Bulgaria: Constitutional Court revokes the unified account for tax payments

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Bulgaria: Constitutional Court revokes the unified account for tax payments

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Rossitza Koleva

The amendments in the legislation in 2012 which resulted in the inability of physical persons and legal entities to specify which of their obligations towards the tax authorities they pay off contradict the Constitution. This is formulated in a decision of the Constitutional Court from February 5 2014. This decision practically revokes the principle of functioning of the unified tax-insurance account which was established during the GERB government with the idea to minimise bureaucracy. As a consequence, from the beginning of 2013 each payment done by physical persons and legal entities towards the state effectively meant paying off the oldest obligation, regardless of whether it was for taxes or contributions. As these two payments have different legal bases, they also have different legal consequences. The insurance contributions do not have the character of a tax since, when paid, the insured receives the right to be covered by social and health insurance (which is guaranteed by the Constitution), while taxes are due state receivables. According to the Constitutional Court right now the payments of the tax payers enter a single account, without being classified by tax type and insurance installments.

With this ruling of the Constitutional Court, another amendment is considered as contradictory to the Constitution, that is the amendment which ruled out the obligation of the National Revenue Agency to transfer the incomes from contributions in the relevant accounts of the National Insurance Institute and the Health Fund, by the end of each working day. According to the analysts, the lack of separation between contributions and tax revenues creates a certain risk that these funds are not used for the purpose for which they were paid. This results in conditions allowing for the possible violation of the constitutional rights of citizens to social and health security.

Two options are being discussed as solutions. The first option is the unified account to be divided into four separate accounts – one each for state taxes, for social security contributions, additional obligatory pension fund and health contributions. In all four of them the first to be paid off is the oldest by date. The second option discussed is to have one account but with four different codes for each type of payment.

Rossitza Koleva (rossitza.koleva@eurofast.eu)

Eurofast Global, Sofia Office

Tel: +359 2 988 69 78

Website: www.eurofast.eu

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