There has been an increasing interest in transformerless inverter for grid-tied photovoltaic (PV) system due to low cost, high efficiency, less weight, etc. Therefore, many transformerless topologies have been proposed and verified with real power injection only. Recently, almost every international regulation has imposed that a definite amount of reactive power should be handled by the grid-tied PV inverter. According to the standard VDE-AR-N 4105, grid-tied PV inverter of power rating below 3.68kVA, should attain power factor (PF) from 0.95 leading to 0.95 lagging. In this paper, a new high efficient transformerless topology is proposed for grid-tied PV system. The new topology structure and detail operation principle with reactive power flow is described. The proposed circuit structure does not lead itself to the reverse recovery issues which allow utilizing MOSFET switches to increase the overall efficiency. Finally, to validate the proposed topology, a 1kW laboratory prototype is built and tested. The experimental results show that the proposed topology can inject reactive power into utility grid without any additional current distortion and leakage current. The maximum efficiency and European efficiency of the proposed topology is measured and found to be 98.54% and 98.27%, respectively.