When implementing the System for avoidance of double taxation these tax liabilities can be reduced. They are not taxed with withholding tax income from dividends and liquidation shares in favor of companies that are resident for tax purposes in the European Union.

The tax rate is 5% for income from interest and royalties received by local legal entities categorized as such within the European Economic Community /in the general case it is 10%/.

What did the CPC find regarding the regulation of liberal professions and what is the economic theory and logic:

1) The CPC recommends removing the possibility of setting minimum prices of services in a number of professions, as "the fixing of minimum prices constitutes one of the most serious distortions of competition, as it limits price competition between market participants. Minimum prices can in no way be a guarantee of quality. Their effect is to protect inefficient market participants."

Price regulations (minimum, maximum, fixed service prices) are found in almost all of them free professions. This is unacceptable in a market economy and harms the users of all such services by artificially creating higher prices and the impossibility of "market punishment" for the provision of poor quality service. Additionally, such requirements can create a gray market.

2) According to the CPC, whenthe mandatory membership in a professional organization "not necessary, professionals should be able to choose which professional organization to join (architects, engineers, vets). Where possible, certain functions should not be concentrated in one organization.”

The creation of chambers, which in their nature are quasi-state structures and which actually determine who is legally competent and can provide the services, creates serious prerequisites for cartelization, the emergence of a gray sector and the limitation of market mechanisms to control the quality of the service. Moreover, the practitioners are obliged to pay membership fees, participate in the trainings of the respective chamber and pass the exams organized by it. In practice, it is the Chambers, not the users, who determine who will provide what service.

In general, the CPC's efforts to observe effective competition in the regulated professions are commendable. Economic theory and empiricism, as well as sound logic, clearly show that heavy regulation of these professions harms both consumers (through higher prices and poorer quality services and generally more limited competition) as well as those providing and seeking to provide the service themselves (by closing the entrance to the profession, unreasonable obstacles to business, unnecessary requirements). At the moment, the situation does not look promising, and EC reports show that the free professions in Bulgaria are one of the most regulated in the EU. In addition, in recent years several representatives of other guilds have also demanded regulation of their professions – there have even been bills for brokers and industrial property representatives.

The question now is how the CPC analysis will be used, and whether at last liberal professions will become truly free and no similar regulation of other professions will be allowed.

There is no longer a deadline to buy a missing one insurance experience for a pension, announced the National Social Security Institute. The regulatory deadline for this expired in 2015, but this restriction has been lifted. The missing months or several years to acquire the right to a pension can be purchased by applicants, even if they live abroad.

In Art. 9a of The Social Security Code the possibilities to purchase are regulated insurance experience. They are two:

One gives the persons the right to purchase the time of their studies for completed higher and semi-higher education, but for a period not longer than the period of study provided for in the curriculum of the completed specialty. Individuals can do this at any time.

The other option is when the person meets the conditions under Art. 68 for retirement and lacks seniority. Then he can buy up to 5 years. insurance experience to acquire the right to a pension for insurance service and age according to the general rules. This cannot be done before the applicant fulfills the retirement conditions. The purchased experience can only be used for retirement, not for other insurance cases.

Lacking insurance experience to acquire the right to a pension can be purchased even if the candidate-pensioner lives abroad. However, for this it is necessary that the country in which it is located has concluded an international agreement in the field of social security with Bulgaria.

A new type of declaration of 1 page has also been developed, which will be submitted by people with minimum incomes who want to use the tax relief and to refund the tax collected in advance in 2014.

And in the revised version of the declaration, the attachments to it for the type of non-labor income received remain. The templates that concern the taxation of companies under the Law on Corporate Income Taxation have also been revised.

The proposal expressly regulates the exemption of legal entities with a non-profit purpose for public benefit, registered in the Central Register, from the obligation to submit declarations for donations received and provided. The text of the proposal for a change in the ZMDT reads:

In Art. 49 is created para. 4:

"(4) Declaration under para. 3 shall not be submitted in the cases under Art. 44, para. 5 and 6 and Art. 48, para. 1, items 5, 6, 8 and 9, as well as for donations received and provided by non-profit legal entities registered in the Central Register of non-profit legal entities for the implementation of public service activities."

