ECONOMIC COUNCIL TO THE PRIME MINISTER OF THE RM

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VAT has been reduced from 15% to 12% for the HORECA sector

December 29, 2020 – Parliament reduced the value added tax for the HORECA sector from 15% to 12%. The implementation of this measure aims to support the sector in overcoming the effects of the crisis generated by the pandemic. Studies conducted by Moldovan business associations in 2020 have shown that one of the sectors most severely affected by the restrictions imposed due to the COVID-19 pandemic was HORECA.

Many countries in the region such as Bulgaria, Romania and Austria have opted to reduce the VAT rate in the HORECA sector either for a specified period, for example from 2020 to 2021, or for an unlimited period.

In the middle of 2020, the Secretariat of the Economic Council supported by the EBRD, the UK Government’s Good Governance Fund, and the International Finance Corporation prepares the Impact Study of the COVID pandemic on the economic sectors and the Policy Matrix. During this exercise, the experts spoke directly with representatives of economic sectors, including HORECA. One of the demands of companies in this field was to reduce the VAT rate.

Thus, the experts proposed in the Matrix with policies for the recovery of economic sectors, the reduction of the VAT rate for HORECA from 15% to 12%.

In 2019 the Parliament reduced the VAT rate for HORECA from 20% to 10%. According to the conclusions of the Impact Study of the COVID pandemic on the economic sectors and the Matrix with policies, the HORECA sector registered in 2019 double revenues from sales – from 215 to 469 million lei. Moreover, this measure contributed to the start of the process of “whitening” the sector, substantially increasing sales through accounting. Subsequently, the VAT rate was increased again, reaching 15% this year.

The Secretariat of the Economic Council to the Prime Minister is supported by the European Bank for Reconstruction and Development, funded by the UK Government’s Good Governance Fund, and the International Finance Corporation’s Investment Climate Reform Project funded by the Government of Sweden’s International Development Agency.

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