Government abandons plans to move most reduced VAT rates to 20%
The Moldovan government has significantly revised its proposed VAT reforms for 2027 tax and customs law updates, abandoning plans to remove most reduced VAT rates after strong opposition from businesses and consumers.
The reforms are part of the country’s EU VAT alignment programme, a condition of joining the union.
The original draft fiscal package, published for consultation in June, proposed one of the country’s biggest VAT reforms in years. Alongside broader tax changes, the government planned to simplify VAT by eliminating many exemptions and preferential rates. Most goods and services currently taxed at reduced rates would instead have been subject to the standard 20% VAT rate.
The proposals would have increased VAT on many everyday purchases, including food, medicines, hospitality and energy supplies, although the changes were to be phased in between October 2026 and April 2027.
The government argued that a simpler VAT system would reduce avoidance opportunities, improve compliance and support wider tax reforms, including faster VAT refunds and a broader right to recover excess input VAT.
New three-tier VAT system
Following consultation, Prime Minister Vasile Tofan has now presented a revised approach that retains reduced rates while simplifying the existing structure.
The latest proposal would introduce:
- 8% VAT on essential goods, including bread, dairy products and medicines.
- 12% VAT on most other agri-food products together with hospitality and tourism services.
- 20% VAT as the standard rate for all other supplies.
The government also intends to preserve targeted relief on household energy, including:
- VAT exemption on the first 100 kWh of electricity consumption.
- 8% VAT on the first 150 cubic metres of natural gas.
- 0% VAT continuing for thermal energy.
- Standard 20% VAT applying above the energy thresholds.
The Prime Minister used the example that traditional Moldovan brynza cheese would remain taxed at 8%, while mozzarella would fall within the new 12% rate, arguing that the revised structure better protects essential consumer spending while still reducing the number of preferential VAT treatments.
A pragmatic compromise
The reversal illustrates the political difficulty of broadening the VAT base during a period of rising living costs.
If approved, the revised measures would form part of Moldova’s wider Fiscal Policy 2027 package, which also includes changes to VAT registration, deregistration, refund rights and corporate taxation.
