Bulgaria’s Constitutional Court rules that tax on deposit interest is legal
Bulgaria’s Constitutional Court has ruled that the taxation of income from bank deposits that had been paid in advance was constitutional, rejecting a challenge from the ombudsman’s office submitted in March 2013.
Last year, as part of the Budget proceedings, Parliament passed a bill that imposed a 10 per cent tax on all revenue from deposit interest. The amendments, which went into force on January 1 2013, said that the tax was due on all fixed-term deposits on which interest was due after that date, even if the interest had been paid in advance.
Ombudsman Konstantin Penchev asked the Constitutional Court to overrule this provision, arguing that the retroactive element was unconstitutional.
He said that it was unacceptable for the state to intervene in this way in an existing contractual relationship and rearrange it in its favour, citing a Constitutional Court ruling in June 1996 that a manifestation of the constitutional principle of the rule of law was the rule against retroactivity in tax provisions.
The Constitutional Court ruled against the challenge, saying that Parliament was within its rights to stipulate “the conditions for the legal framework”, as it did when choosing to equate interest paid in advance with interest paid at the deposit due date.
However, the court said that the legal framework in this case should have been more detailed than it is. “The incompleteness of the law is a typical case of legislative omission, which cannot be filled by judicial activism by the Constitutional Court”, the court said in its ruling.
(Photo: Clive Leviev-Sawyer)