Romania Announces VAT Increase: Standard VAT to Rise from 19% to 21%, 11% Reduced Rate Introduced

On July 25th, the Romanian government officially passed a new fiscal law, implementing a significant change in the country’s VAT structure. Effective from August 1, 2025, the standard VAT rate will increase from 19% to 21%, a move designed to maintain EU financial support and avoid a downgrade in the country’s credit rating.

Alongside the hike in the standard rate, a new 11% reduced VAT rate will replace the previously existing 5% and 9% rates. While this new reduced rate will still apply to certain products and services, stricter criteria and limitations have been introduced, fundamentally altering the application of reduced VAT rates in Romania.

Key VAT Rate Changes

• Standard VAT: The standard VAT rate will rise from 19% to 21%.

• Reduced VAT: A single reduced VAT rate of 11% will be applied, merging the former 5% and 9% rates into one unified rate.

Products and Services Now Subject to 11% Reduced VAT Rate:

The 11% VAT rate will apply to specific goods and services, including:

• Medicines for human use

• Basic food products that do not contain sugar or alcohol (with certain exceptions, including sugary products with more than 10g/100g of sugar)

• Water supply and sewage services

• Agricultural inputs, such as fertilizers, pesticides, seeds, and related services

• Books, newspapers, and magazines (excluding those featuring predominantly multimedia content like videos and music or advertising)

• Cultural access, including museums, historical sites, castles, and botanical gardens

• Firewood and wood pellets (for heating purposes, subject to certain conditions)

• Thermal energy used for heating (available to specific consumer categories)

• Social housing and related real estate (with strict regulations)

• Hotel accommodation and camping services

• Restaurant and catering services, excluding alcoholic beverages and sugary drinks

Products Moving to the 21% Standard VAT Rate:

The following products will now be taxed at the new 21% standard VAT rate:

• Sweetened beverages, confectionery, and food supplements

• Non-alcoholic beverages with CN code 2202, including juices with added sugar and energy drinks

• Food products with 10g/100g of sugar or more (with the exception of powdered milk for infants)

• Food supplements, even if they are natural

Rationale for the Changes:

This overhaul of Romania’s VAT system is a significant step towards fiscal consolidation. The increase in the standard VAT rate is part of the government's broader plan to reduce the national deficit and ensure continued alignment with EU fiscal requirements. 

The new 11% reduced VAT rate aims to preserve essential goods and services for consumers while supporting key sectors like agriculture, healthcare, and education. At the same time, the government is hoping to stabilize its fiscal situation and maintain EU financial backing through these necessary adjustments.