SALE OF AGRICULTURAL LAND LOCATED OUTSIDE THE BUILD-UP AREA : NEW LEGAL CHANGES

New major changes of the legislation regulating the sale of agricultural land located outside the build-up area are enacted by the Emergency Ordinance of the Government no.104/2022, published in the Official Journal no. 657 of June 30, 2022.

The normative act provides for clarification in matters such as : calculation, withholding, declaring, and paying the 80 % supplementary tax due by the seller when selling agricultural land before 8 years since its purchase, by stating the underlying principles used therefor and the percentages to pay to the state and the local budget.

Follows a brief overview of the main legal aspects to be considered when selling agricultural land located outside the build-up area.

Conditions for sale of agricultural land located outside the build-up ares

Pre-emption right

The sale of land to natural /legal persons is subject to a pre-emption right, by ranks, ranging from rank I to rank VII, as following:

1. first rank pre-emptors : co-owners, 1st degree relatives, spouses, parents and relatives up to the 3rd degree, in this order ;
2. second rank pre-emptors : the owners of agricultural investments for crops of trees, vines, hops, exclusively private irrigations located on the lands intended for sale and / or farmers (party to a farming lease agreement). If there are such investments on the lands intended for sale, then the owners thereof have a priority right to purchase ;
3. third rank pre-emptors : the owners and / or farmers / tenants of the neighbouring lands ; it should be noted that the tenant wishing to buy the land located outside the built-up area up for sale shall prove his capacity as tenant under a valid lease agreement, concluded and registered according to the law at least one year before the publicity of the sale offer at the headquarter of the City Hall, and must fulfil several conditions expressly provided for by the Law no. 17/2014 ;
4. fourth rank pre-emptors : young farmers (under the age of 40) ; it will be noted that priority will be granted to the young farmer acting in zootechny having their domicile / residency set in the Romanian territory at least one year prior to the call for sale of agricultural lands located outside the build-up area ;
5. fifth rank pre-emptors : The Academy of Agricultural and Forestry Sciences “Gheorghe Ionescu-Siseşti” and the institutions carrying out research in the field of agricultural, forestry and food industry, organized and regulated under the Law no. 45/2009, located in the vicinity of the plots ;
6. sixth rank pre-emptors : natural persons domiciled / residing in the neighbouring or in administrative-territorial units where the land is located ;
7. seventh rank pre-emptors : the Romanian state.

If those entitled to a pre-emption right DO NOT exert their right in purchasing the land up for sale, then the land can be sold to :

a) natural persons meeting the following cumulative conditions: (i) have had the domicile / residency in the national territory for at least 5 years prior to the call for sale ; (ii) have been carrying out agricultural activities in the national territory for at least 5 years prior to the call for sale ; (iii) have been registered with the Romanian tax authorities for at least 5 years prior to the call for sale of the agricultural land located outside built-up areas.

b) legal persons meeting the following cumulative conditions: (i) have been headquartered and / or have had the secondary office in the national territory for at least 5 years prior to the call for sale ; (ii) have been carrying out agricultural activities in the national territory for at least 5 years prior to the call for sale for the agricultural lands located outside the built-up area ; (iii) produce written proof that at least 75 % of the aggregate revenue of the 5 previous fiscal years account for agricultural activities ; (iv) the shareholder, the natural person controlling the company has had the domicile in the national territory for at least 5 years prior to the call for sale of the agricultural land located outside the built-up area.

If the controlling shareholders are legal persons, they will have to produce proof of having been domiciled / headquartered (secondary offices included), as the case may be, in the national territory for at least 5 years prior to registration of the call for sale of agricultural land located outside built-up area.

Publicity of the offer for sale / purchase of agricultural land located outside the built-up area

• The seller of the agricultural land plot located outside the built-up area shall file a request for posting the offer for sale, to the city hall of the administrative area where the land is located, with a view to informing pre-emptors. Within 5 working days from the date of registration of the request, the city hall will display the offer for sale for 45 working days, including on its website if any. Also, within 10 days, the City Hall must notify the holders of the right of pre-emption of the existence of the offer to sell.
• If no pre-emption right is exerted, potential buyers may submit to the City hall a file justifying the fulfilment of the legal requirements, within 30 days of the expiry of the aforementioned 45 working day period.
• If no pre-emption right is exerted and none of the above potential buyers meets the requirements to purchase the land within the legal timeframe, the sale may be to any other natural or legal person, according to the law.

