Flash News – July 2025
Context
Update: Law no. 141/2025 on certain fiscal-budgetary measures was published in the Official Gazette no. 699 on July 25, 2025.
The VAT-related changes, which we previously outlined during the draft stage of the law, remain applicable. We will provide further details on the new provisions introduced by Law 141/2025 in our July 2025 Newsletter.
One of the most important measures introduced by this law is the modification of VAT rates starting August 1, 2025. The current structure of three VAT rates (19%, 9%, and 5%) is to be replaced with just two: 21% (standard rate) and 11% (reduced rate).
The Romanian Government has initiated a draft law introducing significant tax changes, which has been adopted by Parliament through the procedure of assuming governmental responsibility. At this stage, the draft law is considered approved by Parliament but must still go through two essential procedural steps.
First, the Constitutional Court of Romania (CCR) will examine, on July 22, the challenges regarding the constitutionality of the law. If these challenges are rejected, the law will be sent to the President of Romania, who may choose either to promulgate it or to return it to Parliament with objections. Once promulgated, the law will be published in the Official Gazette and will enter into force as provided.
Below is a summary of the VAT rate changes, based on the latest version of the draft law as adopted by Parliament. Please note that this is not yet an officially published version in the Official Gazette.
Summary of VAT Changes as of August 1, 2025
🔄 Operations shifting from 9% to 11% VAT rate
✅ The following remain subject to a reduced rate (new rate: 11%):
1. Human-use medicines
- ⚠️ Veterinary medicines move to the 21% standard rate
2. Food and beverages (including for animal consumption), live animals and birds from domestic species
- Exceptions subject to 21%:
- Alcoholic beverages
- Non-alcoholic beverages under NC code 2202
- Food products with added sugar ≥10g/100g (except infant formula and baby milk powder)
- Dietary supplements
- Bee feed, plants, and specialty ingredients – all eliminated from the reduced rate
3. Tourist accommodation, including camping
4. Restaurant and catering services, excluding alcoholic and NC 2202 non-alcoholic beverages
5. Water supply and sewerage services
6. Irrigation water supply in agriculture
7. Fertilizers, pesticides, seeds and agricultural products for sowing/planting, and related agricultural services (as defined by a joint order of the Ministry of Finance and the Ministry of Agriculture)
8.Housing provided under social policy, including:
- Homes for the elderly/retirees
- Children’s homes and rehabilitation centers for minors with disabilities
🔁 Operations shifting from 5% to 11% VAT rate
1. Books, textbooks, newspapers, and magazines, in physical and/or digital format
- Excludes those with predominantly video/audio content or primarily advertising purposes (21%)
2. Access to cultural sites: museums, castles, historic monuments, botanical/zoological gardens
3. Firewood and related products: sawdust, wood briquettes, pellets, etc.
- Applies to individuals and legal entities, including NGOs, schools, and hospitals
4. Thermal energy during the cold season, supplied to:
- The general population
- Public/private hospitals
- Schools, NGOs, religious institutions, and social service providers
❌ Operations no longer eligible for reduced VAT and shifting to the standard 21% VAT rate
1. Veterinary medicines
2. Bee feed, plants, and ingredients used in food preparation or to replace/complete food
3. Dietary supplements
4. Social housing (≤120 sqm and ≤600,000 RON, excluding VAT)
- Transitional regime: 9% VAT applies until July 31, 2026, if:
- The contract is signed by August 1, 2025
- At least 20% advance payment is made
5. Housing supplied to municipalities for social rent purposes
- Transitional regime until August 1, 2026 under similar advance payment conditions
6. Green energy systems (for homes and public institutions):
- Photovoltaic panels, heat pumps, installation kits, and separate components
- Also applies to upgrades, repairs, and green systems offered as extra options in construction contracts
7. Recreational and cultural services:
- Access to fairs, amusement parks, exhibitions, cinemas, cultural events (other than VAT-exempt ones)
- Access to sports events
⚙️ How to apply the new VAT rates
When the VAT rate changes, the applicable rate is generally determined by the chargeable event.
General rule → Chargeable event = date of delivery of goods or provision of services
However, there are many exceptions to this rule depending on the type of transaction, such as:
- Rentals
- Real estate deliveries
- Services with progress-based billing (e.g., construction based on work stages)
- Stock held at client’s disposal
- Ongoing deliveries or continuous services
Advance payments invoiced before the VAT change, but where the chargeable event occurs after the new rate takes effect, will require rate adjustment to apply the VAT rate in effect at the date of delivery/service.
📝 Conclusion
- Many operations will lose access to reduced VAT rates and fall under the standard 21% rate
- The new 11% rate will become the only reduced VAT rate, but it applies to a limited range of operations
- Certain transactions (such as housing and social supplies) benefit from transitional regimes under specific conditions
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