Effective 1 August 2025, the standard VAT rate in Romania will rise from 19% to 21%, while a new reduced rate of 11% will replace the current 5% and 9% rates. The government is under increasing pressure to address one of the largest budget deficits in the EU and comply with strict European fiscal rules.

Why the VAT increase:

The key reason for the decision of Romania to raise VAT is to reduce the budget deficit and meet the conditions to join the Eurozone as well as ensure fiscal stability. The extra 2% VAT is estimated to bring in an extra 6 billion RON per annum (around €1.2 billion), which will be very much required to finance public spending. The European Commission has been closely monitoring Romanian finances, and the rise in VAT is one part of a general package of tax increases and expenditure cuts aimed at restraining public debt.

What’s Changing?

Standard VAT rate: Expected Increases from 19% to 21% for most goods and services. The current 5% and 9% VAT rates are combined to create 11%, which covers goods and services such as medicines, food, water, books, accommodation and cultural services.

The 9% rate will be in effect for some housing supplies until August 2026.

Effective date: The new Vat rates apply to all supplies with a supply date on or after 1 August 2025, regardless of when the invoice is issued.

Impact on Businesses.

As B2C e-invoicing and digital reporting become more prevalent, businesses must now prioritize updating their accounting systems and pricing to match the new rates. Why? Special attention may be required to ensure compliance with contracts that involve the rate change and pre-paid goods or services.

The Bigger Picture.

Moreover, starting from January 1, 2025, electronic invoicing (e-invoicing) has become mandatory for business-to-consumer (B2C) transactions. This change requires businesses to issue and transmit all domestic B2C invoices electronically via the RO e-Factura system. While participation in the e-invoicing system for B2C transactions has been optional since July 1, 2024, it became compulsory at the beginning of 2025.

Now, Romania’s VAT hike marks a policy reversal after years of tax cuts aimed at stimulating growth and attracting investment. With the EU’s fiscal watchdogs watching closely, the government is prioritizing budget discipline even if it means higher costs for consumers and businesses in the short term.

For Romanian VAT-payers, it is now an ideal time to get ready for a new VAT system and ensure adherence to the updated regime.