The sale-purchase contract

The sale contract shall be concluded in an authenticated form, after obtaining the prior opinion issued by the territorial structures of the Ministry of Agriculture and Rural Development (for agricultural land with a surface area of up to 30 ha), and by central structure of the same Ministry (for surface areas of over 30 ha).

The above-mentioned notice is valid for 6 months from the date of its communication to the seller or, in case of death of the seller or the pre-emptive / potential buyer, until the date of registration of the death occurring during the period of validity of the notice.

By way of exception, notices are valid even after the expiry of the above-mentioned period if the parties have concluded, during the period of validity, a bilateral promise of sale or an option pact concerning the agricultural land in question, stipulating a period of execution.

Obligations related to the sale of agricultural land located outside the built-up area

New owners of the agricultural land located outside built-up area must pursue exclusively the agricultural activities in place at the date of purchase; if at the date of purchase agricultural investments for crops of trees, vines, hops or private irrigation systems have been made on the agricultural land concerned, the agricultural purpose of these investments must be maintained.

The sale of the land before 8 years from the date of purchase leads to the obligation to pay an additional tax of 80% on the positive difference (the capital gain) between the sale price of the agricultural land and its purchase price.

The value will be determined based on the notary public’s scale. In case of direct or indirect sale of the controlling package of legal persons holding one or several agricultural land plots located outside the built-up area representing more than 25% of the assets, and if the sale takes place before 8 years from the purchase of one of these lands, the seller must pay an additional tax of 80% on the plus-value obtained between the purchase and the sale, determined based on the notary’s scale.

If the legal person holds several agricultural land plots located outside the built-up area, the additional 80% tax applys to the total value of this land, calculated by adding the positive differences relating to the land acquired no later than 8 years before the sale of the control package of the legal person, without considering the negative differences. The seller must declare the income to the competent tax authority, within maximum 10 days from the date of transfer, for the purpose of calculating the tax based on the deed of sale of the controlling package of the legal person.

If the legal entity owns agricultural land located outside the built-up area following a contribution in kind made by the person selling the control package of the legal person, when checking the condition of the sale sooner than 8 years since the purchase, the period during which the said shareholder was owner of the said land will also be considered.

NOTE : The calculation, deduction and payment method of the 80% additional tax due for sale of lands earlier than 8 years, as well as the reporting obligations must be approved within 60 days since the entering into force of the GEO.

Penalities

The sale of agricultural land located outside the built-up area violating the pre-emption right or without obtaining the prior legal notices is forbidden and is subject to absolute nullity of the contract.

These are considered as contraventions and are punished by a fine of 100,000 to 200,000 lei :

1. sale-purchase of agricultural lands located outside the built-up area containing archeological sites and where areas with archaeological heritage or areas with archaeological potential have been established, without the specific approval of the Ministry of Culture or its decentralized public services, as the case may be ;
2. sale-purchase of agricultural lands located outside the built-up area without the prior approval of the Ministry of National Defense, if so recorded in the land register at the date when the land register excerpt for authentication purposes was filed for ;
3. sale of agricultural lands located outside the built-up area without the prior approval of the Ministry of Agriculture and Rural Development, or the territorial structures of this institution, as the case may be ;
4. failure to respect the right of pre-emption ;
5. non-compliance with the posting obligations / transmission of documents by the city halls.

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Therefore, we are waiting for the Application Norms for further clarification, especially with regard to the practical modalities of calculation and payment of the additional 80% tax, in order to avoid that this tax does not account for double taxation ….

Furthermore, in the light of the legal force of a bilateral international Treaty, further clarification is necessary in relation to the newly introduced provision stating that income obtained by non-residents from certain transactions regulated by the Law no. 17/2014 are not covered by the conventions to avoid double taxation, concluded by Romania with other states.