The Law no. 175/2020, in force as of 13 October 2020, establishes new rules for the sale of agricultural land located outside the built-up area

The Law no. 175/2020¹, in force as of 13 October 2020, establishes new rules for the sale of agricultural land located outside the built-up area

In brief

As of 13 October 2020, the sale of agricultural land located outside the built-up area will be subject to new rules, mainly concerning pre-emption right for the sale of agricultural land. The main changes focus on the introduction of new categories of pre-emption right beneficiaries and the extension of the term for exercising the pre-emption right to 45 working days.

Furthermore, the resale of agricultural land located outside the build-up area before the expiry of an eight-year period from the purchase date will be subject to the payment of an additional tax calculated based on the difference between the sale price and the purchase price.

In detail

The categories of individuals and entities with pre-emption rights have been extended.

As of the law’s entry into force, the following will benefit from pre-emption rights for the sale of agricultural land located outside the built-up area, under specific conditions:

• 1^st rank pre-emptors: co-owners and certain relatives;
• 2^nd rank pre-emptors: owners of agricultural investments for the cultivation of trees, vines, hops, exclusively private irrigation and / or agricultural lessees;
• 3^rd rank pre-emptors: the owners and / or agricultural lessees of agricultural land adjacent to the land subject to sale;
• 4^th rank pre-emptors: young farmers;
• 5^th rank pre-emptors: the Academy of Agricultural and Forestry Sciences Gheorghe Ionescu-Șișești and agricultural research and development units;
• 6^th rank pre-emptors: individuals with domicile / residence in the administrative-territorial units where the land is located or in the neighbouring administrative-territorial units;
• 7^th rank pre-emptor: the Romanian state, through the State Domains Agency.

Furthermore, the category of agricultural lessees who benefit from the pre-emption right has been amended to limit it to those with a valid lease agreement, registered at least one year before the date of publishing the sale offer and who meet several conditions relating to the domicile, residence or headquarters address.

If pre-emption right beneficiaries do not exercise their rights, within 30 days of the expiry of the period for displaying the sale offer the sale may be concluded with individuals or legal persons meeting certain criteria relating to, by case, domicile / headquarters, previous experience in carrying out agricultural activities on the national territory, registration with the tax authorities, evidence that 75% of their total income in last five fiscal years is from agricultural activities, etc.

If none of the potential buyers meets the conditions to be able to buy the agricultural land located outside the built-up area, it can be sold to any individual or legal person, under the conditions of Law no. 17/2014.

The term for exercising the right of pre-emption has been extended

The deadline for exercising the pre-emption right has been increased to 45 working days. Sellers can restart the procedure if a lower rank pre-emptor offers a higher price than that offered by the higher rank pre-emptors.

The direct or indirect sale of agricultural land located outside the built-up area within eight years as of acquisition will be subject to an additional tax

Sellers of agricultural land outside the built-up area have to pay an 80% tax calculated based on the difference between the sale price and the purchase price, as provided by the land value index for notary use for the respective periods. For direct or indirect transfers, within eight years of the purchase, of the controlling shares, in companies that own agricultural land located outside the built-up area which represent more than 25% of their assets, the seller has to pay a tax of 80% on the difference between the land value index for notary use at the time of land acquisition and when the controlling shares are transferred. In such cases, the tax on the difference in value of the sold shares will be applied on a reduced basis, in proportion to the percentage of the agricultural land in question in the fixed assets, with double taxation prohibited. The provision does not apply for asset reorganisations or relocations within the same group of companies.

The obligation to maintain the use of the land

The law also obliges owners of agricultural land located outside the built-up area to use them exclusively for the purpose of carrying out the agricultural activities performed at the date of purchase. It is not possible to change the agricultural destination of the investments for tree crops, vines, hops and exclusively private irrigation systems.

Sanctions

The sale of agricultural land located outside the build-up area in violation of the pre-emption right, non-compliance with the legal provisions or selling without obtaining the relevant approvals are all sanctioned with absolute nullity. A further series of deeds are regulated as misdemeanours and the related fines increased.

The takeaway

Agricultural land located outside the built-up area can be sold to any individual or legal person only if pre-emption right beneficiaries do not exercise their right and no potential buyer submits a purchase offer or meets the criteria mentioned above.

The provisions of this law apply only for agricultural land located outside the built-up area, not for the sale of agricultural land located within the built-up area. The law explicitly refers to sale and not to the transfer of the property right through other methods such as donation, de-merger, etc.

^[1] Source: [Law no. 175/2020 for the amendment and completion of Law no. 17/2014 regarding some measures to regulate the sale-purchase of agricultural land located outside the built-up area and to amend Law no. 268/2001 on the privatisation of companies holding public and privately owned state land with agricultural use and the establishment of the State Domains Agency, published in the Official Gazette no. 741 dated 14 August 2020].