The Government aims to enable Romanian entrepreneurs to compete on equal terms in the single market and to increase voluntary compliance by reducing administrative costs, Finance Minister Alexandru Nazare said on Thursday, after the Executive raised the VAT exemption threshold, via ordinance, from RON 300,000 to RON 395,000.

„Through this ordinance, Romania continues to align with European principles of fair competition by providing a digitalized, business-friendly fiscal framework in line with EU standards. We want Romanian entrepreneurs to compete on equal footing in the single market and to increase voluntary compliance by lowering administrative costs,” said Nazare, as quoted in a press release issued by the Ministry of Finance.

In a Facebook post, the minister noted that the decision takes effect on 1 September 2025 and „means that more small businesses will be able to remain exempt from VAT, allowing them to focus on growth.”

He explained that if a company’s turnover remains below the new threshold, it can apply the special VAT exemption regime in other EU countries where it operates. Registration in the VAT system will also be simplified: if a business exceeds the old RON 300,000 threshold in August 2025 but not the new RON 395,000 threshold, immediate VAT registration will not be required; it will only be necessary if the new threshold is exceeded later in the year.

Nazare added that businesses can request removal from the VAT system if they have not exceeded the threshold in previous years.

„Romania is thus transposing into national legislation the provisions of EU Directive 2020/285, which allows small businesses to apply the special exemption regime in member states other than the one in which they are established. Additionally, through the transposition of EU Directive 2022/542 regarding VAT rates and rules for services delivered virtually or electronically, digital activities and electronic services will be taxed based on the client’s location rather than the provider’s,” the minister wrote.

The Government adopted an ordinance on Thursday introducing significant amendments to the Fiscal Code, directly impacting small businesses. This measure forms part of the transposition of EU Directive 2020/285, aimed at harmonizing taxation across Europe and simplifying obligations for SMEs, providing a more flexible legal framework.

Accordingly, small businesses — taxable legal entities established in Romania with turnover below RON 395,000 — will be able to benefit from the special VAT exemption regime in other EU member states, provided their EU-wide turnover does not exceed EUR 100,000 and operations in the member state requesting the exemption do not exceed that country’s applicable threshold. This means these businesses neither collect VAT on sales or services nor deduct VAT on purchases.

Taxable persons exceeding the previous RON 300,000 small business threshold in August 2025 will only need to register for VAT if they exceed the annual exemption threshold of RON 395,000.

If the RON 395,000 threshold is exceeded in August, the taxable person must apply for VAT registration by 10 September and apply the standard taxation regime from that date. Registration will be effective from 10 September.

Businesses established before 2025 that registered for VAT by 1 September due to exceeding the RON 300,000 threshold can request removal from the VAT register starting 1 September 2025 to apply the special exemption, provided they did not exceed the previous year’s threshold and have not yet exceeded the new RON 395,000 threshold.

Newly established businesses in 2025 that registered for VAT by 1 September due to exceeding the RON 300,000 threshold can also request removal from the VAT register starting 1 September if they have not exceeded the new RON 395,000 threshold.

Requests for removal from the VAT register can be submitted to the competent fiscal authorities between the 1st and 10th of each month following the relevant fiscal period. The cancellation becomes effective from the date the decision is communicated.

The ordinance also transposes EU provisions regarding VAT rates, primarily modifying rules for services delivered virtually or online, ensuring taxation occurs in the member state where consumption takes place. Services provided electronically to a client are taxable where the client is established, has a permanent residence, or habitual residence.

AGERPRES