Over the past 15 years, Romania has been considered one of the countries with the most attractive tax regimes in Central and Eastern Europe. The flat 16% corporate income tax, moderate VAT, and reduced dividend tax attracted investors seeking predictability and low costs. However, between 2023 and 2025, the government adopted a package of tax reforms that fundamentally change this balance. Tax increases, the narrowing of incentives, and the implementation of mandatory digital systems place Romania in a new position compared to other countries in the region.

Corporate tax – the relative advantage remains

Romania continues to apply a 16% corporate income tax rate, according to Article 17 of the Fiscal Code. This rate is lower than in the Czech Republic (19%), Slovakia (19–25%, depending on the level of profit), and Poland (9%–19%). However, two countries in the region have much lower rates: Bulgaria (10%) and Hungary (9%).

Dividend tax – from competitive advantage to potential disadvantage

One of Romania’s strongest fiscal advantages was the reduced dividend tax – only 5% until the end of 2022. Recent legislative changes radically alter this benefit, and in 2025, the dividend tax becomes 10%, with an increase to 16% planned for 2026.

This increase places Romania above the regional average. For example, Bulgaria maintains 5%, Hungary has 15%, Poland 19%, and the Czech Republic 15%.

The rise in dividend tax aims to balance capital taxation versus labor taxation, considering the tendency to remunerate employees through micro-enterprises.

VAT – increase with impact on consumption and competitiveness

Romania’s standard VAT was long set at 19%, a level that maintained a balance between budget revenues and price attractiveness. Starting August 1, 2025, the rate increased to 21%. By comparison, Hungary has 27% (the highest in the EU), Poland 23%, the Czech Republic 21%, Bulgaria 20%, and Slovakia has announced a move to 23% from 2025. Even if not at Hungary’s level, this increase shifts Romania from the “moderate” zone to the higher range in the region, which may reduce attractiveness for price-sensitive sectors such as retail and tourism.

Micro-enterprise regime – reduced room for tax optimization

Before 2023, micro-enterprises could have a turnover of up to EUR 1 million and paid income tax of 1% or 3% (depending on the number of employees), being a preferred option for SMEs and freelancers.

Starting in 2024, the ceiling was lowered to EUR 500,000, and beginning in 2025 it is reduced to approx. EUR 60,000 for the 1% rate, with the rest taxed at 3%. In addition, certain fields, such as consulting and IT, have additional eligibility restrictions. Many companies that used this regime will shift to corporate tax, increasing their fiscal burden.

Fiscal digitalization – Romania ahead of the region

One chapter where Romania is ahead of many countries in the region is the digitalization of tax processes. The RO e-Invoice system becomes mandatory starting in 2025 for all B2B and B2C transactions, according to the Ministry of Finance. The main objective is to reduce the “VAT gap,” an indicator measuring VAT losses in the economy, where Romania had one of the highest percentages in the EU – over 34% in 2021, decreasing to around 30.6% in 2022 according to the European Commission report.

Although implementing e-Invoice requires investments in IT systems and training, in the medium term it can increase collection and reduce tax evasion.

Conclusions

• Romania maintains a competitive corporate tax, which remains an advantage for attracting investors. However, other countries in the region offer lower rates, reducing Romania’s relative attractiveness and making the advantage less decisive.

• The increase in dividend tax removes one of the main fiscal incentives for investors and balances the taxation of capital, which had become an alternative to labor taxation. The advantage for the state is increased revenue, but the net return for investors decreases, which may redirect capital to countries with more favorable tax regimes or push business owners to reinvest more and postpone dividend payments.

• The VAT hike may increase state revenues. At the same time, the pressure on domestic consumption and inflation can affect businesses oriented toward the local market.

• The narrowing of micro-enterprise incentives expands the tax base and increases fiscal revenues, an advantage for the budget. However, many SMEs and start-ups will bear a higher fiscal burden, which can reduce Romania’s attractiveness for small businesses and freelancers.

• The implementation of mandatory e-invoicing improves collection and fiscal efficiency, a long-term advantage. In the short term, however, companies must bear adaptation costs and efforts, which represent a temporary disadvantage.

• Romania retains some fiscal advantages and makes progress in digitalization, aiming to increase tax revenues.

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