Romania will maintain its standard VAT rate at 19% but will eliminate most preferential VAT rates beginning in August, retaining reduced rates only for food and medicines, Digi24 reported on June 20, citing sources close to the negotiations between president Nicușor Dan and prime minister-designate Ilie Bolojan. The final decision on lifting the standard VAT rate depends on the October 15 evaluation of the fiscal consolidation plan.

The decision is part of a fiscal policy compromise intended to increase state revenues while allowing president Dan to honour his campaign commitment not to raise the general VAT rate. According to the agreement, the current 5% and 9% VAT rates applied to various goods and services, including cultural events, books, firewood, and museum tickets, will be increased; however, the exact new rates have not yet been specified.

The measure is scheduled to take effect in August and will be formally included in the coalition protocol. However, the agreement leaves open the possibility of further increases. 

An evaluation in October will determine whether the fiscal impact of the new VAT structure and other planned measures is sufficient. If not, the standard VAT rate could be raised from 19% to 21% starting January 1.

“This is the discussion, and it will be assumed in the coalition protocol,” Digi24 reported, quoting sources familiar with the talks.

While food and medicines will remain under the 9% VAT bracket for now, the report notes that a rate increase for these items is not excluded in the future, depending on the outcome of the October assessment.

In addition to VAT changes, other fiscal measures are under discussion. These include increased excise duties on tobacco products, new taxes on gambling and other vices, and institutional expenditure cuts. It remains unclear which of these will be included in the final fiscal package to be presented on June 23.

The plan aims to address Romania’s widening budget deficit without resorting immediately to headline tax hikes, ahead of an October 15 deadline set by the European Commission for the country’s next Excessive Deficit Procedure update.

iulian@romania-insider.com

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