23% domestic electricity inflation forces extended tax subsidy
The Romanian government is considering an extended reduced VAT rate on domestic energy prices for low-volume consumers. This would maintain the reduced Value Added Tax rate at 5% instead of the 19% standard VAT rate between April and July 2022. Inflation was running at over 7% at the end of 2021 in Romania, with heating electricity and gas hitting 23%.
Romania had already cut the VAT rate on domestic heating energy to 5% for the official ‘cold period’ between November 2021 and March 2022. This also applies to public offices, including schools and hospitals. These supplies are currently taxed as the existing 19% standard VAT rate.
Romania is also considering cutting VAT on food to zero from 9% from February to July 2021.
Check which other EU states have cut domestic energy VAT on inflation concerns. Costs of European electricity hit new highs this month as it faces energy shortages as economies recover from the pandemic, boosting demand.
There would also be a cut on the rate for the supply of housing – a reduced VAT rate of 5% for a single dwelling whose value exceeds RON 450 thousand, but does not exceed RON 700 thousand.
Romania seeks to keep within EU budget targets
These measures were included in a package of spending designed to limit the government deficit to 6.2% of GDP, as agreed with the European Union.
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