November 2010

Tax & Legal

Alert
Ernst & Young Bulgaria

Our normal Tax Alert has been broadened to include a number of legal
topics. Ernst & Young provides a range of business legal services in
Bulgaria, as well as tax litigation services, through the Ernst & Young Law
Partnership. Please share this newsletter with any colleagues who may be
interested in legal matters covered here.

Contents
• Tax audit activity leads to increased
tax collections
• The role of the European Court of
Justice (ECJ) in tax disputes
• Other news
Tax audit activity leads to
increased tax collections
After reporting a very poor start to the year
for tax collections (which was reported
in our May Alert), the National Revenue
Agency has recently announced that it now
expects to achieve its planned target of
BGN 11,931 billion by the end of the year.
To some extent, this is due to delays in
making VAT refunds, increased tax audit
activity and reassessment of tax liabilities.
Some of the tax audit activity is resulting
in tax demands which are not properly
justified - improving cash tax collections
rather than always implementing correctly
the law. Inevitably, this kind of approach is
leading to an increase in appeals and tax
litigation. Already in 2009, 15% of cases
coming before the Bulgarian administrative
courts were related to tax matters with
a further 3% relating to social security
contribution issues and this seems set to
increase.
The role of the European Court of
Justice (ECJ) in tax disputes
Disputes which involve issues of European
Law may (and sometimes must) be
referred by a national court to the ECJ for
a ruling. As disputes coming before the
Bulgarian courts start to involve matters
which arose after the EU accession in 2007,
we are beginning to see Bulgarian matters
being referred to the ECJ. We expect even
more claims that Bulgaria is contravening
requirements of European law resulting
from the current tax audit strategy.
ECJ jurisprudence, particularly on indirect
tax matters, should be considered when
dealing with domestic tax disputes. For
example, a recent decision of the ECJ
has already led to specific implementing
measures - the Bulgarian Ministry of
Finance has proposed refunds of overpaid
excise duties on used vehicles.
In another recent case, where Ernst &
Young represented the taxpayer, the ECJ
decided that restrictions on the recovery
of VAT paid before the VAT registration
contradict EU law. This win opens the way to
taxpayers across the EU to claim refunds of
unrecovered pre-registration VAT.
 Ernst & Young

Assurance | Tax | Transactions | Advisory

Other news About Ernst & Young

Ernst & Young is a global leader in
• The Constitutional Court has lifted the restriction on use of any paid vacation entitlement assurance, tax, transaction and advisory
accumulated before 1 January 2010. The two-year limitation period to claim paid services. Worldwide, our 141,000 people
vacation entitlement accruing from 2010 remains. The Bulgarian labor authorities have are united by our shared values and an
unwavering commitment to quality. We
already started inspecting companies for compliance with the labor rules, looking closely
make a difference by helping our people, our
at the implementation of the 2010 amendments. clients and our wider communities achieve
• The Government has submitted to the Parliament proposals for amendments to the their potential.
corporate laws, among which: Ernst & Young refers to the global
organization of member firms of Ernst &
−− Extension of the term for re-registration of companies in the Commercial Register from Young Global Limited, each of which is a
31 December 2010 to 30 June 2011 separate legal entity. Ernst & Young Global
Limited, a UK company limited by guarantee,
−− Registration of companies and deeds to take up to three business days
does not provide services to clients. For
−− New rules for keeping registers of shareholders, requiring identification of all more information about our organization,
please visit www.ey.com
shareholders and the registration of changes in the shareholding
If you would like to include anyone from your
−− Requirement to present updated shareholders’ lists to the Commercial Register organization to our newsletter
• Amendments to the Privatization and Post-Privatization Control Act, according to which mailing list, or would like your name to
be removed from the list of recipients,
the Privatization Agency will be entitled to sell state property with a tax value exceeding
please reply to our e-mail address
BGN 10,000, came into force on 1 November 2010. District governors are allowed to sell (EYTaxNewsletter@bg.ey.com), or fax:
property below this threshold. +359 2 817 7111.
• The Insurance Premium Tax Act introducing a 2% tax on insurance contracts as of For more information, please contact:
1 January 2011 has been promulgated in the State Gazette. Laszlo Szakal
• Refund of VAT paid in 2009 in other EU Member States may be claimed up to Tel: +359 2 817 7141
laszlo.szakal@bg.ey.com
31 March 2011.
Trevor Link
• As of 1 January 2011, the threshold for Intrastat reporting is reduced to BGN 180 000 Tel: +359 2 817 7301
for arrivals and to BGN 200 000 for dispatches. The threshold for reporting the statistical trevor.link@bg.ey.com
value of the goods is BGN 3,4 million for arrivals and BGN 7,5 million for dispatches.
Evguenia Tzenova
• Amendments to the Common Customs Tariff will enter into force on 1 January 2011. Tel: +359 2 817 7143
evguenia.tzenova@ey.bg.com
• The EU and South Korea signed a Free Trade Agreement reducing the tariff and
Julian Mihov
administrative burdens on trade between them. It is expected to come into effect on
Tel: +359 2 817 7142
1 July 2011. julian.mihov@bg.ey.com
Milen Raikov
Tel: +359 2 817 7155
milen.raikov@bg.ey.com
Nevena Kovacheva
Tel: +359 2 817 7146
nevena.kovacheva@bg.ey.com

© 2010 Ernst & Young Bulgaria EOOD

All Rights Reserved.
This publication contains information in summary form
and is therefore intended for general guidance only. It is
not intended to be a substitute for detailed research or
the exercise of professional judgment. Neither Ernst &
Young Bulgaria nor any other member of the global Ernst
& Young organization can accept any responsibility for
loss occasioned to any person acting or refraining from
action as a result of any material in this publication. On
any specific matter, reference should be made to the
appropriate advisor.

Tax & Legal Alert Ernst & Young Bulgaria 2