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Jurists warned about a hole in the Value Added Tax Act
Last update: 2008-05-23 06:36:31

Jurists  warned about a hole in the Value Added Tax Act

A serious hole in law according to one of the most important state taxes - VAT, was discovered by the Bulgarian jurists.
Instead of being obstructive to conmen who drain VAT the new art.176 of the Value Added Tax Act is very dangerous for the state exchequer because it allows companies to avoid paying VAT. This was revealed by Rosen Nikolov, Solicitor for "Legal world" magazine.

The controversial article stipulates that tax services decline VAT registration to companies
which manager or majority partner has bad reputation unless he grants indemnification. The matter refers to people who used to manage companies with unpaid VAT obligations for more than 5 000 BGN or have been convicted for tax crimes, or there are taken penal procedures against them. The amendment in the act entered in force on 19.12.2007 and was proposed by the National Revenue agency. The goal of the amendment was to obstruct conmen who drain
VAT through a company and later register another company without having any trouble.

According to solicitor Nikolov the new regulation might bring damages to the state exchequer especially from mediation, consultancy, software or construction companies. But such companies do not deduct VAT because they do not buy a lot of raw materials and stuff so they do not have interest to be registered under the Value Added Tax Act and to pay the tax.

"If such company accepts for a fictitious partner or shareholder someone from the risky contingent the National Revenue agency is obliged to refuse VAT registration. That way the company will be able to form unlimited turnovers without adding the VAT", solicitor Nikolov claims.

The state department stands that solicitor Nikolov statements are overstrain. "This stipulation was initiated to obstruct the participation of professional conmen in the VAT system through registering new companies. That is a much bigger risk than the eventual misappropriation of art.176a's text", claimed the press centre of the National Revenue agency.

Tax inspectors are checking similar cases and are able to register a company by their own initiation. Besides, it is not favorable for more companies that their business partners are not registered under the VAT Act simply because they cannot receive their tax credit. This makes the majority of the companies obliged to register under the VAT Act. Their present number is over 140 000.



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