AMENDMENTS TO FIVE TAX LAWS APPROVED

Views on BG | November 1, 2001, Thursday // 00:00

BTA

At an extraordinary meeting on October 31, the Government approved the 2002 national budget bill and a package of amendments to the tax laws concerning corporate income tax, local taxes and charges, VAT, personal income tax and excise duty. Under the amendments, all companies will pay a profit tax of 15 per cent, down from 20 per cent. At the moment, the 15 per cent rate is applicable only to companies with an annual profit of less than 50,000 leva (1 lev exchanges for 1 Deutsche mark).

The amendments concerning indirect taxes envisage a shortening of the period for refunding VAT from four to three months.Approving the bill amending the Value Added Tax Act, the Cabinet proposes to set the rate of VAT charged on tourist packages sold by tour operators abroad at 7 per cent, instead of 10 per cent as initially suggested, Finance Minister Milen Velchev said.

A special regime will be introduced for tourist packages sold abroad. Tour operators will pay VAT on the difference between the cost price and the profit margin of a tourist service and will have the right to a tax credit amounting to 65 per cent from the payment they have made when forming the package of services.

Stoyan Markov, Director of Tax Policy Department with the Finance Ministry, said that the changes in the Personal income Tax concern the applicable tax rates from 20, 26, 32 and 38 per cent they become 18, 24, 28 and 29 per cent. The taxable minimum income is increased from 100 to 110 leva. One of the reasons for the reduction in tax rates is that the people making more than 1,000 leva a month - who are potential investors - be left a tax-free amount of money which they can invest in their line of business. The amendment concerns mainly free-lancers and single traders.

The amendments to the Excise Duty Act envisage to charge all types of beer with the same excise duty rate which will be a bit increased, so that a bottle of beer is expected to be about 0.03 leva more expensive, Markov said. One of the elements used to form the excise duty paid on cigarettes - the one presented as a percentage of the sale price of a box of cigarettes, will be increased from 30 to 40 per cent for filter cigarettes, and from 10 to 15 for non-filter cigarettes. According to Finance Minister Velchev, this will result in a 10 per cent rise in the sale price of filter cigarettes, and a 5 per cent rise in the price of non-filter ones. The excise duty charged on coffee will remain unchanged but the excise duty stamps will be mandatory for packaged coffee and it will not be sold in bulk. "This is not expected to lead to an increase in coffee prices," Velchev said.

An excise duty of 180 leva/t will be introduced for propane-butane. The retail price of the gas is expected to be maximum 0.10 leva higher. There will be no rise in the excise duty payable on alcohol.

VAT will be levied on Bulgarian medicines. So far, VAT has been levied on part of the imported components of Bulgarian medicines. As a result, the cost price and the prices of medicines are expected to go up by 5 or 6 per cent. Deputy Finance Minister Kiril Ananiev, added that the price increase will not affect the people using life-supporting or life-saving medicines because their price is covered by the Ministry of Health and the National Health Insurance Fund, and the budget compensates the introduction of VAT.

A 20 per cent one-time tax will be introduced as from 2002 on voluntary pension, social security and health insurance contributions. It will be payable on withdrawing the whole insurance amount. According to Velchev, this is done so that the money stay in the respective funds for a longer time.

For the time being, no VAT will be charged on legal services. Provisions for its introduction will probably be made in a bill amending the law on the bar.

The property tax will remain unchanged but the assessed value of housing property will be increased by an average of 60 per cent, Markov said. Licence taxes will rise by an average of 30 or 40 per cent, which is less than the 1997 cumulative inflation when the licence tax was last increased, Velchev said. Cigarette and alcohol traders will pay an additional fee. Besides the fee they pay on being granted a licence for their business, they will pay an annual fee for having the licence renewed.

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