The Romanian Government has decided to cut the VAT in tourism, as a means to stimulate the development of this sector, which is still facing problems
The left-of-centre Government in Bucharest has passed an emergency ordinance, under which the VAT applied in tourism is reduced from 9% to 5% as of November 1st.
Prime Minister Viorica Dancila has stated that the measure is aimed at boosting the sector: “This is an important decision for the tourism sector. We have decided to cut the VAT down to 5% for hospitality services, but also for the use of sporting and entertainment facilities. Thus, Romania will have the lowest VAT in the whole of the European Union in the field of tourism, and past experiences have shown that reducing this tax will reflect positively on the economy.”
The ordinance drafted by the Finance Ministry stipulates the drop in the VAT for accommodation in the hospitality sector or similar sectors, including renting of camping lots, restaurant and catering services, except for alcoholic beverages, other than beer. The VAT will also be cut for the use of sporting facilities and access to amusement parks. According to the Romanian Finance Ministry, the decision to cut the VAT is aimed at curbing tax evasion, increasing domestic consumption and boosting the economy.
In another move, also as of November 1st, royalties for geothermal waters and natural mineral waters used by the population will be eliminated. This measure was taken in support of spa tourism and also to diminish thermal energy production costs for those systems that use geothermal water. The Government’s decision regarding the reduction of the VAT is complementary to the one regarding holiday vouchers, worth approx. 300 Euros, which can only be used across Romania.
In fact, as early as last month the prime minister had announced that employees in the public sector would benefit from vouchers in 2019 as well. As regards the impact on the international tourism market, several specialists, quoted by AGERPRES, claim that the 2018 summer season brought revenues 25% higher than before. Still, they also believe that the Romanian Black Sea Coast was not ready to receive by 30% more tourists, because of insufficient accommodation capacity and shortage of skilled staff, especially given that Romania has been massively exporting staff to tourist facilities abroad. Also with regard to holiday vouchers, specialists estimate a growth in the number of tourists also in the cold season, especially during the winter holidays.