Romania’s sweeping tax changes in 2025, including higher VAT, dividend, and bank levies, have unsettled investors and slowed projects, yet the government hopes these measures will stabilize the budget and secure long-term growth, according to Vernon David Senior Partner Daniela David.
“Romania has been going through a turbulent period starting in November 2024,” Daniela explains. “For the first time in the country’s history, the Constitutional Court canceled the entire elections due to irregularities in the process. It was an unprecedented move, but ultimately, I think it was the right decision for the future. The president’s mandate was extended until new elections could take place, and in May 2025, fresh elections were held. For the legal and commercial markets, this outcome signaled stability and was seen as a positive step forward."
“Of course, governing in such a period is never easy – no country has it simple,” Daniela continues. “After the new government came to power, one of the most impactful moves was the adoption of new fiscal measures in August 2025. Law 141 introduced a set of tax changes that immediately affected the market. The standard VAT rate was raised from 19% to 21%. While the increase seems modest, even a 2% difference had a noticeable impact. Some reduced rates were also revised: publishing and cultural services went from 5% to 11%, while medicines, most food products, irrigation water, accommodations, and restaurants shifted from 9% to 11%. These changes quickly made themselves felt, with many clients in the investment and M&A space putting projects on hold, uncertain about how the business environment would react.”
Another measure, set to take effect in 2026, according to Daniela, “will raise the dividend tax from 10% to 16%. On one hand, this is meant to keep more profit within the country, but on the other, it raises questions about Romania’s competitiveness. Whether investors continue to choose Romania, or will they look elsewhere for more favorable conditions, that remains to be seen.”
Daniela emphasizes that health contributions were also modified. “Previously, around 6 million people contributed, but under the new framework, the number expanded significantly, with many more people now required to pay. The new contributors will be pensioners with pensions over RON 3,000 (approximately EUR 600), parents on childcare leave, recipients of unemployment benefits who have been exempt, and now require payments. This does create a healthier budget for the state, but it also means reduced disposable income for many lower-income families, which makes things complicated,” she notes.
According to Daniela David, financial institutions were not left out either. “Banks, which previously paid a special tax of 2% on turnover, now see it double to 4% on turnover,” she notes. “While banks do have strong resources, such an increase inevitably affects their lending practices, leading to higher costs for credit and financing.”
“On the optimistic side, these fiscal measures should help reduce Romania’s budget deficit, which is a necessary step for stability,” Daniela adds.“I believe that 2026 has strong potential to be a better year for Romania. If all the fiscal measures are fully implemented, we can expect a more stable and predictable economic environment. A lower deficit could make the country more attractive to investors in the long run.”
Looking ahead, “I’d like to believe that once the war in Ukraine comes to an end, Romania will stand to benefit significantly from the reconstruction efforts. The country could play a key role in real estate, commercial, and cross-border transactions linked to Ukraine’s rebuilding, which would strengthen Romania’s position in the region and bring long-term opportunities,” she concludes.
