As of November 1, 2018, certain business activities will be eligible for a reduced VAT rate of 5 percent. In particular, those affected will mainly be: restaurants, hotels, fitness rooms, fairs, amusement and recreational parks.

Activities affected by the change

Among the many measures taken, Decree Law No. 89 of Oct. 4, 2018 stipulates that as of Nov. 1, 2018, the following activities will be subject to a 5 percent VAT rate:

• Overnight services in the hotel sector or sectors with similar functions, including camping;
• restaurant and catering services, with the exception of alcoholic beverages other than beer;
• services that provide access to fairgrounds, amusement parks, and recreational parks;
• The provision of sports facilities to practice sports and physical education.

The Decree identifies the specific activity codes covered by the benefit.

The motivation for legislative action

The regulatory measure of reducing the VAT rate from 9 percent to 5 percent for hospitality services was adopted in order to combat the high level of tax evasion in the local tourism sector in recent years and to resurface significant portions of VAT tax bases.

In recent years, the fairgrounds, amusement and recreational parks and sports sector have benefited from substantial investments and consequently there has been the emergence of amusement and adventure parks in different parts of the country. With the adopted measure, the legislature aims to boost the development of the sector with the enhancement of Romania’s natural and scenic heritage.

Further clarification

It should be pointed out that the reduction in the VAT rate in the area of food and beverage consumption affects only those activities that demonstrate that they have a space specifically intended for the reception of customers and consumption of food and beverages and not mere sale. Therefore, those who perform home delivery services or simply do not guarantee on-site consumption are excluded.

Still considering the application uncertainty of the recent legislation, individual services offered should be carefully evaluated in order to possibly adjust VAT rates.

Further details will be provided to customers upon specific request.