Romanians will pay fewer taxes this year after a series of measures for loosening the tax policy became effective starting January 1. These include the VAT reduction, removal of the tax on special constructions, and removal of the extra excise duty on fuel.

The general VAT rate was reduced from 20% to 19%, one year after the VAT had seen a more significant cut from 24% to 20%. The lower VAT rate applies to non-food goods and services, as the VAT rate on food was lowered from 24% to 9% in June 2015.

The tax on special constructions was removed. This tax had been introduced in early 2014 and applied to assets that weren’t covered by any tax, such as pillars, pipes, ramps, concrete platforms, other than production or office buildings that were already taxed. Companies in energy were among the top payers of this tax.

The removal of the extra excise duty on fuel, which amounted to EUR 0.07 per 1 liter of fuel, combined with the VAT cut will lead to lower fuel prices. The lower prices are already visible at local gas stations.

These three measures were all included in the law that changed the Fiscal Code, which was voted by the Parliament in 2015. Most of the changes to the Tax Code came into force on January 1, 2016.

The tax exemption on reinvested profits extends indefinitely. The shareholders who reinvest profits in technological equipment, computers, software, control and billing equipment will be exempt from paying this tax.

Farmers will benefit this year from a special VAT scheme if they are individuals or small businesses that provide agricultural services and encounter difficulties in applying the normal VAT arrangements. They will be gradually given a compensation in the flat-rate, namely a compensation of 1% in 2017, 4% in 2018 and 8% in 2019.

Starting January, employees in the public education sector should receive higher salaries by 15%. In December, the salaries of people working in the public healthcare sector were increased by 15%.

Pensioners will receive a higher income starting January 1 after the government approved in December the increase in the pension point by 5.25%, from RON 871.7 (EUR 192) to RON 917.5 (EUR 202). The measure also applies to military pensions.

A law that removes 102 non-fiscal taxes, including the radio-TV tax and the environment tax for car registrations, should also come into force in the following weeks. The Parliament refused the President's request to review this law, at the end of last year, so President Iohannis has no other choice but to sign it.

Romanian election winner wants coming tax cuts postponed to implement its own promises

editor@romania-insider.com