Significant price increases sweep Romania, spurred by the government's decision to enhance tax rates
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The Romanian government's recent decision to increase the Value Added Tax (VAT) rate from 19% to 21% and unify reduced VAT rates into a single 11% rate has led to higher prices for various goods and services.
Starting August 1, 2025, train ticket prices are expected to rise due to the VAT increase. Second-class tickets may increase up to RON 3, while first-class tickets could rise up to RON 4.5, particularly for long routes over 600 km.
Communications providers like Digi are adjusting their tariffs to apply the new 21% VAT rate from the same date. However, retailers such as Carrefour, Mega Image, and Lidl are responding by offering price freezes or discounts to offset these hikes.
Excise duties on alcohol and other products are also being increased, contributing further to price rises. Additionally, health contributions for categories previously exempt are now subject to adjustment, affecting individual taxpayers and businesses alike.
The number of reduced VAT rates has been reduced to one, 11%, and will apply to human-use medicines, food, live domestic animals, water supply and sewage services, agricultural products, housing used as retirement or care homes, children's homes, rehabilitation centers for minors with disabilities, accommodation in the hotel sector, rental of campsites, and restaurant/catering services.
Excise duties for products like solar thermal panels, heat pumps, and low-emission high-efficiency heating systems will now be subject to the 21% VAT rate. A 21% VAT will also apply to homes with a maximum usable area of 120 sqm and a value not exceeding RON 600,000, significantly raising prices for such homes.
The VAT rate increase will also affect specific regulated consumer categories, with textbooks, books, newspapers, magazines, access to castles, museums, firewood, and thermal energy during the cold season seeing an increase to 11%. Meanwhile, veterinary-use medicines, plants and ingredients used in food preparation, seeds, and bee feed will see a rise to the standard 21% rate.
The health insurance contribution (CASS) will be applied to pension income exceeding RON 3,000 (EUR 600) per month, for each pension entitlement, effective between August 1, 2025, and December 31, 2027. Other individuals required to pay CASS may include those earning income from sources such as unemployment benefits, social protection payments, or personal income from child-raising or accommodation leave.
Individuals earning income subject to CASS may opt to pay contributions for their dependents. Pensioners will be required to pay a 10% health insurance contribution (CASS) on the portion of pension income exceeding RON 3,000 (EUR 600) per month, for each pension entitlement.
These tax changes aim to reduce Romania's budget deficit and align its fiscal regime closer with EU standards but have caused immediate price pressure across many sectors.
The government's decision to increase the VAT rate has implications for various businesses, as communications providers like Digi are adjusting their tariffs to include the new 21% VAT rate. Financial projections indicate that this change could escalate pricing for train tickets, with second-class tickets potentially increasing by RON 3 and first-class tickets by up to RON 4.5 for long routes.
