Ministry of Finance Proposes Amendments to the Fiscal Code Regarding VAT

Bucharest, March 2025

The Ministry of Finance has launched for public consultation a draft Emergency Ordinance introducing a set of amendments to the Fiscal Code concerning Value Added Tax (VAT).

These changes aim to align Romanian legislation with European directives and to prevent infringement procedures for the incorrect transposition of specific EU provisions.

Key Amendments

1. Increase of the VAT Exemption Threshold for Small Enterprises

The draft ordinance proposes raising the threshold for the special VAT exemption scheme applicable to small enterprises from RON 300,000 to RON 395,000.

Taxable persons whose annual turnover exceeds RON 395,000 will be required to apply for VAT registration no later than the date they exceed this threshold, which will also mark the start of the new tax regime.

Additionally, transitional provisions will allow taxpayers who registered for VAT this year (following the previous RON 300,000 threshold) to apply for deregistration starting April 1, 2025, under specific conditions.

⚠️ Note: Small enterprises not registered for VAT do not collect VAT on supplies of goods or services, nor can they deduct input VAT.

2. Reciprocal VAT Exemption Regime within the EU

The ordinance grants the possibility for taxable persons established in Romania to apply the small enterprises exemption scheme in other EU Member States, and for foreign entities to apply it in Romania, provided they meet specific criteria:

• An annual EU-wide turnover of no more than EUR 100,000;
• Compliance with the exemption threshold of the Member State where the transaction takes place.

This transposition aligns Romania with EU Directive 285/2020 (amending the VAT Directive) and the related EU Regulation on administrative cooperation for monitoring the proper application of the scheme.

3. Determining the Place of Taxation for Virtual Services

The project introduces new rules for determining the place of taxation for services provided via virtual means (online events, streaming, virtual conferences, etc.).

These services will now be taxed in the Member State where the customer is established, domiciled, or habitually resident, regardless of whether the customer is a natural or legal person. Furthermore, such services will no longer qualify for reduced VAT rates.

4. Removal of VAT Exemptions for Certain Non-Profit Activities

The ordinance also proposes eliminating VAT exemptions for:

• Construction/rehabilitation/modernization services for hospital units provided to non-profit organizations;
• Supplies of medical equipment to non-profit entities;
• Transactions carried out by companies fully owned by non-profits.

This amendment follows a formal request by the European Commission, as part of Romania's commitment to comply with the VAT Directive by March 2025, thereby avoiding potential infringement proceedings.

Implementation Timeline

Some changes will take effect immediately upon publication of the Emergency Ordinance in the Official Gazette, while others, such as the VAT deregistration option, will apply starting April 1, 2025.

Looking Ahead: ViDA Package to Reshape VAT Rules EU-Wide

In the longer term, taxpayers should prepare for further VAT reforms stemming from the EU level. The Council of the European Union has recently approved the ViDA (VAT in the Digital Age) package, designed to modernize VAT rules across Member States.

The ViDA reforms will be progressively implemented until January 2035 and will be published shortly in the Official Journal of the EU. Afterward, they will be transposed into national legislation by each Member State, including Romania.