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AMENDMENTS TO THE LOCAL TAXES AND CHARGES ACT EFFECTIVE AS OF 1 JANUARY 2015

AMENDMENTS TO THE LOCAL TAXES AND CHARGES ACT EFFECTIVE AS OF 1 JANUARY 2015

In State Gazette No 105 from 19 December 2014 is promulgated Law for Amendment and Supplementation of the Value Added Tax Act. With the Law for Amendment and Supplementation have been adopted amendments to all of the tax acts, including to the Local Taxes and Charges Act (LTCA).

The amendments to LTCA enter into force as of 1 January 2015 and could generally be presented as follows:

1. The regime for declaring and determination of the vehicles tax has been amended

Until 31 December 2014 the taxable persons have been obliged to submit a tax declaration upon acquisition of vehicles and based on the information included therein the municipal authorities determined their liabilities for vehicles tax. The municipal authorities did not have the obligation to announce the so determined tax liabilities. This regime for declaring and determination of tax liabilities has been burdensome and incurring additional administrative expenses for the business, individuals and municipalities. There were conditions for performing violations by the taxable persons related to non-fulfillment of the obligations for declaring and payment of vehicles tax. In addition, there were conditions for double payment of the tax, in case the sale of the respective vehicle has not been declared and due to the lack of electronic exchange of information between the municipalities and the bodies of the Ministry of Interior (MI) about the registered vehicles.

As of 1 January 2015 amendments to LTCA enter into force, directed from one side to decrease the administrative burden and the expenses of the business, individuals and municipalities and to the other side – to increase the revenue of the municipalities by means of limiting the opportunities for non-declaring the acquired vehicles and for tax evasion.

The basic amendments could be summarized as follows:

a) The amount of the vehicles tax would be determined by the municipal authorities based on data from the register on vehicles kept by MI and would be announced to the taxable persons (new para 1 to Art. 54 of LTCA).

b) Tax declarations for acquisition of vehicles would be submitted only in particularly determined cases (Art. 54, para 3 and 4 of the Law), namely:

  • When the vehicle is acquired as a heritage;

  • When the vehicle is owned by more than one person;

  • When the owner/ owners of the vehicle does not/ do not permanent address, respectively a registered place on the territory of the country;

  • Upon existence of grounds for claiming the right for tax exemption;

  • When there are grounds for using tax relieves (with some exceptions of tax relieves in the case that there is data in the register on vehicles of MI for the eco category of the vehicle).

c) Electric motorcycles and mopeds are added to the vehicles that are tax exempt (supplementation to Art. 58, para 2 of LTCA).

d) Electronic services for automatic exchange of information between MI, Ministry of Finance (MoF) and the municipalities are introduced for the registered, deregistered and suspended from movement vehicles (commented in more details in point 4 below).

2. Tax declarations under LTCA would also be submitted electronically

As of 1 January 2015 taxable persons will have the opportunity to apply the regulation stipulated in the Tax and Social Security Proceedings Code and to submit their tax declarations under LTCA electronically (new para 2 of Art. 3 of LTCA) which will facilitate the fulfillment of their obligations for declaring under LTCA.

3. The deadlines for approval of a new procedure for determining of garbage charge (GC) are extended

There is a new deadline (until 30 March 2015) within which the Council of Ministers and the National Association of Municipalities in the Republic of Bulgaria shall:

  • Develop a methodology for preparation of a plan-scheme including the expenses necessary for the performance of the activities on garbage collection, transportation to depots, neutralization etc., and for the types of bases that to be used for determining of the amount of garbage charge;

  • Submit a project for amendment of the provisions settling the determination of the amount of garbage charge (Art. 66 and Art. 67 of LTCA).

As a result there has been extended the initial moment after which the provision of Art 67, para 2 of LTCA shall enters into force. This provision sets out that if the quantity of the garbage cannot be estimated, the amount of the garbage charge shall be determined in BGN per consumer or proportionally on a base, defined by the Municipal Council. The base cannot be the tax evaluation of the real estates, their carrying amount or their market price. The new procedure shall enter into force as of 1 January 2016.

In 2015 the procedures effective till now for determining of garbage charge shall be applied, namely the garbage charge shall be determined on the basis of the declared book value of the real estates or according to the quantity of garbage when the use of garbage containers is declared.

4. There has been introduced an electronic exchange of information between the municipalities and MoF aiming to establish a national data base for local taxes and charges

a) With the new provision of Art 5a of LTCA has been introduced an obligation of municipalities to provide electronically to MoF daily information about the taxable persons subject to taxation with local taxes and charges, tax evaluations, tax reliefs and exemptions from tax according to the law, the amount of the obligations by types of taxes and charges, payments and outstanding liabilities etc.;

b) In connection with the new procedure for determining of the vehicles tax commented in p. 1 above, the following exchange of information has been regulated:

  • A new obligation of MoF has been introduced to provide automatically or electronically on a monthly basis to the respective municipality the data containing in the register on vehicles, maintained on a daily basis by MI (new para 2 of Art. 54 of LTCA);

  • The obligation of the MI to provide daily to MoF information about the registered, deregistered and suspended from movement vehicles has been preserved.

The introduction of an automatic exchange of information between MI, MoF and the municipalities shall contribute to the establishment of a national data base for local taxes and charges, which will facilitate the administration of the tax liabilities by the municipal authorities and will lead to reducing the expenses of taxable persons for declaring, checking and  payment of the outstanding amounts for local taxes and charges.

5. Other

a) It is introduced by an explicit requirement that the real estate tax (RET) determined by the municipality authorities shall be announced to the persons until 1 March of the year for which it has been determined (supplementation to Art. 19, para 1 of LTCA);

b) The deadlines for making of the second payment for the real estate tax and the vehicles tax have been clarified (Art. 28, para 1 of LTCA) – till 31 October (before: till 30 October);

c) The new para 4 of Art. 49 of LTCA refers to circumstances under which a declaration shall not be submitted (e.g. for received and made donations by non-profit legal entities for performing of socially useful activity; when the property was donated by lineal relatives or between husband and wife; if contributions in kind has been made to the capital of an entity).