New Deposit Tax Comes into Effect in Bulgaria

A new and controversial 10% levy on people's interest earned from bank deposits comes into force in Bulgaria from January 1, 2013.

Bulgarians will be obliged to include the income on bank deposits in their tax declarations a year later – in 2014 – after the taxation process is streamlined.

The so-called termless deposits, saving accounts, child savings and current accounts will not be taxed.

The banks will be responsible for declaring the tax while only those who file written declarations with the National Revenue Agency, NRA, will be mandated to file declarations on tax from deposits. Taxation on interest earned from deposits will be done at the time it is paid, even if the account was opened in 2013.

The tax was proposed by Finance Minister, Simeon Djankov and slammed by the opposition, who voiced concerns that the new tax will affect mainly people with small savings and retirees.

Economists and the central bank have also opposed the government's decision to introduce a 10% tax on bank deposit income, saying this would dent people's savings and shake the bank system foundations due to capital outflow.

The government says the new tax aims to raise BGN 120 M and force richer people to pay taxes on the income they earn from bank deposits.

Banks in Bulgaria continue to record steady growth in savings, a trend which has been gaining momentum throughout last year, but breakdowns show that the increase is due to mainly companies and only slim percent of the private savers.