Romanian law firm Blaj Law has obtained a series of final court rulings annulling additional VAT liabilities imposed by the Romanian tax authority on HoReCa (an acronym for hotels, restaurants, and cafés/catering) operators in relation to coffee and tea-based beverages served in cafés, restaurants, bars and vending machines.
The VAT Dispute Concerning Coffee and Tea-Based Beverages
The judgments have enabled companies represented by Blaj Law to recover several million Romanian lei, and have created a relevant line of case law in a matter that affected the entire Romanian HoReCa sector. The rulings confirm that fiscal obligations must have a clear legal basis and cannot be created or extended through subsequent administrative interpretation.
The disputes concerned the VAT rate applicable to coffee and tea-based beverages following the fiscal amendments applicable from 1 January 2023. Through those amendments, certain non-alcoholic beverages were removed from the reduced VAT regime. In its considerations, the legislative change referred, in particular, to beverages containing added sugar, other sweeteners or flavourings. In the text of the law, the change targeted products falling under specific customs classification codes.
As such, the measure was generally perceived as targeting soft drinks and similar bottled products, rather than coffee or tea-based beverages prepared for immediate consumption in the HoReCa market. Coffee and tea-based beverages served in cafés, restaurants, bars or through vending machines are not typically placed on the market as bottled soft drinks and were not regarded by operators as falling under the relevant customs classification codes. They are prepared on the spot, served directly to the consumer and, in many cases, do not contain added sugar or sweeteners unless the consumer expressly requests or adds them.
For this reason, during a significant period after the entry into force of the amendments, most operators treated such beverages as continuing to benefit from the reduced 9% VAT rate applicable in Romania at the time. This approach was also supported by the fact that certain operators expressly sought clarification from local fiscal authorities as to whether the amendments applied to coffee and tea-based beverages prepared and served for immediate consumption in cafés and similar HoReCa venues. In one such case, the answer received from a local tax authority indicated that the amendment did not apply to these products. At that stage, however, no unified national interpretation had been issued.
Several months later, the national tax authority adopted a unified interpretation taking a different view, considering that certain liquid products based on coffee, tea or cocoa could fall within the category excluded from the reduced VAT regime and should therefore have been subject to the standard 19% VAT rate.
Following tax audits, operators were required to pay the 10% VAT difference for products already sold to final consumers. Since the transactions had already taken place, the prices had already been paid and the fiscal receipts had already been issued, the additional VAT could no longer be recovered from customers. As a result, the reassessed VAT became a direct cost for the businesses concerned.
For high-volume products, the financial exposure was substantial. A difference that may appear limited when assessed at the level of an individual product may have a material impact when applied across thousands or millions of transactions, and that was exactly the case here. The exposure was further increased by interest and penalties, although the taxpayers had acted in a period marked by legislative ambiguity and lack of clear administrative practice.
Court Challenges and Final Rulings Obtained by Blaj Law
Blaj Law challenged this approach before the Romanian courts on behalf of several operators in the HoReCa industry. The firm argued that the tax authority had exceeded the limits of the applicable legal framework and had unlawfully assimilated coffee and tea-based beverages to a category of products which the legislature had not intended to exclude from the reduced VAT regime.
Blaj Law further argued that, even if the wording of the legislation left room for interpretation, such ambiguity could not be resolved by adopting the most burdensome reading for taxpayers and applying it to transactions already completed. In tax matters, administrative interpretation cannot replace the law and cannot be used to extend the scope of a fiscal obligation beyond the wording, purpose and limits set by the legislature.
On June 12, 2025, the Brașov Court of Appeal issued the first final judgment in this series of disputes, upholding the annulment of the tax authority’s decisions establishing additional VAT liabilities. In that case, the court confirmed that the application of the 19% VAT rate, instead of the reduced 9% rate, to coffee and tea-based beverages was unlawful.
The same approach was followed in subsequent cases finally resolved to date, confirming that the disputed interpretation was not an isolated assessment issue, but reflected an administrative practice that could not be upheld within the limits of the applicable legal framework.
The consequences of the judgments were substantial for the firm’s clients. Once the tax claims were annulled, the taxpayers were restored to their previous legal position, and the amounts already paid became subject to restitution, together with the related interest. The rulings therefore reversed not only the legal position adopted by the tax authority, but also the economic effect of that interpretation on the companies concerned.
“Tax obligations cannot be created or extended through administrative interpretation. Where the law is ambiguous, the taxpayer cannot be penalised for adopting a reasonable and legally grounded interpretation, especially in respect of transactions already completed,” stated Bogdan Blaj, Blaj Law founder and managing partner.
Broader Implications for Taxpayers in Romania
The VAT disputes handled by Blaj Law arise in a broader fiscal context in which companies operating in Romania have faced frequent legislative amendments, increased tax burdens and inconsistent administrative practice. Romania has been undergoing an accelerated fiscal adjustment, under the pressure of major budget deficits. In recent years, the fiscal framework has been amended repeatedly, including through increases in tax rates, restrictions on preferential tax regimes, changes to reduced VAT rates, amendments to the taxation of dividends and other measures aimed at consolidating public finances and increasing budget revenues.
For companies, however, the effect goes beyond a higher tax burden. Higher taxation is a challenge that businesses may incorporate into their financial planning where the rules are clear, stable and applied consistently. A more difficult risk arises where rules are amended rapidly, their scope is unclear, secondary legislation or implementation guidance is delayed, and administrative practice varies from one period to another or from one taxpayer to another.
As an EU Member State and one of the largest markets in Central and Eastern Europe, Romania remains an important jurisdiction for cross-border investment, manufacturing, retail, energy, technology, transport and services. However, companies operating in Romania must increasingly assess not only the content of fiscal legislation, but also the risk that such legislation may later be interpreted by the tax administration in a stricter or more burdensome manner.
The central question for taxpayers is therefore not only what the law provides at a given moment, but whether the interpretation adopted in good faith at the time of the transaction will remain accepted, whether administrative practice will be applied consistently and whether the tax authority may subsequently reassess completed transactions on the basis of a different interpretation.
In this context, the final rulings obtained by Blaj Law are significant because they confirm the role of judicial review as a safeguard against unlawful or excessive administrative interpretation. Courts do not replace the legislature and do not deny the State’s right to collect taxes. However, they have the authority and obligation to verify whether a tax act was issued in compliance with the law, whether the authority’s interpretation has a valid legal basis and whether the obligation imposed on the taxpayer is lawful and justified.
The experience of Blaj Law in the VAT on coffee litigation shows that an administrative tax interpretation in Romania may be successfully challenged where it lacks sufficient legal basis. For companies, the practical conclusion is that in an unstable fiscal climate, legal defense is a necessary component of tax risk management.
About Blaj Law
Blaj Law is a Romanian law firm advising local and international clients on complex legal matters involving dispute resolution, tax and administrative litigation, corporate, commercial law and regulatory issues. The firm combines courtroom experience with strategic legal consultancy, assisting companies in preventing, managing and resolving disputes with public authorities, commercial partners and other stakeholders. Its work includes analysing and challenging tax and administrative acts, representing clients before Romanian courts, advising on regulatory and commercial risks, and managing cases in which the interpretation of legal rules may have significant economic effects on business operations.