The payment of land tax is an annual tax obligation for landowners, regardless of whether the land is located in the built-up or non-built-up area. But what happens when a person owns land for which they do not have valid title deeds? Can and should he pay tax even in this situation?
According to Art. 463 paragraph (1) of the Tax Code (Law no. 227/2015), land tax is due by any person who owns land located in Romania.
However, even if a person does not hold title deeds to a piece of land (contract of sale-purchase, certificate of heir, title deed, etc.), he has the obligation to pay tax if he is the possessor of the land.
Possession is defined by Article 916 of the Civil Code as “the exercise in fact of the prerogatives of ownership of a property by the person who possesses it and behaves as an owner”. Therefore, if someone uses and behaves like an owner with regard to land (encloses it, cultivates it, rents it, disposes of it, etc.), he will be considered as a possessor and will owe tax, even if he does not have a valid legal title.
The only case in which the possessor will not owe tax is when he or she is exercising possession under the name of a precarious possessor (i.e. recognizing the ownership of another person), such as a tenant, bailee, lessee, etc. But if he or she is possessing under the name of an owner (i.e. behaving as a true landowner), he or she will have to pay the tax liability on the property.
Land tax is payable annually, in two equal installments, by March 31 and September 30. Individual taxpayers can also pay the tax in full by March 31 and benefit from a rebate set by the local council.
To be able to pay the tax on land for which they do not hold title deeds, owners must take the following steps:
- go to the specialized department of the local public administration authority within whose territorial radius the land for which the tax is to be assessed is located.
- fill in a tax return in which they must indicate the identification details of the land (administrative address, category of use, actual surface area, neighborhood, etc.) and the fact that they own the land without deeds. The tax return must be accompanied by a copy of the identity card and any other documents that may help to identify the land (sketches, plans, photographs, etc.).
- to pay the tax established by the tax assessment decision issued by the specialized department, within the terms and conditions stipulated by the Tax Code.
Pursuant to Article 465 of the Tax Code, the amount of land tax is determined taking into account the area of the land, the rank of the locality in which the land is located, the area within the locality and the category of use of the land, as classified by the local council.
But the most important benefit of declaring possession of a plot of land and paying the property tax is the right to invoke usucaption (acquisitive prescription) and acquire future ownership.
Usucaption is a way of acquiring principal rights in rem, by means of possession exercised in the name of the owner, by the possessor or his successors in title, subject to certain conditions, for a certain period of time laid down by law. Possession in the owner’s name implies that the possessor behaves as a true owner of the right, including by paying the tax obligations relating to the property possessed. More details on acquiring ownership by accession can be found in the following article: Uzucaption – what does it mean and what documents are required?
Therefore, possessors who do not declare ownership of the property to the tax authorities and do not pay the related taxes run the risk of not being able to make use of the effects of the acquisitive prescription and are considered to be in possession by default (under the name of precarious possessor). Declaring possession to the tax authorities is therefore a way of strengthening the chances of subsequently obtaining a title by usucaption.
Finally, paying tax on land for which you do not hold title deeds is not only a legal obligation, but also a way of proving that you are in possession in the name of the owner, with a view to acquiring the right of ownership by usucaption.
Owners of land without deeds must submit tax returns to the local authorities and pay the established tax, in the amount and within the deadlines stipulated by the Tax Code.
Non-declaration or non-payment of the tax can lead to fines, late payment penalties and, worst of all, the loss of the right to invoke usucaption. Therefore, the wisest course of action is to declare possession of the land without deeds and to pay the related tax obligations while it is owned and used as your own property.
