Over the past decade, Romania has faced increasing pressure - both from domestic and from international institutions - to modernize its property tax system. With structural challenges in housing affordability and significant fiscal constraints at the national level, local tax reform, as outlined in the National Recovery and Resilience Plan (PNRR), has emerged as a critical priority, writes Daniel Grigore, Director, Corporate Income Tax, Deloitte Romania.
This article was first published in Property Forum’s annual listing of "The 50 most influential people in Romania’s real estate market”.
Over the past decade, Romania has faced increasing pressure -both from domestic and from international institutions-to modernize its property tax system. With structural challenges in housing affordability and significant fiscal constraints at the national level, local tax reform, as outlined in the National Recovery and Resilience Plan (PNRR), has emerged as a critical priority.
Despite attempts at reform, local property taxes remain an underused fiscal tool in Romania.
By 2023, property tax revenues accounted for less than 1% of total tax revenues, compared to a European Union average of around 2.2% (Eurostat data).
This significant gap highlights both the fiscal potential of local taxation and the structural weaknesses that the upcoming reform aims to address.
The World Bank has recommended a recalibration of Romania's property tax regime, pointing to its relatively low contribution to budget revenues, outdated structure and mechanisms.
A reform initially proposed to take effect in 2023 was postponed until 2025 and, more recently, by Emergency Ordinance no. 124/2024, has been delayed again until 2026. Notably, this latest update introduces a new institutional element: the creation of a dedicated department within the Ministry of Finance - RO e-Proprietate in charge of designing and managing the digital infrastructure needed to support this ambitious transformation.
While specific parameters such as tax rates and base calculation methods have yet to be disclosed, early signals indicate a strong preference for aligning the taxable value of real estate properties with their market value, The Ministry of Finance has also expressed interest in simplifying the tax system and reducing exemptions, a direction evident in the previously shelved 2023 proposal, which would have used notarial grid values as a proxy for market prices.
With the RO e-Proprietate system, the Ministry seems to be aiming higher: to build a digital model fed with real transaction data (presumably from Form 208 submitted by notaries), potentially overcoming the limitations in the notarial grid approach.
A similar framework has been implemented in Spain, where centrally determined taxable values serve as market-based proxies, built on data from cadastral records and transaction reports.
With this paradigm shift towards a market value-based taxation system, the implications for Romania's real estate market are substantial.
As a caveat, it's important to note that property tax liabilities depend not only on the tax base but also-sometimes more significantly on the tax rates applied.
Significant impact on individuals
Assuming tax rates remain unchanged, a transition to a market value-based tax base will likely result in higher property taxes, in some cases substantial, for both individuals and companies.
However, the steepest increases (in relative terms) are expected to affect individual owners, particularly those who currently benefit from outdated property values. This would lead to an increase in the total cost of ownership.
In the residential sector, these changes may trigger rent increases, bringing monthly payments even closer to mortgage installments.
This convergence might incentivize tenants to transition into homeownership, boosting both demand for residential properties and mortgage lending.
At the same time, the increased cost of ownership could lead to more property sales, expanding supply and potentially causing downward price corrections.
This may improve access to housing for buyers who are prepared to absorb higher tax-related costs.
A key social risk must also be acknowledged.
Romania's demographic landscape especially in large cities-includes many elderly homeowners residing in historic buildings with high market value.
Aligning taxes to market prices may impose unsustainable burdens on this segment.
However, international practice suggests mitigation measures, such as deferred taxation, in some jurisdictions, property taxes for these owners are accrued and only collected at the time of the transfer of ownership, either by deducting them from the sale price or by shifting liability to the new owner.
Tax increase also expected in the commercial segment
Regarding the commercial segment, tax increases are also expected, but the impact may be milder in percentage terms.
This is due to the current practice of assessing non-residential properties using the GEV500 standard, a cost-based valuation method updated every five years.
While still far from market value, these appraisals better reflect the real value of assets compared to the residential sector.
That said, changes in absolute tax amounts may not yet be negligible.
In this context, corporate tenants particularly in office and industrial spaces are likely to bear the increased tax burden, as landlords pass on the higher costs through rent.
In an already strained economic climate, this could generate additional pressure on profit margins and impact expansion strategies. A potential positive outcome of the reform could be to discourage speculative acquisitions and to incentivize the reintegration of unused properties into the economic circuit.
This effect could be amplified if the reform would also eliminate the current exemptions granted to public institutions, which collectively hold a substantial stock of underused and/or damaged properties.
What is clear is that the Ministry of Finance aims to increase property tax revenues for local authorities - an objective supported by both the OECD and the World Bank.
Reform is not optional, it is a commitment assumed through Romania's PNRR.
However, enforcement must be handled carefully, especially as the final tax burden will depend not only on how the taxable values are determined, but also on the rates applied by local authorities.
This is a pivotal moment for the real estate ecosystem in Romania.
The reform will impact both corporate strategies and household budgets.
Property taxation is a powerful policy tool that can be used to shape investment behavior, influence workforce mobility, and support social policy.
There is an urgent need for a properly documented public debate on this topic.
Policymakers need to build on regional best practices and design a system tailored to Romania's unique socio-economic context: a high number of homeowners, a significant stock of rural housing, undermaintained and underused buildings, and a significant segment of elderly population with limited financial capacity.
The question is not whether to reform, but how to do so in a way that balances fiscal needs, market stability, and social cohesion.
