Loans of more than 5000 leva will have to be reported in people's personal income tax declarations for 2010, the National Revenue Agency (NRA) said on October 18 2009.

This is provided in amendments to the law on income tax adopted by the Cabinet last week, still to be approved by Parliament.

NRA asked for the amendments because "personal loans" were often used by taxpayers to explain the source of their incomes, BTA Bulgarian news agency said.

According to NRA, this was the explanation given on every second inspection of people's incomes when tax inspectors register discrepancies between a person's legally declared income and his or her living standard.

In one case a person said he had taken loans from 139 separate people and NRA had to check each of them.

In September an owner of a luxury Bentley vehicle told NRA he bought it with loans from 42 friends.

Two other individuals said that they had borrowed about 300 000 leva each from their own companies so that their luxury vehicles could be registered as company cars.

Another problem NRA had when performing tax checks was that very often contracts have not been verified by a notary, hence there was no proof of bank transfers between the respective parties.

According to NRA, personal loans in Bulgaria amounted to about 2.7 billion leva. Most of these loans had no interest on them and had a span of 10 years. Almost all of these loans, however, were fake and conducted with the specific purpose of avoiding taxation, BTA quoted NRA.

"Fake loans have become a national sport in Bulgaria. Every day we listen to explanations of non-existent loans. We have to put all this to an end. I am convinced that reporting loans in tax declarations will not be an administrative burden to taxpayers because we all know that these loans do not exist," NRA head Krassimir Stefanov said.