Legislative Changes Applicable Starting August 1, 2025

Dear Client,

We would like to inform you that, starting from August 1, 2025:

Based on Law no. 141/2025, published in the Official Gazette, as well as official documents from the Ministry of Finance and the Government of Romania, a series of fiscal changes will come into effect on August 1, 2025, with major impact on the business environment, employees, pensioners, and the general population. These changes aim to improve the efficiency of revenue collection for the state budget and align the tax system with sustainability requirements.

 
1. Increase of the Standard VAT Rate to 21% and Unification of Reduced Rates to 11%

Starting August 1, 2025, the standard VAT rate will increase from 19% to 21%, meaning all goods and services not benefiting from reduced rates will be taxed at this new percentage. Authorities justify this measure by the need to align fiscal revenues with the EU average and to support public spending in the context of the budget deficit.

At the same time, the reduced rates of 5% and 9% will be eliminated and replaced with a single reduced rate of 11%. This rate will apply only to clearly defined categories of goods and services: basic food products, firewood, books, school textbooks, tourism services (accommodation, catering), delivery of medicines, water and sewage services, thermal energy for vulnerable populations, irrigation services, and agricultural inputs (pesticides, fertilizers).

It is important to note that some products or services previously benefiting from the 5% rate may now be taxed at 21% if they no longer fall under the privileged categories.

2. Increase in Excise Duties on Harmful Products: Alcohol, Tobacco, Fuels

To discourage the consumption of harmful products and increase budget revenues, the Government has decided to raise excise duties on ethyl alcohol, cigarettes, heated tobacco products, and fuels. The new excise levels will lead to direct shelf price increases for these products, averaging 10–15%.

 3. Introduction of Health Contribution (CASS) for Pensions Over 3,000 RON/Month

A change with direct social impact is the introduction of the 10% health contribution (CASS) applicable to pensions exceeding the 3,000 RON/month threshold. Note: CASS will apply only to the amount that exceeds this threshold, not the entire pension. For example, for a pension of 3,500 RON, the contribution will be applied only to 500 RON.

 4. Adjustment of Medical Leave Indemnities

Starting August 2025, the payment percentage for medical leave will become progressive, depending on the leave duration, as follows:

 · Up to 7 days – 55% of the gross base salary;

· Between 8 and 14 days – 65%;

· Over 15 days – 75%.

The only notable exception applies to cardiovascular diseases, where the 75% rate applies regardless of the leave duration.

5. Increase in Turnover Tax for Banks: From 2% to 4%

Credit institutions, including foreign bank branches, will pay a turnover tax of 4% starting August 1, 2025. This measure effectively doubles the previously introduced special tax and comes amid record profits reported by commercial banks in recent years.

 6. Increased Taxation in the Gambling Sector

The state is introducing a series of increased taxes for the gambling industry, a sector under heightened supervision due to its social implications. The changes include:

 · Higher taxes on licenses for slot machines and VLTs;

· Additional taxes for online betting and physical betting shops, with rates reaching up to 25%.

 7. Reassessment of the Reduced VAT Rate for HoReCa in Autumn

Although the HoReCa sector will benefit from a reduced VAT rate of 11% for now, an impact assessment will be conducted between August 1 and October 31, 2025. The Government reserves the right to adjust this measure. Depending on the results, the reduced rate may be maintained or replaced with the standard 21% rate.

Best regards,
Geseidl Team