The change in the ZMDT is the result of the efforts of the Bulgarian Center for Non-Profit Law and the Bulgarian Donor Forum to show the need to drop this obligation.

Their identity will be authenticated only with a personal identification code (PIC), which is issued free of charge by NAA, Vladislav Goranov also announced, presenting the package of tax changes voted yesterday by the cabinet. Among the approved changes are amendments to the Tax Insurance Procedural Code, which facilitate the use of the online service of NAA.

And at the moment, nearly 140,000 natural persons have been issued a PIK, regularly using the code for checks their employment contracts and the transferred insurances. An application for obtaining a PIK can be made at any office of NAA, but its receipt is at an office at the place of residence. The application form is available on the website of the National Revenue Agency. 

At the moment, it is impossible to submit declarations with only PIK, without an electronic signature, and this is one of the explanations for the low percentage of submitted online declarations - 14% for 2014.


source: c. NOW

Many economists and businesses supported this tax reform, as it was associated not only with the unification of rates, but also with a significant reduction in direct taxes. Just a year after the introduction of the flat tax however, the country's economy went into recession. According to everyone, the global financial crisis was to blame. Over the next few years, the economy continued to stagnate without registering a rapid recovery from the recession. The crisis in the Eurozone must be to blame for this.

However, the facts show a completely different picture. In 2010, when the eurozone crisis began, Bulgaria's exports to the European Union grew by 25%, and in 2011 they increased by another 34%, according to NSI data. It is obvious that the effect of the Eurozone crisis on the Bulgarian economy was minimal, if any. This is because the production of Bulgarian enterprises is well integrated in the process of processing products in Europe. In 2012, there was a decrease in exports to the EU by 3.6%, but such a correction is normal after the strong increase of the previous years and in view of the negative effects of public spending savings in the countries of the monetary union, which led to an increase in unemployment and eroded household spending power.

The effect of the European crisis can be found in the sharp drop in investments. Gross capital formation in fixed capital has decreased every year since 2008, when it reached 37% of Bulgaria's gross domestic product.

But investments are not decreasing because of external factors, but because of the contraction of consumer demand in the country. Companies invest somewhere because of the prospects for sales growth. If consumption falls, so does investment.

This is where the influence of the flat tax. To compensate for the decline in direct tax rates, the state has done much in the past few years to increase collections, but has also increased additional costs to businesses and consumers by raising the minimum wage, minimum insurance thresholds and the rates of health and pension payments .

Basically, the decrease of the taxes on profits and incomes is a stimulus for the economy in the short term. The reason is that lower rates on profits support investment and those on income support consumption and saving.

But in the medium term, the multiplier effect of these measures decreases. Thus, some phenomena can be easily explained. The flat tax it was certainly one of the reasons why the crisis in Bulgaria came a year later and for the large influx of investments in 2008.

In the following years, however, it was one of the reasons for the stagnation of the economy. Why? Essentially the flat tax is regressive, i.e. its relative burden on lower-income households and companies is greater than on those in higher ones. Thus, the fiscal policy of the state became one of the factors that led to the growth of poverty in Bulgaria and to the bankruptcies of small and medium-sized enterprises, which in turn caused the growth of unemployment and the decline of consumer demand. At the same time, household savings grew to record levels, exceeding BGN 35 billion, because the low direct taxes do not stimulate spending, at high rates on consumption.

Like the currency board is a rejection of monetary policy, as well the flat tax is a waiver of a fiscal one. The problem is that this way the state does not fulfill its role as an anti-cyclical factor. It does not counteract the negative trends in the domestic market, does not stimulate consumption, does not support small companies, which are the main engine for increasing employment. Instead, the government is teetering on the brink of a budget deficit, looking for ways to realize planned revenues and emptying the fiscal reserve.

