Inheritance tax and inheritance law in Romania
Taxation Researcher | December 10, 2020
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Romania: what restrictions there are and whether making a will is advisable.
How high are inheritance taxes in Romania?
There are no inheritance taxes (taxe succesorale) due if the inheritance procedure was finalized within two years from the death of the benefactor. Otherwise, a 1% tax is due on the value of the inheritance.
Thanks to Mihai Apostol from Martínez-Echevarría, Perez and Ferrero Law Offices
What inheritance laws apply in Romania?
Romanian laws govern the inheritance of immovable assets in Romania.
The main laws regarding inheritance in Romania are:
- The Civil Code.
- The Code of Civil Procedures.
- The law no. 105/1992 regarding the settlement of international private law relations.
- Organic law no. 312/2005.
The basis principles of these laws are that:
- Foreigners are not treated differently to Romanian citizens, nor are any distinctions made under the Romanian constitution between foreigners of different nationalities or religions.
- The inheritance of immovable assets or real property in Romania is governed by the laws where the assets are located (i.e. the principle of lex rei sitae.)
- Law no.105/1992 (regarding the settlement of international private law relations) provides that movable goods, no matter where they are located, are governed by the national law that the deceased subscribed to at the time of his/her death.
- Organic law no. 312/2005 provides for restrictions on foreign ownership of land in Romania. At the present time, the only way a foreigner can become the owner of land in Romania is through legal inheritance.
A testator making a will may submit to other national laws which govern the transfer by inheritance of his/her immovable assets, but he/she does not have a right to avoid the imperative stipulations of Romanian laws. If the law of a foreigner´s nationality provides that a foreigner´s relevant national law for inheritance issues is Romanian law, then Romanian law is applicable.
The competent court for inheritance cases is the court having jurisdiction in the last domicile of the deceased, or if no domicile is known, the court having jurisdiction in the place where the immovable assets are located. According to Romanian law the domicile is the place where a person has his/hers permanent or principal home.
Inheritance issues in Romania are handled by a civil court or by a notary public (if all parties agree and there are no conflicting issues). The civil court or the notary public applies very formal written procedures. Court procedures regarding inheritance, may last from 6 months to 18 months, depending whether there are conflicts of interests between the inheritors.
To handle an inheritance procedure in Romania, a foreign inheritor must give power of attorney to a lawyer or relative in Romania. This process takes time, during which the foreigner cannot sell the inherited property. A foreign inheritor must present a birth certificate (with all the legal formalities and legalizations needed to be effective in Romania) amongst other documents.
Romanian law governs intestate and testate inheritance.
In Romania, the property of a deceased person can be acquired by:
- Legal or intestate inheritance, in the absence of a will.
- Testamentary or testate inheritance, through the implementation of a will.
Both Romanian and foreign citizens are governed by the Romanian rules of legal and testamentary inheritance with respect to property located in Romania.
In the absence of a will.
In the absence of a will the estate of the deceased goes to the legal inheritors. If there are no legal inheritors the estate goes to the Romanian state. The legal inheritors are the surviving spouse and the relatives of the deceased (regardless of whether the family bond resulted from marriage, outside marriage, or adoption). Romanian law provides that four classes of relatives have the right to inherit the property of the deceased, following a strict order of priority. The four classes, and their priorities, are as follows:
- First Class: The descendents in a straight line (i.e. the children of the deceased, the grandchildren, then the great-grandchildren, without grade limit).
- Second Class: The ascendants and privileged collaterals (i.e. the parents of the deceased, and the brothers and sisters) and the descendents of these, until the fourth grade).
- Third class: The ordinary ascendants (i.e. the grandparents and great-grandparents, without grade limit)
- Fourth class: The ordinary collaterals (i.e. the family in collateral line of the deceased, other then those in the second class, including the fourth grade, (i.e. the aunts, cousins, brothers and sisters of the grandparents of the deceased)
The relative grade is established as follows:
- In a straight line, depending on the number of births (father and son are first grade relatives, the grandson and the grandfather are second grade relatives).
- In a collateral line, depending of the number of births (starting with one of the relatives, until the shared ascendant, and coming down until the other relatives).
Orders of priority are established between and within inheritance classes.
- Each inheritance class has an order of priority established by law. Inheritors from the first class inherit preferentially, in the absence of the second third and fourth class. In the absence of the first class (or if they renounce the inheritance) the second class inherit, and so on. The priority of inheritance is governed by the order of the classes, and not by the relative grade of the inheritor with respect to the deceased.
- The proximity of the relative grade of the inheritor with respect to the deceased governs inheritance in the same class. The closest relatives of the deceased inherit by priority. By exception, in the second class, the deceased parents (who are first grade relatives) do not exclude the brothers and sisters of the deceased (who are second grade relatives).
- Relatives in the same class and in the same grade, inherit with equal shares.
The surviving spouse has inheritance rights against each class.
By exception to the above rules, the surviving spouse, who is not included in the fourth class, cannot exclude another class, or be excluded from the inheritance, and he/she inherits against each class The surviving spouse inherits against the descendants of the deceased, regardless of their number. He/she has the right to at least ¼ of the inheritance.
- If against the privileged and collateral ascendants of the deceased, the surviving spouse has the right to 1/3 of the inheritance.
- If against only the privileged ascendants or collaterals, the surviving spouse has the right to ½ of the inheritance.
