Romania Increases VAT to 21% and Merges Reduced Rates

August 1, 2025

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On July 25, 2025, the Romanian President formally signed the Law that implements the tax reform, which significantly affects VAT rates starting August 1, 2025. The Law, as well as budgetary measures implemented by the Law, are part of the broader fiscal policy changes and adjustments adopted by the new Romanian government, which intends to reduce public spending and increase state revenue.

Change in Applicable VAT Rates

With the publication of the Law in the Official Gazette, Romania completed the process of increasing the standard VAT rate from 19% to 21%, as well as merging two previously existing reduced VAT rates into a single reduced VAT rate. Therefore, the previously applicable 5% and 9% reduced VAT rates are no longer in effect, and the new consolidated 11% standard VAT rate applies.

Consequently, the new 11% reduced VTA rate applies to medicines, staple food items, certain cultural services, printed books, newspapers, energy services such as water supply, sewage, and thermal energy, as well as hospitality, restaurant, and catering services not involving alcoholic beverages, as well as to many other supplies and transactions.

The only exemption from these rules is provided for qualifying housing transactions whose value is below RON 600,000 (approximately EUR 120,000) and which are no bigger than 120 sqm. This transitional exemption remains in effect until August 1, 2026, provided the advance payment conditions are met.

Conclusion

Whether this measure will help Romania achieve its goals, which include reducing the budget deficit and meeting the conditions for joining the Eurozone, as well as ensuring fiscal stability, remains to be seen.

Nevertheless, with the latest budgetary policy and the implemented Law, the Romanian government established a dual VAT system, with only one reduced VAT rate in effect, in addition to the existing standard VAT rate. Therefore, taxable persons should act promptly and ensure their ERP and invoicing systems are up to date.

Source: Romanian Legislative Portal

When does Romania’s new VAT reform take effect?

The new VAT rates in Romania take effect on August 1, 2025, following the official publication of the Law on July 25, 2025.

What is the new standard VAT rate in Romania as of August 2025?

Starting August 1, 2025, Romania's standard VAT rate increases from 19% to 21% under the new tax reform.

What happened to the 5% and 9% reduced VAT rates?

The 5% and 9% reduced VAT rates were eliminated and replaced by a consolidated 11% reduced VAT rate that applies to a broad category of goods and services.

What goods and services are covered under the new 11% reduced VAT rate?

The new 11% VAT rate applies to medicines, staple foods, printed materials, cultural services, certain utilities like water and thermal energy, and hospitality services excluding alcohol.

Are there any exemptions from the new VAT system?

Yes, qualifying housing transactions under RON 600,000 and 120 sqm remain exempt until August 1, 2026, if advance payment requirements are met.

What should businesses in Romania do to comply with the new VAT rules?

Businesses must update their ERP and invoicing systems to reflect the new VAT rates to ensure compliance starting August 1, 2025.

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