Goods purchased by companies using tax incentives would be subject to taxation if they are used by employees for personal purpose outside work, according to new regulations proposed by Bulgaria’s Finance Ministry. Dubbed the “weekend tax” by media reports, the ministry’s proposal comes only weeks after similar provisions were rejected by Parliament as part of the 2016 Budget package.
At the time, MPs objected to the low threshold proposed by the ministry in the amendments to the Value-Added Tax Act, 700 leva, prompting an increase to 5000 leva, which would have restricted the scope of the new tax to company cars or real estate properties. In the end, even with a higher threshold, the amendments were retracted.
But the latest proposal does not include a minimum threshold at all, which means that all company-owned goods would be subject to the tax if used for personal purpose.
It is unclear how the ministry plans to enforce the new tax (nor how much money it hopes to raise), because the regulation envisions companies reporting any dual use (for business and personal purposes) in their annual VAT declarations.
According to the head of Parliament’s budget committee, Menda Stoyanova, the proposals rejected by MPs were intended “to help businesses” by creating the legal framework for calculating the tax. The core issue, however, of the need to implement such taxation was never in question, as it is required by EU laws and has been repeatedly re-affirmed by court decisions on the subject of VAT taxation, she said.
“The Finance Ministry has drafted a methodology so that tax authorities not apply that VAT ‘creatively’. These are the things that were rejected on the House floor, which were actually meant to help businesses and apply the law uniformly,” Stoyanova said, as quoted by Bulgarian National Radio.
The ministry’s proposal has also prompted the first call for Finance Minister Vladislav Goranov’s resignation, which came from Radan Kanev, the co-chair of the Reformist Bloc coalition. (Kanev’s party, the Democrats for a Strong Bulgaria, pulled their support for the Cabinet to protest changes to the constitutional amendments on judicial reform, but the rest of the coalition will remain part of the government coalition, it was decided earlier this week.)
In a Facebook post, Kanev said that Goranov’s resignation was “the minimum requirement towards pursuing rightist policy, reasonable and accountable spending of common money and a strategic business policy”.
(Finance Minister Vladislav Goranov, front, and Menda Stoyanova.)