- If against the ordinary ascendants or with the ordinary collaterals, regardless of their number, the surviving spouse has a right to ¾ of the inheritance.
- In the event of no inheritors, from none of the four classes, the surviving spouse inherits everything.
- In addition to the fraction of the inheritance established by law, the surviving spouse has a special inheritance right to furniture, domestic objects and wedding gifts, if against other inheritors (other than the descendents of the deceased).
- If the surviving spouse is not the owner of the house where he/she has lived for at least one year since the death of the deceased spouse, then he/she has a right of habitation to that house, but only if it is a part of the inheritance, and respecting some provisions established by law.
The reserved portion.
A person cannot dispose of the reserved portion of his/her estate in Romania to anyone he/she wishes by means of donations during life or through a will. The inheritors entitled to the reserved portion are the descendants of the deceased, the privileged ascendants, and the surviving spouse. The reserved portion is distributed as follows:
- The portion of the estate reserved for descendants varies depending on their number. The reserved portion is ½ if there is only one descendant, 2/3 if there are two descendants, or ¾ if there are three or more descendants. Children resulting from marriage, illegitimate children born outside marriage and adopted children are all entitled to the reserved portion for descendents.
- The portion of the estate reserved for privileged ascendants is ½. when the deceased leaves 2 or more parents, or ¼ when only one parent survives the deceased. This category includes both the biological and adoptive parents of the deceased.
- The portion of the estate reserved for the surviving spouse is ½ of the quota that he/she is entitled to as a legal inheritor. The reserved portion of the surviving spouse varies depending on the inheritance class he/she comes up against. If against the descendants, the reserved portion is 1/8. If against the privileged ascendants and collaterals of the deceased together, the reserved portion is 1/6. If against only the privileged ascendants or collaterals the reserved portion is ¼. If against the ordinary ascenders and collaterals the reserved portion is 3/8. If against any other inheritors, other that the legal ones, the reserved portion of the surviving spouse is ½.
- The residue of the estate (i.e. that portion outside the reserved portion) can be freely willed to anyone, but with certain restrictions regarding the ownership of land by foreigners and non residents in Romania.
It is common in Romania for people to make wills.
In order for the will to be considered valid in Romania, the will must follow certain requirements in terms of acceptable form, and the date when it was concluded, modified or revoked, or at the date of the death of the testator, according to the following laws:
- The National law of the testator
- The law of the place where the will was concluded modified or revoked.
- The law of the place where the immovable asset is located
- The law of the competent court considering the inherited property.
If a foreign citizen wants to grant a local will in Romania, some specific formalities are required. The will should be in a written form, by the hand of the testator, and dated and sign by the testator. It is advisable for a will to be made in front of a Public Notary, which requires the presence of the testator in Romania.
Gifts made during the lifetime of the owner may be returned after death.
In principle, an owner may freely give his/her property in Romania to anyone prior to death; however, any descendant or surviving spouse who received such gifts may be obliged to return them to the estate of the deceased, at the request of any legal inheritors that have not been gratified, unless the donor stated otherwise, Another restriction on gifts is that regarding the ownership of land by foreign citizens and non residents in Romania.
Registered ownership and marital rights determine the ownership of real property in Romania.
The owner of immovable assets in Romania is the person registered in the Property Register (to the extent that a foreign citizen can own properties in Romania, he/she can also be registered in the Property Register). If the owner is married, but the spouse does not appear as joint owner in the register, the registered owner may transfer, sell or give the immovable assets to someone else, but only with express permission from the other spouse.
The transfer of the ownership right is not subject to income tax, if the inheritance is disputed and settled within 2 years of the death of the succession author. Otherwise, the inheritor is required to pay 1% of the value of the inheritance.
If foreign spouses have the same nationality, then the applicable property law is that which is common to both. If the couple have different citizenships then the applicable law is the law of their common domicile. This law continues to be applicable if one of the spouses changes citizenship or domicile. In the absence of common citizenship or domicile the applicable law is that of the country where the couple shared their residence, or the country in which they had their strongest common bonds.
Ownership of land in Romania is restricted.
According to Article 44 of the Romanian Constitution, foreign individuals and stateless persons may own land in Romania under the conditions provided by the accession to the European Union, as well as by international treaties based on reciprocity. However, the ownership of Romanian land can be exercised only under the conditions stipulated by organic law no. 312/2005.
The classes of people who will be entitled to own land in Romania 5 years after accession to the EU (7 years in case of agricultural land) include:
- Citizens of EU member states, who are non-resident in Romania
- Stateless persons domiciled in an EU member state, who are non-resident in Romania
- Legal entities registered in an EU member state
- Foreign legal, natural or stateless persons residing in other than EU states (according to the provisions of the relevant international treaties on a reciprocity basis.
Organic law no. 312/2005 does not apply if the ownership right over the land by foreign citizens or stateless persons is by legal inheritance.
Guardians must be appointed to protect the property rights of children.
If property in Romania is inherited by a child, or children, not of legal age, or by other persons that have no legal capacity of exercising their rights, a guardian must be appointed. Normally the legal guardian is the surviving parent. If both parents of a child under legal age are deceased then a guardian is appointed by the competent authority. If a person has a lack of legal capacity to exercise his /her rights, because of mental disorders, a guardian is appointed by the court which decides that the individual is incapable of managing his /her own affairs.