NEW FISCAL PACKAGE: INCREASED VAT, CONTRIBUTIONS, AND TAXES

The first reform package, adopted by the government via the procedure of assuming responsibility in Parliament, was promulgated by the President and published in the Official Gazette no. 699/25.07.2025 as the Law no. 141/25.07.2025 after the rejection of the motion of no confidence filed by the opposition in the Parliament and the challenge filed at the Constitutional Court.

Delivered in a context of budgetary pressure and firm European commitments, these measures have a major impact on the economic environment and the tax burden borne by taxpayers. They aim to increase budget revenues, strengthen the fight against tax evasion, and restore budgetary discipline.

Among the measures included in the reform package, we mention in particular:

VAT: first time increased in the last 8 years

The measure with the widest economic impact in the new fiscal package is the increase of the standard VAT rate from the current 19 % to 21 %, starting August 1, 2025.

Romania has applied the 19% rate since 2017, after a decrease from 24%, which was introduced during the economic crisis, on July 1, 2010. The new increase marks a return to levels close to those in the austerity years and will have a direct impact on consumers, especially in the current inflationary context.

A reduced VAT rate of 11% will apply to a series of products (human use medicines, supply of food and beverages - with several exceptions, among which alcoholic beverages and foods with minimum 10 g/100 g of product added sugar, food supplements -, water and sewage services, irrigation water in agriculture, fertilizers and pesticides for agriculture - with some exceptions, books, textbooks, newspapers, magazine – on paper and digital, with exceptions, access to museums, castles, monuments etc., firewood and wood products for heating - for individuals and companies, thermal energy in the cold season for households, hospitals, schools, NGOs and religious institutions, housing as part of social policy, including elderly homes, orphanages, hotel and camping accommodation, restaurant and catering services, excluding alcoholic drinks and non-alcoholic drinks under NC code 2202).

The reduced VAT rate of 9% will be temporarily maintained until July 31, 2025, in the following cases:

• Purchase of the first home, between August 1, 2025 – July 31, 2026, if all the following cumulative conditions are met: (i) Maximum usable area of 120 sqm (excluding utility annexes), (ii) Construction and land value less than 600,000 RON (excluding VAT), (iii) The individual has not purchased another home with a reduced VAT rate since January 1, 2023, (iv) The ownership transfer occurs by July 31, 2026, (v) A 20% downpayment was made under a legal document concluded by July 31, 2025
• Delivery of housing to municipalities, by August 1, 2026, for subsidized rental, provided legal acts are concluded by August 1, 2025.

The 11% reduced VAT rate for delivery of chemical fertilizers and pesticides typically used in agricultural production will apply until December 31, 2031 (included)

The 11% reduced VAT rate for firewood, sawdust, and other wood waste for individuals or legal entities, including schools, clinics, or hospitals, will apply until December 31, 2029, included.

Increased dividend tax

The dividend tax is raised from 10% to 16% for Romanian legal entities; the tax must be declared and paid to the state budget by the 25th of the month following the month when

Higher minimum turnover tax for credit institutions

Another key element of the new fiscal legislation is the extension of the additional turnover tax for credit institutions. Originally introduced on January 1, 2024, as a temporary budget-balancing measure, this tax regime for the banking sector is under the new law tightened and extended until December 31, 2026, with rates based on the institution's size.

Thus, credit institutions - Romanian legal entities and Romanian branches of foreign legal entities - will owe, in addition to the profit tax, a specific turnover tax as follows:

• 2% between January 1 – June 30, 2025 inclusive
• 4% between July 1 – December 31, 2025
• 4% for all of 2026

By derogation, credit institutions with a market share below 0.2% (calculated as the annual average of the credit institution’s/branch’s assets in the total banking sector assets) will benefit from a reduced 2% rate, applicable from July 1, 2025, to December 31, 2026.

For credit institutions / branches undergoing accounting adjustments affecting turnover for the period January 1 – June 30, 2025, the law requires recalculating the tax due by filing a corrective return in accordance with the Fiscal Procedure Code.

