Bulgaria: Constitutional Court revokes the unified account for tax payments
International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX
Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Bulgaria: Constitutional Court revokes the unified account for tax payments

koleva.jpg

Rossitza Koleva

The amendments in the legislation in 2012 which resulted in the inability of physical persons and legal entities to specify which of their obligations towards the tax authorities they pay off contradict the Constitution. This is formulated in a decision of the Constitutional Court from February 5 2014. This decision practically revokes the principle of functioning of the unified tax-insurance account which was established during the GERB government with the idea to minimise bureaucracy. As a consequence, from the beginning of 2013 each payment done by physical persons and legal entities towards the state effectively meant paying off the oldest obligation, regardless of whether it was for taxes or contributions. As these two payments have different legal bases, they also have different legal consequences. The insurance contributions do not have the character of a tax since, when paid, the insured receives the right to be covered by social and health insurance (which is guaranteed by the Constitution), while taxes are due state receivables. According to the Constitutional Court right now the payments of the tax payers enter a single account, without being classified by tax type and insurance installments.

With this ruling of the Constitutional Court, another amendment is considered as contradictory to the Constitution, that is the amendment which ruled out the obligation of the National Revenue Agency to transfer the incomes from contributions in the relevant accounts of the National Insurance Institute and the Health Fund, by the end of each working day. According to the analysts, the lack of separation between contributions and tax revenues creates a certain risk that these funds are not used for the purpose for which they were paid. This results in conditions allowing for the possible violation of the constitutional rights of citizens to social and health security.

Two options are being discussed as solutions. The first option is the unified account to be divided into four separate accounts – one each for state taxes, for social security contributions, additional obligatory pension fund and health contributions. In all four of them the first to be paid off is the oldest by date. The second option discussed is to have one account but with four different codes for each type of payment.

Rossitza Koleva (rossitza.koleva@eurofast.eu)

Eurofast Global, Sofia Office

Tel: +359 2 988 69 78

Website: www.eurofast.eu

more across site & bottom lb ros

More from across our site

New requirements for advisers to inform clients of any relevant matters that might impact their relationship have raised concerns from a raft of professional bodies
The fallout from PwC China’s Evergrande audit has reportedly hit the firm hard; in other news, the US and Turkey look to reform their corporate tax rates
Canada risks inflaming US trade relations in a presidential election year and increasing costs for consumers, according to local experts
Dudbridge, ForrestBrown director and head of its advisory practice, FB Consulting, tells ITR about the joys of tax advisory work, what he finds most exciting about the role and what makes tax cool
A UK court rejected Tills Plus’s claim for R&D tax credits due to a lack of technological advancement
View the Social Impact EMEA Awards 2024 shortlist and join us on September 12 at The Waldorf Hotel in London
The announcement is due to be made during the country’s Union Budget statement next week, according to reports
Around 30 roles are to be cut as the firm’s tax controversy and disputes practice will be incorporated into its tax division
The Labour Party has made ambitious commitments to close the UK’s ‘tax gap’, but how can they do it, and what will it mean for business?
The refreshed leadership team does not include Paddy Carney, who previously made headlines for her dual role on PwC Australia’s and PwC International’s boards
Gift this article