600,000, excluding VAT;
• the home, at the time of delivery, which may not be later than 31 July 2026, must be fit for habitation as such, in accordance with the legal requirements in force on the date of conclusion of the inter vivos legal acts concerning advance payment for the purchase of such a home;
• no purchase with reduced VAT after 1 January 2023 – the buyer has not purchased another home subject to a reduced VAT rate since 1 January 2023, according to the information in the “Register of purchases of homes subject to the reduced VAT rate”
• preliminary sale agreement + minimum 20% advance by 1 August 2025 – the buyer concluded by 1 August 2025 an inter vivos legal act concerning an advance payment for the purchase of such a home. To benefit from the reduced 9% rate, an individual, individually or jointly with another individual/other individuals, for inter vivos legal acts concerning advance payment for the purchase of a home concluded between 3 July and 31 July 2025 inclusive, must provide proof at the time of delivery that an advance payment of 20% of the value of the home excluding VAT was paid in full by 31 July 2025 inclusive.
• delivery by 1 August 2026 – until 1 August 2026, a reduced VAT rate of 9% applies to the delivery of buildings, including the land on which they are built, to local authorities for allocation by them under subsidized rent to individuals or families whose financial situation does not allow them to access home ownership or rent a home at market rates, provided that inter vivos legal acts concerning advance payment for their purchase were concluded by 1 August 2025.

Eligibility will be verified by public notaries.

Conditions for applying the reduced VAT rate

Public notaries are required to verify compliance with the condition concerning the purchase of a single home subject to the reduced VAT rate by consulting the “Register of purchases of homes subject to the reduced VAT rate” before authenticating legal acts concerning the transfer of ownership or advance payment for the purchase of such a home and, if they find that this condition is not met, to authenticate them only if the delivery is subject to the standard VAT rate.

They must complete the “Register of purchases of homes subject to the reduced VAT rate” on the date of authentication of legal acts concerning the transfer of ownership and record in the legal acts concerning the transfer of ownership or advance payment for the purchase of such a home that the reduced VAT rate of 9% applies.

Examples of VAT calculations in 2025–2026

Calculation for 21% VAT

Given that, starting from 1 August 2025, the standard VAT rate for purchasing a new home in Romania increased from 19% to 21%, if the net price of an apartment is EUR 100,000, the applicable VAT will be EUR 21,000, resulting in a total price of EUR 121,000.

It is important to take this change into account in budget estimates, especially for real estate transactions planned after this date. The new VAT rate directly affects the final cost borne by the buyer and may have a significant impact on purchasing decisions. We recommend carefully checking contracts and offers to determine whether the price includes VAT.

Calculation for 9% VAT

As noted above, starting from 1 August 2025, Romania’s Tax Code provides for a reduced VAT rate of 9% for the purchase of a new home, provided that specific criteria are met (for example: a usable area below 120 sq m, a value below a certain threshold, purchase for personal use, etc.).

This reduced rate has a significant effect on the final price. For example, for an apartment with a net price of RON 500,000, 9% VAT amounts to RON 45,000, resulting in a total of RON 545,000. By comparison, applying the standard 21% rate would generate VAT of RON 105,000 and a final price of RON 605,000. The RON 60,000 difference highlights the positive impact of the tax incentive for eligible buyers.

How VAT affects the purchase decision

The increase in the standard VAT rate to 21%, applicable from 1 August 2025 to new homes, has already influenced the timing of purchases. Many buyers rushed to sign contracts in order to benefit from the reduced 9% rate, available only under certain conditions set out in the Tax Code.

This was also reflected in statistics from the National Agency for Cadastre and Land Registration, which indicated a significant increase in home sales in July compared with previous months.

The VAT difference – example: RON 500,000 + 9% = RON 545,000 vs. +21% = RON 605,000 – means an additional impact of RON 60,000, affecting cash flow and investment returns.

Developers responded quickly by offering discounts, flexible down payments, and pre-contracting campaigns ahead of the deadline. Some developers also announced that they would absorb part of the VAT increase. At the same time, investors are reassessing profitability scenarios, while end buyers are becoming more attentive to timing and the financial structure of the transaction.

