Romania to cut VAT on food products to 9%

Food chain welcomes early cut on VAT

Romania will cut value added tax (VAT) for all food products to 9% from 24% starting on the 1st of June 2015, six months earlier than planned as budget revenue is higher than expected, after cutting budget deficit to 1.8% of GDP last year from 7.2% in 2009 by a series of measures including cuts in state salaries, limits in public employment and tax hikes, the Romanian Government has announced.

The law extends the scope of the reduced VAT rate to food, including beverages but excluding alcoholic beverages, animals, and live poultry from domestic species, seeds, plants, and ingredients normally used in food preparation, and also restaurant and catering services, excluding sales of alcoholic beverages. Applying the cut to the whole food chain makes it easier to manage.

The plan is expected to cost the Government up to RON1.8bn (£300m) during the period 2016-2018, but is expected to considerably reduce tax evasion. Under a separate proposal, the standard VAT rate is also to fall from 24% to 20% from 2016.

Romalimenta, the federation of food industry employers in Romania, has supported the sharp lowering of VAT on foods as it believes the impact on consumption would be greater than that of a cut in headline VAT from 24% to 20%.

For related information please see our previous eBiz post:

Romanian VAT decrease to 20%