Increased VAT exemption limit for small enterprises in Romania, along with streamlined business registration process

Romania is set to increase the Value-Added Tax (VAT) exemption threshold for small businesses, aligning its fiscal framework with European standards. The change, which will take effect starting September 1, 2025, is a result of the approval of emergency legislation to amend the Tax Code by the Romanian government.

The new VAT exemption threshold will be raised from RON 300,000 (approximately EUR 60,000) to RON 395,000 (approximately EUR 78,000). This means that Romanian small businesses with a turnover below the new threshold can benefit from special VAT regimes in other European Union (EU) member states.

The Finance Minister of Romania, Alexandru Nazare, stated that the change aligns with European principles of fair competition. He further emphasised that the measure implements EU Directive 2020/285, which aims to harmonize taxation across Europe and reduce administrative burdens for small and medium-sized enterprises.

The changes also introduce new rules for taxing electronic services. Such services will now be taxable where the client is established, has a permanent residence, or a usual residence. This shift in taxation is in line with the principles of taxation of electronic services at the point of consumption, as outlined in EU Directive 2020/285.

Notably, the legislation does not mention any changes to the EU-wide turnover limit of EUR 100,000 for small businesses. This means that businesses with a turnover exceeding EUR 100,000 will still be subject to VAT regulations in the EU, regardless of their operations in Romania.

Businesses established before 2025 that registered for VAT due to exceeding the old threshold can request deregistration starting September 1, provided they did not exceed RON 300,000 in 2024 and have not surpassed RON 395,000 by their deregistration request date.

The changes are part of a broader effort to digitalize and streamline Romania's business environment. The legislation simplifies VAT registration processes, ensuring a digitalized, business-friendly fiscal framework in Romania that is in line with European standards.

The changes were reported by News.ro, but no new statement from Minister Nazare was made in this paragraph. The European Parliament and the Council of the European Union adopted EU Directive 2020/285, paving the way for similar changes across the EU. The change is expected to reduce administrative burdens for small businesses and promote fair competition within the EU.

Increased VAT exemption limit for small enterprises in Romania, along with streamlined business registration process