The Minister of Finance of Bulgaria, Lyudmila Petkova, has proposed a unique initiative to increase the state’s revenue. Companies that wish to take advantage of the tax amnesty and pay their delayed obligations to the state without penalties can do so by borrowing from the Bulgarian Development Bank (BDB). The bank will create a special credit line for this purpose, as reported by the Bulgarian news website “Sega”. The three key draft budgets – the state budget, the budget for the National Health Insurance Fund, and the budget for the State Social Security Fund – were approved by the Council of Ministers.
Petkova expects the tax amnesty to have the most significant impact on revenue, with the Ministry of Finance anticipating 5.51 billion BGN annually. The tax amnesty, as proposed in the 2025 budget, will apply to individuals, companies, state institutions, and municipalities that have overdue public liabilities (taxes and social security contributions) from 2019 to the end of 2023. Citizens can settle these liabilities without interest if they do so between March 1 and June 30, 2025. If the settlement occurs between July 1 and September 30, 2025, 90% of the accrued interest will be waived, and if it happens by the end of 2025, 80% of the interest will be waived.
In addition, individuals can voluntary declare previously undeclared income, subject to a 15% tax, without facing penalties or criminal charges. They have until June 30, 2025, to declare the income and pay the tax by September 30, 2025. The Ministry of Finance anticipates receiving 750 million BGN from this measure and approximately 4 billion BGN from the waiving of interest on overdue taxes and social security contributions.
Minister Petkova has also stated that the Financial Action Task Force (FATF) will be informed to ensure that criminal capital does not benefit from the amnesty. The Ministry of Finance primarily expects additional revenue from companies that have not been paying taxes and social security contributions. The ministry plans to increase the capital of the Bulgarian Development Bank by 2 billion BGN to help these companies settle their overdue liabilities through loans from the bank.
The situation raises questions, as it is unclear where the Ministry of Finance will obtain the 2 billion BGN to deposit into the Bulgarian Development Bank. The minister acknowledged that the state will issue debt to provide the funds to the state-owned bank to lend to struggling companies to pay off their debts.
Title: Petel.bg – News: "Shift" All with Levs Under the Mattress: "Transfer" Them Legally with a 15% Tax
Introduction
In Bulgaria, the use of cash has been a longstanding tradition, with many people preferring to keep their savings at home rather than in banks. However, the Bulgarian National Revenue Agency (NRA) has recently introduced a legal way to "shift" these funds, often referred to as "levs under the mattress," into the formal economy with a 15% tax rate. This initiative, reported by Petel.bg, aims to boost the country’s economy and combat the shadow economy.
The Initiative
The NRA’s initiative, dubbed "Shift," allows individuals to declare their cash savings and pay a one-time tax of 15%. This tax rate is significantly lower than the standard income tax rates in Bulgaria, which can reach up to 30% for high-income individuals. The initiative is open to all Bulgarian citizens and residents, regardless of their previous tax compliance status.
How It Works
To participate in the "Shift" initiative, individuals need to follow these steps:
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Declaration: They must declare their cash savings to the NRA, specifying the amount and the source of the funds. The declaration can be submitted online through the NRA’s website or at any local tax office.
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Tax Payment: Once the declaration is submitted, the individual pays a 15% tax on the declared amount. The tax can be paid in cash or through a bank transfer.
- Legalization: After the tax is paid, the cash is considered legalized, and the individual can use it freely without fear of prosecution.
Benefits and Impact
The "Shift" initiative offers several benefits:
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Economic Boost: By shifting cash from the shadow economy into the formal economy, the initiative is expected to boost Bulgaria’s GDP and stimulate economic growth.
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Increased Tax Revenue: The 15% tax rate, while lower than standard rates, is still a significant increase in tax revenue for the Bulgarian government.
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Legalization of Funds: The initiative allows individuals to legalize their cash savings, protecting them from potential loss or seizure.
- Encouragement of Bank Deposits: The initiative may also encourage individuals to deposit their cash in banks, further stimulating the financial sector.
Challenges and Criticism
While the "Shift" initiative has been praised for its potential economic benefits, it has also faced criticism:
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Potential Abuse: Critics argue that the initiative could be abused by individuals seeking to legalize ill-gotten gains.
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Low Tax Rate: Some argue that the 15% tax rate is too low and could encourage tax evasion in the future.
- Lack of Anonymity: The requirement to declare the source of funds may deter some individuals from participating.
Conclusion
The "Shift" initiative, as reported by Petel.bg, is a novel approach by the Bulgarian government to combat the shadow economy and boost the country’s economy. While it faces challenges and criticism, the initiative offers a legal way for individuals to shift their cash savings into the formal economy with a relatively low tax rate. As the initiative unfolds, its success will depend on factors such as public participation, enforcement, and potential policy adjustments.
