Building Valuation for Companies: Regulations and Procedures Explained by Activ Property Services

The revaluation of buildings for companies is an essential process for maintaining the accuracy of property values recorded in accounting records, as well as for complying with applicable tax and accounting regulations. This process helps companies update the value of their assets and make sound strategic decisions regarding property management.

Activ Property Services, a company with extensive experience in real estate valuation, explains the importance of revaluation, the applicable regulations, and the procedures that must be followed to ensure compliance with current legislation.

1. The Importance of Building Revaluation

Building revaluation for companies is necessary for several reasons, including:

• Compliance with tax requirements: In Romania, building revaluation is required at regular intervals to ensure compliance with tax regulations and to avoid incorrect taxation. 

• Accounting accuracy: Revaluation updates the carrying value of buildings to reflect their current value. This is essential to ensure that a company’s financial statements are accurate and complete. 

• Preparation for sale or mergers: The revaluation of a building helps establish an up-to-date market value, providing a solid basis for negotiations in the event of a sale, merger, or acquisition. 

Revaluation and Its Tax Impact

Under Romanian tax legislation, the revaluation of buildings is important for establishing the correct taxable base. If a building is not revalued within the legally required timeframe, the property tax may increase significantly.

Companies are therefore encouraged to have their buildings valued in accordance with legal requirements in order to avoid an increase in the taxable value and, consequently, in the amount of property tax due.

Activ Property Services emphasizes that a properly conducted revaluation not only ensures compliance with legal requirements, but can also provide important tax-related benefits for companies, helping them manage their tax costs more efficiently.

2. Regulations Governing Building Revaluation

Building revaluation is regulated by several legislative acts in Romania, including Accounting Law No. 82/1991 and the Fiscal Code. According to these regulations, revaluations must be carried out in accordance with the Valuation Standards (SEV) issued by ANEVAR – the National Association of Authorized Romanian Valuers.

ANEVAR Standards

Authorized valuers carrying out revaluations must comply with the ANEVAR Valuation Standards (SEV). These standards establish valuation criteria, applicable approaches, and professional ethics requirements.

Revaluations must be objective, based on accurate information, and supported by relevant evidence from the real estate market.

Activ Property Services, through its team of ANEVAR-authorized valuers, complies with these standards in all the revaluations it conducts, ensuring that valuation reports are accurate, detailed, and compliant with applicable regulations.

3. Building Revaluation Procedure

The building revaluation process involves several key stages, from collecting the initial information to preparing the final valuation report.

Activ Property Services follows a structured and transparent approach to ensure that each revaluation is carried out professionally.

a. Data Collection and Preliminary Analysis

The first step is to collect all relevant information about the building, including:

• Legal documents such as title deeds, cadastral plans, and lease agreements; 

• Technical information regarding the construction and condition of the building, including dimensions, materials used, age, and current condition; 

• Relevant financial information, such as income generated by the property and maintenance and modernization costs. 

This preliminary analysis helps valuers gain a better understanding of the building’s characteristics and determine the most appropriate valuation approach.

b. Property Inspection

An important step in the revaluation process is the physical inspection of the property.

The valuers at Activ Property Services visit the property to assess its actual condition, verify its consistency with the available documentation, identify any improvements or issues that could influence its value, and inspect the area in which the property is located.

c. Applicable Valuation Approaches

Depending on the type of building and the purpose of the revaluation, Activ Property Services may use one or more valuation approaches, including:

• Market approach: Comparing the property with similar buildings that have recently been sold or are available on the local market. 

• Cost approach: Estimating the cost of reconstructing or replacing the building. 

• Income approach: Valuing the property based on the income it generates, such as rental income, and projections of future cash flows.  

Valuers select the approach or combination of approaches that provides the most relevant results based on the characteristics of the property and the client’s requirements.

d. Preparation of the Valuation Report

Once the analysis has been completed and the appropriate valuation approaches have been applied, Activ Property Services prepares the final valuation report, which includes details regarding the valuation process, the approaches used, and the conclusions regarding the value of the building.

The valuation report is an official document that can be used to update accounting values, for the company’s financial reporting, or for tax purposes.

4. Revaluation and Its Benefits for Companies

A properly conducted building revaluation can offer companies several benefits:

• Tax optimization: An up-to-date revaluation helps companies avoid unjustified increases in property taxes. 

• Accounting clarity: Updating the value of assets recorded in the accounts contributes to more accurate financial statements and provides a realistic picture of the company’s assets. 

• Preparation for sale or leasing: A revaluation can provide a solid basis for negotiating a sale price or lease terms by reflecting the building’s current market value. 

Building revaluation is an essential process for companies, both from a tax compliance perspective and in terms of financial accuracy.

Through its expertise and strict compliance with ANEVAR standards, Activ Property Services ensures that each revaluation is carried out professionally, giving clients confidence that their properties are valued correctly, in accordance with applicable legislation and the market conditions prevailing on the valuation date.

Regardless of the type of building or the purpose of the revaluation, Activ Property Services is committed to providing high-quality valuation services, helping companies make well-informed decisions and manage their costs more effectively.