PwC: Doubling of turnover tax to raise banks’ effective taxation to as much as 87% in 2026

Romanian banks face a steep increase in their effective tax burden following the government’s decision to double the turnover tax for most credit institutions, PwC Romania warned during a conference on July 8, according to Profit.ro. The average effective tax rate for the banking sector is projected to rise from 23% in 2024 to 29% in 2025 and 34% in 2026.

From July 1, 2025, a 4% turnover tax will apply to credit institutions with a market share above 0.2%, rising from the current 2% rate.

According to Diana Coroabă, Partner at PwC Romania, only 10 to 11 of the 32 banks operating in Romania as of January 1, 2025, would qualify for the lower 2% rate, as they fall below the 0.2% asset threshold. These institutions are typically niche players or limited-activity branches.

“Banks with large activity, with large assets, will all, of course, be subject to the increased tax rate,” Coroabă said. The 4% rate will remain in force for the entire 2026 fiscal year, while the 2% rate applies only to the first half of 2025 for qualifying institutions.

The increase will significantly impact profitability, Coroabă noted, especially as the turnover tax is a non-deductible expense in calculating corporate income tax. The average effective tax rate for the banking sector is projected to rise from 23% in 2024 to 29% in 2025 and 34% in 2026.

However, this tax burden will not be evenly distributed. PwC’s analysis shows that effective tax rates in 2025 could range from 24% to 61%, while in 2026, they could reach between 27% and 87%. In some cases, effective taxation may even exceed 100%, particularly for banks posting losses or low profits relative to turnover.

These estimates are based on 2024 profit levels and were calculated using the ratio of profit tax and the additional turnover tax to gross accounting profit.

The turnover tax increase was included in the government’s first fiscal consolidation package, for which it assumed responsibility in Parliament on July 8. The measure is part of broader efforts to reduce the budget deficit and applies uniformly to banks based on 2024 market share averages.

“The impact will be considerable for most institutions, and especially for those with lower profitability margins,” Coroabă stated.

iulian@romania-insider.com

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