New rules on health insurance contributions

The tax reform extends the contribution base and establishes clearer and more uniform rules for various categories of taxpayers.

• Employees – in order for adult dependants (spouses, parents, or young adults without their own income) to benefit from a health insurance, the employee must pay health insurance contributions (CASS). In this case, the calculation base is fixed: 6 gross minimum wages in effect on January 1 of the year the option is exercised. Payment is made in two instalments. The option is expressed via the “Single Return on income tax and social contributions owed by individuals,” submitted during the year. Until now, employees supporting dependents without income were not required to pay CASS on their behalf.
• Individuals earning income from rents, dividends, interests, independent activities, or similar sources and exceeding the threshold of 6 gross minimum salaries/year must pay the CASS. The calculation base varies by income level: 6, 12, or 24 gross minimum wages per year. Payment is made via the Single Return, in two instalments: 25% upon declaration, 75% by May 25 of the following year.
• Pensioners: Starting August 1, 2025, pensioners will owe CASS on the portion of their pension exceeding 3,000 RON gross per month. The cap applies to each pension right separately, regardless of whether the pension is paid in a lump sum or in instalments and regardless of whether it comes from the public or private system (including optional or occupational pensions).

Pensions received from abroad will also be subject to income tax and CASS, with the rate applied to the gross annual income, reduced by the non-taxable threshold and, if applicable, by CASS.

Employers and income payers (including pension houses) are required to withhold and pay CASS at source. Still exempt from CASS: (i) patients with cancer (during treatment) and (ii) pensioners with incomes up to 3,000 RON/month.

The insured status ceases 12 months after filing the declaration. If the declaration is not renewed, insured status ends automatically.

Temporary work inability benefit – new amounts

The gross monthly amount of the allowance for temporary work incapacity due to ordinary illness or accidents outside work is established depending on the duration of the medical leave, as follows:

• 55% down from 75% currently, from the calculation basis for medical leave of up to 7 days;
• 65% for medical leave of 8–14 days;
• 75% for medical leave of over 15 days; the same amount applies to temporary incapacity due to cardiovascular diseases.

The maximum duration of medical leave is 183 days within a one-year interval.

For certain serious illnesses, the period may be extended up to 12 months.

The measures apply from August 1, 2025.

Taxation of gambling incomes

The taxation of gambling income is undergoing an important change. The most obvious change concerns the increase in the tax rates applicable to gross income obtained from gambling, while the method of calculating the tax on winnings exceeding the non-taxable ceiling of 66,750 lei has been reformulated.

Thus, for gross income up to 10,000 lei inclusive, the tax rate increases from 3% to 4%. For the part between 10,001 lei and 66,750 lei inclusive, the fixed base tax increases from 300 lei to 400 lei, to which 20% is added for the amount exceeding the threshold of 10,000 lei.

Regarding income exceeding 66,750 lei, the fixed tax increases from 11,650 lei to 11,750 lei, with the 40% rate for the amount exceeding the threshold remaining unchanged.

Another change is made to the article regulating the calculation of the tax due on income obtained from gambling games specific to casinos, poker clubs, slot machines and lottery tickets, when they exceed the non-taxable threshold of 66,750 lei. The new wording provides that, after applying the tax scale, the amount of 11,750 lei is deducted from the result obtained (compared to the previous regulation which provided for the deduction of the amount of 11,650 lei from the result obtained).

Romania in a regional context

The current tax package will certainly grow pressure on companies and the population in general, with expected reorganizations and a drop in consumption.

However, despite these measures, Romania still has attractive taxation compared to other countries in the region:

• Hungary: standard VAT 27% (reduced rates 18% and 5%); corporate tax – general rate of 9%.
• Bulgaria: standard VAT 20% (reduced rate of 9%), corporate tax – flat rate 10%.
• Czech Republic: Standard VAT 21% (reduced rate of 12%), corporate tax - general rate 21% (a 5% rate applies to core investment funds, and pension funds are tax-exempt, with a rate of 0%)
• Poland: Standard VAT 23% (reduced rates 8% and 5%), corporate tax - standard rate 19% or 9% (for small companies and newly established companies in their first year of activity).