Romania is trying to join the Organization for Economic Co-operation and Development (OECD), and now the OECD is recommending that the government in Bucharest increase certain taxes, targeting PFA income, local property tax and VAT increase in HoReCa from 11% to 21%, according to Startupcafe.
Romania has candidate status to join the OECD in 2022. Eventual membership of this club of 38 developed countries would, in theory, make it more attractive to major investors.
On Monday, the OECD published a study in which it makes a series of recommendations for the Bolojan government.
Effective tax rates are much lower for the self-employed, especially at higher incomes. The main reason for this is the difference in social security contributions between employees and the self-employed.
Here are the main recommendations:
Growth at PFA
Employees pay full social security contributions based on their real income, while self-employed persons (PFA, self-employed, etc.) benefit from a ceiling that limits social security contributions. Even though the ceiling was increased in September 2025, the OECD recommends that it be eliminated or significantly increased, at least for health contributions.
Capital income is still taxed less than labor income, which limits tax revenues and reduces the redistributive capacity of the system. As these incomes are concentrated mainly among high-income earners, the tax gap creates imbalances.
Dividend hike
Increasing the dividend tax from 10% to 16% in January 2026 is seen as a positive step. But there is room for further measures, such as reducing the standard deduction of 40% for rental income or increasing the taxation of other investment income - capital gains, interest or royalties - to the 16% level.
It is also proposed to introduce a capital gains tax on the sale of dwellings, excluding the main residence, applied only to properties acquired after the reform enters into force.
Tax optimization for micro-enterprises
Romania has significantly reduced the scope of the micro-enterprise regime, which allowed companies to pay a turnover tax of 1% or 3% instead of a corporate income tax of 16%.
From 2026 there is a single quota of 1%, and the eligibility ceiling decreases progressively: €250,000 in 2025 and €100,000 in 2026.
Previously, the €1 million cap covered about 96% of firms and created incentives to keep companies small, split them into several entities or under-report income.
Even after the reform, there is still room for tax optimization between the micro-enterprise regime and the VAT threshold. The OECD recommends aligning these thresholds.
Increasing property income taxes
Property tax revenues are very low in Romania - around 0.6% of GDP in 2024, less than half the OECD average.
The main problem is that the taxable value of property is still largely based on area, not market value. A reform due to take effect in 2023 has been postponed to 2026.
The government has already increased the tax base by almost three times, but a full transition to market value assessment requires a mass valuation model, comprehensive cadastral and notarial data and a digital platform for local authorities. Such a system is being developed with World Bank support.
Currently, the state sets tax brackets for housing between 0.08% and 0.20%, and local authorities choose the concrete level.
Gradually increasing these ranges could bring Romania's incomes closer to the OECD average. At the same time, tax exemptions and reductions should be limited and better targeted, especially for vulnerable households.
Red tape and taxation remain major obstacles for the Romanian business environment, and while the business registration process has become more digitized, the business licensing and authorization system remains highly fragmented, the OECD study shows.