MoF Decision #517/1 dated 17th April 2018 on the application of the article 13 of the Law #64 dated 20th October 2017 related to the revaluation of fixed assets and the introduction of the capital gain tax of 15% on individuals and tax exempted entities
The Ministry of Finance (MoF) has issued the decision #517/1 dated 17th April 2018 (here below) on the application of article 13 of the Law #64 dated 20th October 2017 that amended the Article 45 of the Legislative-Decree #144 dated 12/6/1959 (Income Tax Law) related to the revaluation of fixed assets and the introduction of the capital gain tax of 15% on individuals and tax exempted entities.
In the first sections of this decision, the MoF has clarified the application of article 45 of the Legislative-Decree #144 dated 12/6/1959 (Income Tax Law) related to the revaluation of fixed assets held by taxpayers subject to real profit taxation (companies and establishments) and companies subject to lump sum profit tax as defined by the article 45 of the Legislative-Decree #144 and the way the capital gain resulting from this revaluation is either taxed or exempted in case it is used by the company for a capital increase, knowing that the capital gain tax has been increased from 10% to 15% starting from the 27th October 2017 according to the Law #64.
Furthermore, the MoF has defined in the section 3 (articles 18 to 22) of this decision the new categories of taxpayers subjects to the Capital Gain Tax of 15% on the disposal of real estate properties. These taxpayers are all the individuals and entities exempted so far from the income tax or individuals subject to income tax but selling real estate properties that are not part of their professional business according to the article 13 – paragraph 3 of the Law #64 starting from the 27th October 2017.
The capital gain on the disposal of a real estate property or part of it is defined as the difference between the acquisition price and the selling price. The acquisition price is defined by the MoF decision as follows:
- In the case of an inheritance or a donation, the acquisition price is equal to the value used by the MoF to define the inheritance tax on this property.
- In the case of a purchase, the acquisition price is equal to the value registered in the cadaster or in the purchase contract if not registered.
- If the property was built by the owner without justification documents supporting the construction cost, the capital gain is defined as being 15% of the selling price.
In order to calculate the capital gain subject to tax, a deduction of 8% of the capital gain is applied per year from the acquisition date according to the registration date or as set in the purchase contract till the selling date.
However, the primary and secondary residence of individuals (maximum of 2 residences occupied by the taxpayer during his lifetime) and real estate properties held by this category of taxpayers for more than 12 years (8% deduction from the capital gain per year held) are exempted from capital gain tax. The capital tax has to be declared according to special tax forms prepared by the MoF and paid within 2 months from the transaction date.