Romania's Turnover Tax Reforms and Their Impact on Foreign Investment

Romania's 2025 fiscal reforms, including a reintroduced 0.5% turnover tax on certain constructions and broader adjustments to VAT, excise duties, and corporate taxes, are reshaping the investment environment for multinational corporations. These changes, aimed at stabilizing public finances and aligning with EU standards, present both challenges and opportunities for foreign investors. Understanding the nuances of these reforms is critical for structuring tax-efficient strategies in a market poised for long-term growth.

The 0.5% Turnover Tax on Constructions: A Double-Edged Sword

The reintroduction of a 0.5% turnover tax on the value of new constructions not already subject to building taxes, effective August 1, 2025, marks a targeted effort to capture revenue from capital-intensive sectors. While this tax applies broadly to private-sector developments, exemptions for public-use structures (e.g., hospitals, schools) and transitional measures for residential projects under EUR 120,000 create a nuanced playing field. For foreign investors in real estate or construction, the tax could increase project costs, particularly for mid-sized developments. However, the transitional 9% VAT rate for qualifying residential units until July 2026 offers a window to mitigate some of these pressures.

Broader Fiscal Reforms: A Shift in the Tax Base

The 2025 reforms extend beyond construction. The standard VAT rate rose to 21% from 19%, while reduced rates were consolidated to 11%, affecting sectors like healthcare, food, and construction. Excise duties on energy, alcohol, and sugary beverages increased by 10% in two tranches, with further hikes planned for 2026. These changes are expected to raise consumer prices, potentially dampening short-term demand but stabilizing state revenues for infrastructure and social programs.

For multinational corporations, the VAT and excise adjustments necessitate recalibrating pricing strategies and supply chains. For example, companies in the renewable energy sector—such as those installing photovoltaic panels—now face a 21% VAT rate, which could reduce margins unless offset by higher energy savings incentives. Conversely, the removal of tax exemptions for microenterprises and IT/construction sectors may drive consolidation, creating opportunities for larger foreign firms to acquire undervalued assets.

Dividend and Corporate Tax Changes: Strategic Reconfiguration

The dividend tax increase from 10% to 16%, effective January 1, 2026, is a significant shift for equity-focused investors. While dividends distributed in 2025 based on interim financial statements remain at 10%, this creates a narrow window for tax-efficient structuring. Multinationals with Romanian subsidiaries should consider accelerating dividend distributions in 2025 to lock in the lower rate, particularly if they operate in countries without double taxation treaties with Romania.

Similarly, the supplementary tax for credit institutions—rising to 4% of turnover for entities with a market share above 0.2%—could pressure smaller banks to merge or exit the market. Foreign financial institutions with a foothold in Romania may find acquisition opportunities in this space.

Opportunities for Tax-Efficient Structuring

Despite the headline-grabbing tax hikes, the reforms also open avenues for strategic optimization:
1. Real Estate Timing: Investors in residential construction can leverage the transitional 9% VAT rate for units under 120 m² and EUR 120,000 price caps until July 2026. This creates a short-term incentive to finalize contracts and deliver projects before the deadline.
2. Public-Private Partnerships (PPPs): Exemptions for public-use structures make PPPs more attractive. Foreign firms with expertise in infrastructure or healthcare could partner with the Romanian government to avoid the 0.5% tax while securing long-term contracts.
3. Dividend Scheduling: As noted, accelerating 2025 dividend distributions allows companies to avoid the 16% rate. This is particularly relevant for firms with Romanian subsidiaries in high-growth sectors like technology or manufacturing.
4. Sectoral Diversification: The removal of tax incentives for IT and construction sectors may redirect investment toward less saturated areas, such as agriculture or green energy, where subsidies remain intact.

The Bigger Picture: Stability vs. Short-Term Pain

Romania's reforms are part of a broader effort to align with EU fiscal rules and reduce budget deficits. While the immediate impact may strain certain sectors, the long-term goal is to create a more predictable and sustainable tax environment. For foreign investors, this means a market that is less prone to sudden policy shifts—a critical factor in risk assessment.

However, the success of these reforms hinges on effective implementation. If the government uses the additional revenue to improve infrastructure and public services, it could enhance Romania's competitiveness. Conversely, mismanagement or corruption could undermine investor confidence.

Conclusion: Navigating the New Normal

Romania's 2025 fiscal reforms are a mixed bag for foreign investors. The 0.5% turnover tax on constructions and broader adjustments to VAT and excise duties add complexity, but they also create opportunities for those who act swiftly and strategically. By focusing on transitional periods, exempt sectors, and dividend timing, multinational corporations can mitigate the impact of these changes while positioning themselves to benefit from Romania's long-term growth trajectory.

For investors with a medium-term horizon, the key takeaway is clear: adaptability is paramount. The next 12–18 months will test the resilience of Romania's economy and its ability to attract capital. Those who navigate the new tax landscape with foresight will find themselves well-placed to capitalize on a market in transition.