The tourist tax that was introduced in Bulgaria in April 2011 is unconstitutional, the Bulgarian Constitutional Court has ruled.

The Court made the ruling on April 5 but it was not made public until Monday, April 9, when it was announced on the institution's website.

The probe into the legality of the controversial tourist tax had been launched at the request of 61 Members of Parliament from the opposition Bulgarian Socialist Party and the rightist Democrats for Strong Bulgaria Party.

Under the amendments of the Local Taxes and Fees Act last April, the tourist tax replaced the local tourist fees that hotel owners used to pay per night stay; the new tax was estimated on the annual occupancy of the hotels and other accommodation establishment but set a minimum threshold of a 30% occupancy rate, that is, assuming that any hotel got at least a 30% occupancy in a given year, unless the reported occupancy rate was higher.

The rationale of the new tourist tax was the fact that it was widely believed that hotel owners misreported the number of hotel stays they got in order to pay lower fees under the previous taxation method.

However, hotel owners have revolted against the new tax alleging that hotels that provide seasonal accommodation have no way of reaching even the minimum threshold of a 30% annual occupancy rate on which the tourist tax is estimated.

The opposition MPs declared in their request to the Constitutional Court that the new tax in fact taxes the number of hotel beds, rather than the actual number of hotel stays in a given year.

This, the MPs argued, means that the tourist tax, which is supposed to be an income tax, has been turned into a property tax, with this mixing of the two taxation concepts "contradicting the rule of law principle in the Bulgarian Constitution." The new tax is also said to be in violation of the principle that taxation must take into account the actual income.

In its ruling, the Bulgarian Constitutional Court has agreed with the arguments of the opposition MPs, stating that it is the number of night stays that need to be taxed, while the minimum 30% occupancy rate threshold turns the tourist tax into a property tax.

This contradicts the Constitution in its requirement that income and property taxes be clearly differentiated, the judges have ruled. They have also based their ruling on a 1996 case in which the same court ruled that the two type of taxes mentioned above cannot be mixed in Bulgarian legislation.

Two of the 12 judges of the Bulgarian Constitutional Court have signed the ruling against the tourist tax with reservations.

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