ROMANIA Law and Practice Contributed by: Monia Dobrescu and Mădălina Trifan, Mușat & Asociații
If the delays in the execution of the obligations are serious and substantially affect the works, the termination of the contract is also an option, although this is an undesirable outcome con - sidering the implications that may arise from it. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Additional guarantee clauses for the proper exe - cution of the works are as follows: • successive deductions of 5% to 10% of the corresponding value of the invoices issued by the contractor, during the execution of the contract – the amounts charged as a guaran - tee will usually be refunded to the contractor after the final reception; and • a letter or bank guarantee representing 5% to 10% of the total value of the works. 7.6 Liens or Encumbrances in the Event of Non-payment According to the Civil Code, the contractor ben - efits from a legal mortgage on the works, consti - tuted and preserved in accordance with the law, in order to secure payment of the price due for the work. Without any formality, the mortgage extends to the construction and its accessories, even if they are subsequent to the constitution of the mortgage. 7.7 Requirements Before Use or Inhabitation The receipt of the works represents the final procedure that must be fulfilled before the con - struction can be commissioned. This procedure is performed by the Reception Committee (eg, a representative of the Competent Public Author - ity, a representative of the investor, a representa - tive of the State Inspectorate in Constructions and one to three specialists in the field of con - structions), whose purpose, inter alia, is to verify
compliance with the provisions of the building permit, the execution of the construction works in accordance with the contract and the comple - tion of all the construction works. The construction can be put into use only after the receipt of the works is completed and the reception report has been signed by all the Reception Committee members.
8. Tax 8.1 VAT and Sales Tax
The sale and purchase of real estate property located in Romania is generally VAT exempt without a deduction right, except for new build - ings and plots of land that can be built upon, which are generally subject to 19% VAT. Moreo - ver, the right to opt for VAT (19% standard rate) for transactions that are generally VAT exempt may be exercised under certain conditions. The supplies of real estate, if subject to VAT, fall under the reverse-charge mechanism if both the buyer and the seller are registered for VAT pur - poses in Romania. In such cases, neither the seller nor the buyer is obliged to pay VAT to the state budget. Furthermore, no VAT would be trig - gered if the real estate is transferred by way of a transfer of a going concern that is outside the scope of VAT. As of 1 January 2024, the supply of buildings as part of the social policy, including the land on which they are built, is subject to the reduced rate of 9% (previously 5%). The delivery of housing as part of the social policy is under - stood to cover housing with a usable surface area of a maximum of 120 sq m, exclusive of household annexes, the value of which, includ - ing the land on which the housing unit is built,
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