The recent modifications to Law 17/2014 regarding on the regulation of sale of extramuros agricultural land („Law 17”) came into force through the modifications brought by Law 116/2024, adopted on 29 April 2024 and published a day later.
A new sanction is enforced against the non-payment of the 80% tax under art. 42 and a new exemption from the application of Law 17 is enacted.
- Relative nullity of the transfer deed for the non-payment of the 80% tax set forth in art. 42
- Amended form of the provision
Art. 16 par. (2): The alienation by sale of extramuros agricultural land without respecting the provisions of Article 42 relating to the obligation to pay the tax is prohibited and is sanctioned by relative nullity.
- Practical consequences
To briefly put it into context, art. 42 par. (1) states that the sale of extramuros land earlier than 8 years since its acquisition is taxed with an applied quota of 80% on the difference between the value of the land at the moment of sale and the value of the land at the moment of acquisition.
Art. 42 par. (2) states that, every time a company that owns extramuros land that amounts to, at least, 25% of its total immovable assets, sells its majority shareholding earlier than 8 years prior to the acquiring of any of the lands, an 80% tax will be imposed on the difference between the value of the land at the moment of sale and the value of the land at the moment of acquisition.
Up until the modifications through Law 116/2024, no other sanction than an administrative fine was imposed in case of non-payment. Even though the fine is still maintained (between RON 100.000 and 200.000), art. 16 par. (2), introduced through the recent modifications, sanctions the sale of the extramuros land with relative nullity in case the 80% tax is not paid.
Relative nullity, as opposed to absolute nullity, can only be invoked by the party protected by a disposition meant to protect a private (i.e. not public) interest. Although the lawmaker’s choice is difficult to justify in this sense (because Law 17 protects a public, not a private, interest), the sanction chosen is pragmatic in the sense that it allows the seller to pay the 80% tax even after the conclusion of the sale, essentially covering the cause for nullity. This solution would not have been possible if absolute nullity was applied.
Although, at large, the modification is beneficial, a new uncertainty arises. It is now uncertain if the same can apply to art. 42 par. (2), as art. 16 par. (2) refers to the transfer by sale of extramuros agricultural land, and not by sale of the majority shareholding, as is the case with art. 42 par. (2).
We are currently expecting answers from the relevant ministries with respect to the already existing uncertainty regarding the application of the preemption procedure and endorsement from MAPN to art. 42 par. (2). In light of the recent modifications, we will also address the newly risen questions with the ministries.
- Art. 2 par. (1) was amended to clarify further practical uncertainties
- Amended form of the provision
Art. 2 par. (1): Intramuros lands and lands that form a single immovable asset, identified through one single cadastral number, which are partially comprised of a majority surface situated intramuros under construction-yard category and partially comprised of an agricultural extramuros surface are exempted from the application of Law 17.
- Practical consequences
The exception is limitative, in the sense that it is only lands that are in majority formed of intramuros surfaces with the lad use category construction-yard (in Romanian: curți-construcții) and in minority formed of extramuros agricultural land are going to be exempted from the application of Law 17.
We will keep you updated on this matter.
By Ioana Roman, Patner, Ioana Grigoriu, Counsel, and Alexandru Kober, Associate, Filip & Company
