An announcement will be made in October as to whether tax and social insurance contributions will be reduced.

The announcement will be made in that month after national budget revenue collected up to August is reported.

Deputy Finance Minister Georgi Kadiev said this on June 30 at a seminar for journalists.

Three options were being considered, he said.

The first is that corporate income tax may be reduced to 12 per cent from the current 15 per cent. The second option envisages the 22 per cent tax band rate to be removed from the personal income taxation schedule, while the third option is for social security contributions to be reduced by two per cent.

“It is possible that only one of these three options will be enforced, or two of them, or all three, or none, depending on the implementation of the revenue side of the budget,” Kadiev said.

He recommended a four per cent reduction of the contributory burden instead of the currently considered two per cent.

Only days earlier, associations of employers in Bulgaria asked for a further six per cent cut in social security contributions. Businesses insist that the six per cent cut that came into effect in the beginning of 2006 had caused no harm to state earnings.

The monthly tax threshold will increase to 200 leva from the current 180 leva, unless Parliament or the Government decide differently.
Next year, patent tax will no longer apply to juristic persons, but only to natural persons and sole traders. This is seen as a way to support small enterprises.

Also in 2007, the 10 per cent tax deductibility rate on donations to natural persons will apply only to donations made to a preferential group of organisations. This change is intended to minimise the possibility of fraud.

Incentives are planned for individuals and companies who submit their tax returns via the internet.

Most probably the deadline for filing declarations under the Personal Income Taxation Act will also be changed from April 15 to April 30. Penalties are levied if the tax is paid more than a month after the due date for declarations.

The excise duty on fuels in Bulgaria will increase in 2007 according to an approved plan while the excise duty on cigarettes will not rise until 2010, when it should reach the minimum rate in the European Union, the Finance Ministry’s Lyudmila Elkova told the same seminar on tax legislation changes on July 1.

The rate on leaded petrol will change from 670 leva for 1000 litres to 830 leva. Although the sale of this type of petrol is not allowed, the EU requirement is that an excise duty should be set for it.

The rate on unleaded petrol will rise from 530 leva for 1000 litres to 585 leva in 2007.

The excise duty on diesel fuel and kerosine will increase from 430 leva for 1000 litres to 485 leva.

The EU requires the imposition of excise duty on electricity, coal and coke. It is possible that such duty will not apply to electricity for household use, Elkova said.