There has been an increasing interest in transformerless inverter for grid-tied photovoltaic (PV) system due to low cost, high efficiency, light 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 efficiency transformerless topology is proposed for grid-tied PV system with reactive power control. The new topology structure and detail operation principle with reactive power flow is described. The high frequency common-mode (CM) model and the control of the proposed topology are analyzed. The inherent circuit structure of the proposed topology does not lead itself to the reverse recovery issues even when inject reactive power which allow utilizing MOSFET switches to boost the overall efficiency. The CM voltage is kept constant at mid-point of dc input voltage, results low leakage current. Finally, to validate the proposed topology, a 1 kW laboratory prototype is built and tested. The experimental results show that the proposed topology can inject reactive power into the utility grid without any additional current distortion and leakage current. The maximum efficiency and European efficiency of the proposed topology are measured and found to be 98.54% and 98.29%, respectively.