VAT Increase in Real Estate After August 1st: Legal Implications and Solutions for Buyers

Real Estate Lawyer: The Impact of the VAT Increase on Buyers in Romania

Starting August 1, 2025, the VAT regime applicable to real estate transactions underwent significant changes, with the standard rate increasing from 19% to 21%. This change has generated numerous questions and uncertainties among buyers and developers: who will bear the VAT difference, under what conditions the reduced rate can be applied, and how these measures affect the final price of properties. For buyers in particular, the risk of disputes is high when contracts do not clearly specify how VAT adjustments will be handled or when specialized legal advice is lacking. Legislative changes have direct implications on prices, delivery deadlines, and contractual obligations, making the involvement of a real estate lawyer or a tax lawyer essential to analyze the situation and protect property rights.

These changes also impact developers’ financial planning, as they must adjust their commercial and fiscal strategies to comply with the new regulations. The legislation sets specific conditions for maintaining the reduced 9% VAT rate in certain real estate transactions, and failing to meet these conditions may result in disputes. In the article below, you will find detailed information on the applicable conditions, the VAT calculation method, and the legal steps buyers and developers can take to avoid conflicts and protect property rights with the support of a real estate lawyer, VAT lawyer, or tax lawyer.

Legal Provisions for Real Estate Contracts Signed Before August 1st

Law no. 141/2025, which came into force on August 1, 2025, introduces significant changes to the fiscal regime applicable to real estate transactions by increasing the standard VAT rate to 21% and limiting the possibilities to apply the reduced rate. To continue benefiting from the 9% reduced rate for purchasing a new property, the law provides a transitional period, valid until July 31, 2026, during which buyers and developers must simultaneously meet multiple conditions.

Thus, the property must have a usable area of no more than 120 sqm, and the total value cannot exceed 600,000 RON excluding VAT. Additionally, the property must be deliverable and habitable by July 31, 2026, and the buyer must not have purchased another property with reduced VAT after January 1, 2023. A legal document regarding advance payment must exist, signed by August 1, 2025. For contracts concluded between July 3 and July 31, 2025, the law requires an advance payment of at least 20%, fully paid before August 1, to maintain the 9% rate.

The basic fiscal rule imposes that the VAT applied is the one in force at the time of the taxable event, namely at the moment of property delivery. Regardless of whether a real estate sales contract was signed before August 1, 2025, delivery after this date, without respecting the transitional conditions, will be subject to the increased 21% rate.

This discrepancy between contractual clauses and fiscal obligations can generate numerous disputes in real estate. In these situations, the involvement of a real estate lawyer, VAT lawyer, or tax lawyer is essential to protect property rights. A real estate lawyer can help analyze all aspects related to property rights, ensuring documents are compliant and protecting the buyer’s interests. Additionally, a VAT lawyer can clarify how the tax applies to the specific situation, and a tax lawyer can manage disputes and defend property rights before fiscal authorities. Their expertise helps resolve disputes and avoid similar conflicts in real estate transactions.

Who Bears the VAT Difference: Buyer or Developer?

In practice, legislative changes regarding VAT in real estate can lead to complex disputes between buyers and developers, especially for contracts and preliminary agreements signed before August 1. Prospective buyers may find themselves obliged to bear the increase to 21% VAT, even if the transaction is already engaged and binding, without a real possibility of renegotiation or withdrawal. This situation can create conflicts between the principles of legal certainty and legitimate expectations and the fiscal-budgetary policy objectives of the legislator.

In such cases, the involvement of a real estate lawyer, VAT lawyer, or tax lawyer becomes essential to analyze contractual clauses and protect the buyer’s property rights. A real estate lawyer can review all legal aspects of the preliminary contract and advise on appropriate measures to manage this tax increase, while a VAT lawyer or tax lawyer can intervene in disputes to defend property rights and the buyer’s financial interests.

What Legal Actions Can Be Taken if You’re Affected by the 21% VAT?

Buyers who consider that the application of the increased VAT is incorrect or that they have been prejudiced can turn to a real estate lawyer or tax lawyer to analyze the situation and initiate disputes. Possible legal solutions include contesting the improper VAT application before tax authorities, renegotiating the contract, or initiating judicial procedures to protect property rights. In certain cases, if the developer does not fulfill contractual obligations, the buyer may file for contract rescission, requesting cancellation of the transaction and refund of paid amounts. This step may be necessary, especially when fiscal changes significantly affect the final property price. A VAT lawyer, together with a real estate lawyer, can assess whether rescission is the best option or if continuing with the contract is advisable. A tax lawyer can manage complex disputes related to property rights and defend the buyer’s interests until a final ruling is obtained.

A bucharest lawyer experienced in real estate law and fiscal matters can help you choose the most effective legal and fiscal measures for your case. The goal is to protect the buyer’s legal position and prevent the financial burden caused by sudden fiscal changes.

“The increase of vat in the real estate sector, combined with the instability of recent fiscal measures, creates a significant impact on buyers’ budgets and developers’ financial planning. In this context, collaboration with a vat lawyer, tax lawyer, or real estate lawyer is no longer optional — it’s a legal necessity. These professionals play a critical role in contract renegotiation, handling real estate litigation, and protecting property rights before the fiscal consequences become irreversible,” stated Coordinating Bucharest Lawyer, Dr. Radu Pavel, from the Romanian Law Firm Pavel, Mărgărit & Associates.

The VAT increase in real estate has fundamentally changed how contracts are negotiated and executed between parties. The transitional period provides a limited chance to maintain the reduced rate but requires strict compliance with legal conditions. The lack of adapted clauses and legal consultation increases the risk of disputes and can severely affect property rights.

Therefore, working with a real estate lawyer, VAT lawyer, and tax lawyer is not just recommended but essential for the legal and financial security of a transaction.

Pavel, Mărgărit and Associates Romanian Law Firm is one of the top law firms in Romania, offering high-quality legal services. Among the firm’s clients are major multinational and domestic companies. In 2024, its successful track record has brought it international recognition from the most prestigious legal directories and publications. Thus, Pavel, Mărgărit and Associates was ranked 3rd in Romania by Legal 500 for its exceptional expertise in business law. The firm is also recognized internationally by IFLR 1000 Financial and Corporate 2024 and is the only Romanian firm recommended by the Global Law Experts directory in London for Dispute Resolution. All relevant information about Pavel, Mărgărit and Associates Romanian Law Firm is available at www.avocatpavel.ro.