The austerity law comes into force on Friday. Higher VAT and increased taxes

New fiscal measures also include updated rules for the purchase of housing with 9% VAT, the introduction of health insurance contributions (CASS) for pensions over 3,000 lei, and an increase in the dividend tax to 16% starting in 2026.

From August 1, 2025, there will be two VAT rates in Romania: a 21% general VAT rate, up from 19%, and an 11% reduced VAT rate, up from 5% or 9%, as applicable.

The reduced VAT rate of 11% will be applied to the tax base for the following services and/or supplies of goods, including medicines for human use, food and non-alcoholic beverages, and live domestic animals and birds.

Also, according to the law, between August 1, 2025, and July 31, 2026, an individual may purchase a single dwelling with 9% VAT if the maximum usable area is 120 square meters, the value is a maximum of 600,000 lei (excluding VAT), it can be inhabited as such, has not been purchased with 9% VAT after January 1, 2023, there is a legal document concluded by August 1, 2025, and for advances paid between July 3 and July 31, 2025, there must be proof of payment of a 20% advance by July 31, 2025, inclusive.

Another measure is the introduction of CASS for pensions over 3,000 lei. Only 10% is paid for the part that exceeds this threshold.

The dividend tax will increase from 10% to 16% in 2026. It is determined by applying a tax rate of 16% to the gross dividend paid to a Romanian legal entity.

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VAT increases starting August 1

According to the law, „in 2026, starting January 1, the gross amount of basic salaries/function salaries/function wages/monthly classification allowances received by personnel paid from public funds shall remain at the same level as that granted for December 2025, provided that the personnel occupy the same position and perform their duties under the same conditions.”

At the same time, the amount of the road tax is increased. The level of the national road usage fee for passenger cars (…) is changed as follows: 1 day – 3.5 euros, 10 days – 6 euros, 30 days – 9.5 euros, 60 days – 15 euros, and 12 months – 50 euros. The amount of the fine imposed on users in the absence of a valid vignette for passenger cars will be between 500 and 1,000 lei.

In addition, the tax on banks’ turnover and excise duties on tobacco and fuel will be increased.

On July 7, the government took responsibility in Parliament for the first package of fiscal measures aimed at reducing the budget deficit.