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Bulgaria votes tax breaks for major investors and married couples with mortgages

Thursday, Dec 04, 2008

Bulgaria's Parliament handed tax breaks to young married couples with mortgages and to major investors, left value-added tax (VAT) on foods, medicines and books unchanged at 20 per cent, and hit smokers with higher excises on cigarettes.

The moves were approved in voting on the second reading of various tax-related items of legislation on December 2 2008.

To be eligible for an effective 10 per cent discount on mortgage interest, at least one of the spouses must be younger than 35, the couple should own only one home, and the mortgage should be for a sum no higher than 100 000 leva. The change takes place through amendments to the Income Tax on Natural Persons Act.

Parliament voted to allow companies that invest 10 million leva in the Bulgarian economy in one year or 50 million leva over a five-year period to defer their corporate tax payments for a period of five years. The corporate tax rate was left unchanged at 10 per cent.

VAT on food, medicines and books was left unchanged at 20 per cent after an opposition proposal to reduce the rate to 18 per cent, with a differentiated seven per cent rate for medicines and books, was turned down.

Bulgarian news agency Focus reported that MPs decided to reject a requirement that VAT invoices have handwritten signatures. The requirement for name and surname was kept in place. According to the amendments, VAT returns and tax credits may be done without introducing an invoice, but only with another tax document, which proves the purchase of certain goods.

Amendments to the Excise Duty and Tax Warehouses Act that will come into effect as of January 1 2009 provide for the excise duty on cigarettes to be increased from 37 leva a 1000 pieces plus 35 per cent of the retail price to 40.50 leva a 1000 pieces plus 42 per cent of the retail price.

The online English-language version of Dnevnik daily reported on December 3 2008 that British American Tobacco (BAT) had called for predictable state policy on excise duties.

BAT executive director Petya Petkova said that it was harmful to market players that legislative frameworks should be only in force for a year and excise duties changed at the last minute.

Tobacco company Philip Morris said that raising the percentage component would go against European practices while increasing the other part would affect all market players equally.

A BAT survey revealed that Bulgarians buy some of the costliest cigarette brands compared to their income.

Taxes form about 70 per cent of the price of cigarettes while producers got only 20 per cent, the company said.

Source: Sofiaecho.com