At the end of 2024, the Romanian Government approved the reintroduction of the construction tax, previously known as the “pillar tax.” Although the rate has been reduced from 1.5% to 1%, the new version introduces significant changes that may pose substantial challenges for taxpayers. The tax will be collected starting from the second half of 2025.

What does the new “pillar tax” entail?

The new version of the “pillar tax” applies to constructions, excluding those already subject to building tax paid to the Local Tax and Fees Departments (DITL). This change in definition expands the tax’s scope, now covering not only special constructions but also certain improvements made by tenants in rented spaces.

Taxpayers who carry out improvement works will have to pay the 1% tax on their value, even if the landlord has already notified them, increasing the taxable value of the property. In the absence of clear regulations, there is a risk of double taxation.

The tax is calculated based on the value of the constructions owned as of December 31 of the previous year and applies to the following categories:

• Romanian legal entities (including public institutions, national research and development institutes, associations, foundations, and other non-profit legal entities).

• Foreign legal entities operating through a permanent establishment in Romania.

• Legal entities headquartered in Romania, established under European legislation.

Payment will be made in two equal installments, by June 30 and October 31, 2025. ANAF will update tax forms to facilitate the declaration and administration of the tax.

Reason for the tax reintroduction

The government reintroduced this tax to increase budget revenues and reduce the fiscal deficit. Finance Minister Tánczos Barna stated that the measure was recommended by the World Bank.

Reducing the rate from 1.5% to 1% aims to lessen the impact on the business environment. However, applying the tax to the full value of constructions (excluding locally taxed buildings) will impose a significant financial burden on taxpayers.

Impact on the business environment

The reintroduction of the tax has generated mixed reactions from the private sector. Representatives of the energy and telecommunications industries, among the most affected, warn that the tax could lead to increased production costs, which would be reflected in consumer prices. Past experience shows that the tax has influenced electricity and gas prices.

For tenant improvements, there is a risk of double taxation, which would increase operational costs. Without clear methodological norms, different interpretations of the legislation may arise.

Regulations and consultations

To mitigate negative effects, the government must finalize the methodological norms by March 2025. Consultations with the business community are essential to identify issues and adjust legislation accordingly.

Taxpayers are advised to analyze their fiscal obligations and consult specialists to avoid compliance issues.