General Info

Area -238,391 sq km (92,043 sq miles).
Population- 22.2 million (UN, 2005).
Population Density 90.9 per sq km.
Capital-Bucharest. Population: 2 million (2005).
Geography
  Romania is bordered to the north and east by Moldova and Ukraine, the southeast by the Black Sea, the south by Bulgaria, the southwest by Serbia and Montenegro and in the west by Hungary. The country is divided into four geographical areas. Transylvania(a belt of Alpine massifs and forests) and Moldavia compose the northern half of the country, which is divided down the middle by the north–south strip of the Carpathian Mountains. South of the east–west line of the Carpathians lies the flat Danube plain of Walachia with the capital Bucharest, its border with Bulgaria being defined by the course of the Danube. Romania’s coastline is along the Black Sea, incorporating the port of Constanta and the Danube Delta.
Language
  Romanian is the official language. Some Hungarian and German are spoken in border areas, while mainly French and English are spoken by those connected with the tourist industry.
Religion
  86 per cent Romanian Orthodox, with Greek and Roman Catholic, Reformed/Lutheran, Unitarian, Muslim and Jewish minorities.

Market & Locations

 Romania, along with Bulgaria, acceded to the EU on 1 January 2007. The country's joining looks set to introduce this Eastern European nation, with a colorful history, to many investors searching for the next property hotspot.
A largely beautiful country that remains predominantly agricultural, it has a Black Sea coastline with several reasonably attractive resorts, including Mamaia, the port city of Constanta, and the dark and moody Transylvanian Mountains. Nestling there are the pretty Saxon medieval towns of Brasov and Sighisoara - the birthplace of Vlad the Impaler, on whom it is said the legend of Dracula is based.
 The upshot of a tumultuous couple of decades is a country that joined the EU at the beginning of the year 2007.. Its joining will bring further growth as EU subsidies kick in and its economy will transform to a fully free market one, with resulting upward pressure on property prices caused by greater demand from foreign investors and house buyers. Presently, property remains cheap by Western standards, but prices are rising rapidly and can be expected to increase by 20-30% in 2007 as many new apartment blocks begin to be completed and released into the marketplace. In Bucharest, the capital, new studios start at around €60,000(£40,000), rising to €500.000( £300,000)-plus. Elsewhere, prices for a new-build range from €65,000(£45,000) to€210,000(£150,000); a modest, rural three-bedroom house can be picked up for around €25,000.
 Bucharest has a cosmopolitan population and eclectic architecture with strong French influences, which earned the city its nickname 'little Paris' during the 19th century  Bucharest is a booming city with a highly educated and motivated workforce running a host of the world's top companies that have set up there, companies such as Goldman Sachs, BMW, Boeing, Bosch, BP, Deutsche Bank, Ericsson, Hewlett Packard, Shell, Sony, Tesco, Walmart and Unilever have all opened operations in the city."
 The future for Bucharest, and Romania in general, looks a bright one. Foreign buyers looking for an affordable second home or an investment opportunity will have to be quick off the mark. The secret is out on one of Europe's newest hotspots.

Buying Process

 At the present time, the Constitution of Romania prohibits a foreign national from directly owning real estate in Romania. Even if a foreign national inherits real estate, that foreign national simply cannot take possession and ownership of inherited real estate in that country. Thus, it is fairly safe to assume that there will be fairly significant pressure on the Romanian government to liberalize its real estate laws to at least permit ownership of real estate in Romania by foreign nationals from a EU country.
  With this said, a Romanian company may own real estate in the country even if that company is owned 100% by a foreign national. Obviously, foreign nationals who have an expressed interest in owning real estate in Romania, are establishing companies - corporations or limited liability companies within Romania
  The process for creating these entities is not that difficult and takes about 7-10 days. Generally, foreign nationals are retaining legal counsel in Romania to assist them in establishing these entities. There are lawyers in Romania that now specialize in this type of legal affair. It is important that an accountant has contact with the client's lawyer to ensure that any further required information can be easily passed on.
   Provided that a foreign national have duly established a bona fide corporation or limited liability company in Romania, the process for purchasing real estate within the country is not particularly complex. The process commences with the execution of a preliminary contract for sale. Via this document, the purchase price is established and a deposit is made by the buyer(usually 10% of the overall purchase price).  During the interim between the execution of the preliminary or initial sales agreement and the date of the signing of the final agreement conveying ownership of the real estate to the buyer, the purchaser is obliged to obtain any necessary financing that he or she will need to effect the purchase of the real estate.
  If a person (or company) wants to buy real estate in Romania and needs a loan to do so, that person or company will need to use some other form of collateral for the loan beyond the real estate that is being purchased.
Below is the standard purchase process in Romania and issues that may affect that purchase:
 ■ Before the purchase process begins, the vendor will provide a fiscal certificate (‘certificat fiscal’) confirming the property is properly registered with the fiscal authorities and that all due taxes are paid. The vendor will also provide a certificate (‘certificat de sarcini’) to confirm that the property belongs to the vendor, and that it has no mortgages or other legal encumbrances attached to it.
■ The buyer may need to sign a preliminary contract as an agreement to purchase the property and then pay a holding deposit through their lawyer. However, the vendor may be happy to wait for the signature of the final contract. This is the day the complete cost of the property is due.
■ The final contract will be signed by the vendor and purchaser in front of a public notary, who will legalize the transaction and submit the necessary documents for title transfer to the land registry.

Costs & Tax Issues

Costs of a standard property purchase in Romania include the following:
■ Transaction costs include a Survey Fee (1-3% + 19% VAT).
■ Land registry registration fees (€10).
■ Transfer tax (0.5-3%).
■ Notary fee (0.5–1.5%).
■ Real estate agent’s fee (3% to both buyer and seller).
■ Rental income earned by non-residents is taxed at 16%, with roughly 25% of the gross rental income from immovable property deductible. When the landlord is a foreigner, the person paying the revenue (the tenant) pays the tax directly to the state.
■ Property tax for legal entities is payable at 0.5–1% of their property value; the taxable value is calculated on the size and type of the property.
■ Land tax is calculated dependant on the area of the land, the rank of its locality and the category of use of the land. A fixed rate applies to land outside urban areas.
■ Corporate income tax applies to the income earned by a corporation in rent, at a fixed rate of 16%. Expenses attributable to earning the income can be deducted from the taxable revenue.
■ Capital gains tax does not apply on earnings from the sale of real estate, but corporate income tax will normally apply to capital gains from disposal of Romanian property.
■ Property transfer taxes applies to income derived from the sale of real estate at the rate of 16% when the building transferred has been owned for less than three years, and all land without real estate.
■ Stamp duty of 0.5–3% is payable on the purchase of real estate, the rate depending on the value.
■ Romanian companies with an annual turnover in excess of RON 200,000 (approximately €57,000) have to register for VAT. VAT applies to the transfer of real estate, although if both buyer and seller are VAT payers then the payment on such a transfer will be ‘reverse chargeable’ and the net VAT cost for both parties will be zero. Rental payments are usually exempt from VAT.