Advice for buyers and investors

For buyers considering the purchase of a new home in Romania, the current fiscal context requires greater rigor and attention, as well as the involvement of specialists familiar with taxation and the real estate market. The first step is to check the developer’s reputation.

Buyers should pay attention to the developer’s track record in delivering similar projects and to how transparent the contractual relationship is. They should then ensure that the preliminary sale agreement includes clear delivery clauses – the applicable VAT rate is determined at the time of delivery, not at the time of signing.

If the buyer is targeting the reduced 9% rate, eligibility must be confirmed with the help of a public notary before signing the contract. The conditions are strict: a home under 120 sq m, a value below RON 600,000 excluding VAT, a minimum 20% advance payment made by 1 August 2025, and delivery by 31 July 2026.

A comparative analysis of the final price is also very important. Example: RON 500,000 + 9% = RON 545,000 vs. +21% = RON 605,000. The RON 60,000 difference can tip the balance between a feasible purchase and one that is postponed.

Frequently asked questions about VAT in real estate

How can I plan a purchase to benefit from the reduced 9% VAT rate?

To benefit from the reduced 9% VAT rate when purchasing a new home in Romania, you must already have a sale and purchase agreement or preliminary sale agreement signed, with a minimum of 20% paid by 31 July 2025, concluded by 31 July 2025.

The usable area must be no more than 120 sq m, and the total value (excluding VAT) must not exceed RON 600,000. The property must be “fit for habitation as such” upon delivery – meaning fully completed, with all installations functional and finishes applied.

It is mandatory for the minimum 20% advance payment based on the value excluding VAT to be paid by 31 July 2025, even if delivery of the home takes place later, but no later than 31 July 2026. You must also confirm with the developer and notary that all criteria for applying the reduced rate are met. VAT is applied at the time of delivery, not when the preliminary sale agreement is signed.

Is it worth waiting or should I buy now, given the VAT increase to 21%?

The decision to purchase a home should be carefully analyzed and should primarily take into account the ability to support this type of investment from own funds or borrowed funds. It is also necessary to establish whether there is a genuine need to purchase a home. Property prices in Romania are continuously increasing, an evolution supported by economic growth, even though GDP growth has been marginal over the past two years, as well as by rising household incomes. Regardless of the VAT increase, the local real estate market is an emerging market that follows developments in CEE countries and, more generally, in Europe.

In conclusion, if you need a home and your income can support such a purchase, even though VAT has increased to 21%, this is a very good time to take this step. What is important is to have specialists and consultants with in-depth knowledge of the real estate market by your side to ensure a smooth and informed process.

How can I check that the developer can deliver by the deadline?

Before signing or paying a deposit, the buyer should carry out a minimum due diligence review with a notary or real estate consultant. Information can also be obtained from the building permit, land registry, PUZ, or PUD.

Regular site visits and checking contractors and subcontractors are also ways for the buyer to obtain information about the progress of the works.

What impact does the VAT increase have on investment returns?

For individuals, VAT is included in the final price, so the buyer bears the full increase.
If the developer maintains the same net price (excluding VAT), the buyer will pay 2% more on the total price.

Example: for a net price of EUR 100,000, the price including 19% VAT is EUR 119,000, while with 21% VAT it is EUR 121,000. This results in a difference of EUR 2,000 (+1.68% of the total VAT-inclusive price).

In this context, if rent remains unchanged but the final price increases, the yield decreases marginally by approximately 0.1 percentage points.

Conclusion

The purchase of a home, especially in the context of the VAT rate change, requires a strategic and informed approach. Confirming eligibility for the reduced 9% rate requires attention to detail – an area below 120 sq m, a value below RON 600,000, and the advance payment made in full by 31 July 2025.

Compliance with deadlines is essential to take advantage of the available tax incentives and avoid significant additional costs, such as the VAT difference between 9% and 21%. A comparative analysis of final prices can highlight the major impact VAT has on the purchase budget.

Planning ahead and working with specialists (notaries, real estate consultants, tax experts) are recommended steps for navigating the complexity of the process and minimizing risks. Consulting professionals ensures the correct interpretation of legislation, avoidance of potential errors, and optimization of total costs. Thus, the choice becomes not only a financial decision, but also a strategic one, based on a clear understanding of the stages and obligations involved in a real estate purchase.