Annually NAA issues over 1 million certificates of presence or lack of obligations, the majority of which serve for the information of other government bodies (for example, the requirement to enter into a contract for participation in public procurement procedures or the request for credit). Issuance of a paper certificate is associated with at least one visit to the agency's office, and if the taxpayer uses an electronic signature, then he will have to spend at least twice.

The new electronic service is now operational and enables state institutions to obtain the necessary information directly, electronically, from NAA, namely whether a company or a citizen has obligations to the budget.

The software does not specify other details, such as the amount or type of debt, if the company or individual has any, because that information is confidential by law, the press office of NAA.

Source: NSI

The growth of the economy in the third quarter it was entirely due to domestic investments and consumption, while after the minimal growth of exports in the previous two quarters, a decline in external sales was already reported in the third. Investments (gross formation of fixed capital) started to recover from the crisis as early as the last quarter of 2012, but the growth rate only strengthened from the end of last year to 4-5% per year. The third quarter of 2014 saw growth of 4.2% on an annual basis. The faster growth probably reflects the accelerated absorption of European funds since 2013, since a large part of the projects are precisely for the construction of engineering objects.  

Final consumption, in turn, grew by 1.4% in the third quarter after positive growth in the first two quarters, which was due both to increased government spending this year, as well as individual consumption. The latter has grown steadily this year, with part of the explanation lying in increased social payments in this year's budget and increased pensions from April last year (which contributed to annual final consumption growth of 3.3% in the first quarter of 2014) and from July year
 

Probably a bigger contributor to consumption growth this year, however, is the serious stir of the labor market, where for the first time since the beginning of the crisis we have witnessed significant net job creation. At the same time, in the third quarter, not only the number of employed people continues to grow seriously (by 49,000 people) compared to a year earlier, but the rate of increase also accelerates compared to the first half of the year. By comparison, 39,100 and 39,600 new jobs were created in the first and second quarters of 2014, respectively, compared to the same period in 2013. The explanation behind the stronger employment growth in the third quarter can be found in stronger creation on jobs in seasonal industries such as tourism and agriculture. The tourist season, based on advance bookings, was expected to be strong this year, which may have prompted managers to hire more labour. Ultimately, however, the results were disappointing, including the negative effect of prolonged rainfall and flooding, as well as the crisis in Ukraine, which reduced tourists from there. NSI data shows a smaller inflow of tourists this summer, and representatives of the sector share that their financial results are worse this year.

Perhaps it is worth noting here that while NSI's quarterly labor force data (which is a sample survey) shows steady employment growth this year, monthly employment data (based on declared contracts) shows steady decline, except for the month of July. The data on the employed do not include the self-employed and those working on civil, copyright, etc. under. contracts. Still, however, it is strange that there are none of the new 40-50 thousand jobs this year among those employed in labor and service relations, which suggests either a sharp growth of the shadow economy in labor relations this year, or a low quality/gaps in labor market statistics. By the way, AIC surveys on the gray economy show its continued contraction this year.

Another factor that has a positive impact on household consumption, is the ongoing deflation on an annual basis for more than a year now. Average annual deflation for the last 12 months to September was -1.6%. It is very likely that this trend of falling prices will be interrupted in October due to the increase in electricity prices for the regulated market (households and small businesses) by about 10%, which, apart from its direct effect, will automatically affect a number of other prices. Accordingly, final consumption in the last quarter will most likely be more conservative.

Overall, the performance of economy this year is better than the previous one despite political instability and another snap election in October. The export performance is disappointing, especially given the fact that a new EU recession has been avoided for now. At the same time, the best news comes from the labor market, which has traditionally been the slowest to respond to economic recovery and is another sign of the relatively healthy state of the economy right now. Given all this, our earlier forecasts for the growth of the Bulgarian economy of 1.2-1.3% this year seem too pessimistic, even if some slowdown in growth in the last quarter is taken into account. A more realistic forecast would see growth of around 1.5-1.6% this year, which is actually also written into the government's updated 2014 macro framework.

Source: Ime.bg