Legal & Tax Alerts

New conditions for sale of extra-urban lands

On 14.08.2020, Law no. 175/2020 regarding the amendment and supplement of Law no. 17/2014 on certain measures for regulating the sale and purchase of extra-urban agricultural lands and on the amendment of Law no. 268/2001 on the privatization of commercial companies owning public and private property of the state with agricultural destination and the establishment of the Agency of State Domain (“Law no. 175/2020”) was published in the Official Gazette of Romania.

This normative act enters into force on 13.10.2020 and brings a series of amendments and supplements to the regulation on the sale and purchase of extra-urban agricultural lands.

The amendments brought by Law no. 175/2020 concern, among others, the following aspects:

(i) The change in the ranking of preemptors, namely:

a) 1st rank preemptors: co-owners, first degree relatives, spouses, relatives and in-laws up to and including the third degree;

b) 2nd rank preemptors: owners of agricultural investments for tree crops, vines, hops, exclusively private irrigation and/or tenant farmers. If agricultural investments like the ones mentioned are located on the lands subject to sale, the owners of these investments have priority in the purchase of such lands;

c) 3rd preemptors: the owners and/or tenant farmers of the agricultural lands adjacent to the land subject to sale.

With regard to tenant farmers preemptors, they must hold this capacity based on a valid agricultural lease agreement which must be registered according to the legal provisions with at least 1 year before the sale offer of the land is displayed at the headquarters of the mayoralty. Also, the tenant farmers must prove that their domicile/residence was located on the Romanian territory for a period of 5 years prior to the registration of the sale offer, and in case of tenant farmers – legal entities held by another legal entity, the shareholders controlling the company must prove that their headquarters/secondary office was located on the Romanian territory for a period of 5 years prior to the registration of the sale offer.

In case of owners of adjacent agricultural lands, the priority to purchase extra-urban agricultural lands is established as follows:

− the owner having a common border with the largest side of the land subject of the sale offer;

− when the land subject to sale has two large sides or all equal sides, priority will be given to the owner, young farmer, who has the domicile/residence located on the national territory for a period of at least 1 year prior to the registration of the sale offer;

− the owners having common border with the land subject of the sale offer, in descending order of the length of the common border with the concerned land;

− when the large side or one of the equal sides of the land subject to sale has the common border with a land located within the radius of another administrative-territorial unit, priority will be given to the owner of neighbouring agricultural land with the domicile/residence within the administrative-territorial unit where the land is located.

d) 4th rank preemptors: young farmers. In case of exercise of the preemption right by young farmers, the young farmer who carries out activities in livestock and who has the domicile/residence established in Romania for a period of at least 1 year prior to registration of the offer of the land will have priority to purchase. According to Law no. 175/2020, a “young farmer” is a person up to the age of 40 who intends to carry out or carry out agricultural activities;

e) 5th rank preemptors: Academy of Agricultural and Forestry Sciences „Gheorghe Ionescu-Șișești” and research-development units in the fields of agriculture, forestry and food industry, as well as educational institutions with agricultural profile, for the purpose of purchasing extra-urban agricultural lands with destination strictly necessary for agricultural research, located in the neighbouring of the plots of land existing in their patrimony;

f) 6th rank preemptors: natural persons with domicile/residence in the administrative-territorial units where the land is located or in the neighbouring administrative-territorial units;

g) 7th rank preemptors: the Romanian state, through the Agency of State Domain.

(ii) Establishment of certain conditions for the land sale to other persons than the holders of the preemption right not expressing their intention to purchase the extra-urban agricultural lands, namely such natural persons must observe the following cumulative conditions:

a) to have the domicile/residence established on the Romanian territory for a period of at least 5 years prior to the registration of the sale offer;

b) to carry out agricultural activities on the Romanian territory and to be registered by the Romanian tax authorities for a period of at least 5 years prior to the registration of the sale offer.

The legal entities must observe the following cumulative conditions:

a) to have the headquarters and/or secondary office established on the Romanian territory for a period of at least 5 years prior to the registration of the offer sale;

b) to carry out agricultural activities on the Romanian territory for a period of at least 5 years prior to the registration of the sale offer;

c) at least 75% of the total income from the last 5 fiscal years must represent income from agricultural activities;

d) the shareholder natural person controlling the company or, in case the control is held by another legal entity, the shareholder natural person controlling the company must have the domicile established on the Romanian territory for a period of at least 5 years prior to the registration of the sale offer.

(iii) In case no one exercises their preemption rights, and if the potential buyers do not meet the conditions under (ii) above, any natural person or legal entity may purchase the concerned land.

(iv) In case of sale of extra-urban agricultural lands prior to the expiry of a period of 8 years from the date of land purchase, Law no. 175/2020 states that such sale can be made by the seller only with the payment of a tax of 80% of the amount representing the difference between the sale price and the purchase price, based on the grid of notaries in that period. In case of a direct or indirect sale of the controlling interest of companies that own extra-urban agricultural lands representing more than 25% of their assets, the seller will have to pay a tax of 80% of the difference of the value of the respective lands, computed on the basis of the notaries’ grid between the moment of acquiring the lands and the moment of selling the controlling interest.

As regards the use of such lands, Law no. 175/2020 sets forth that the owners of extra-urban agricultural lands have the obligation to use them exclusively for carrying out the agricultural activities from the purchase date, and if there are agricultural investments for tree crops, vines, hops and exclusively private irrigation, the agricultural destination of such investment will be maintained.

(v) The sale of extra-urban agricultural lands without observing the provisions regarding the preemption right provided under items (i), (ii) and (iv) above or without obtaining the necessary permits required by law is sanctioned with the absolute nullity of such deed. Also, the limits of the monetary fines applicable in case of failure to observe the legal provisions have been increased to RON 100,000 and RON 200,000.

 

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