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Commission Opinion [COM(1997) 2008 final - Not published in the Official Journal]Commission Report [COM(1998) 707 final - Not published in the Official Journal]Commission Report [COM(1999) 501 final - Not published in the Official Journal]Commission Report [COM(2000) 701 final - Not published in the Official Journal]Commission Report [COM(2001) 700 final - SEC(2001) 1744 - Not published in the Official Journal]Commission Report [COM(2002) 700 final - SEC(2002) 1400 - Not published in the Official Journal]Commission Report [COM(2003) 676 - SEC(2003) 1210 - Not published in the Official Journal]Commission Report COM(2004)657 final - SEC(2004)1199 [Not published in the Official Journal]Commission Report COM(2005)534 final - SEC(2005)1352 [Not published in the Official Journal] Treaty of Accession to the European Union [Official Journal L 157 of 21.06.05]


In its Opinion dated July 1997, the Commission stressed that transposal of the existing body of Community rules in the direct taxation field should not pose major difficulties for Bulgaria. Although Bulgaria had begun reforming its indirect taxation system, it would have to make a sustained effort if it were to comply with existing Community rules on VAT and excise duties in the medium term.

The November 1998 Report, while noting continuing difficulties in the field of indirect taxation, seemed to bear out that initial assessment.

The October 1999 Report noted that Bulgaria had made considerable progress in this field. Some additional efforts were needed, however, in the excise duty field. Special attention would also have to be paid to the implementation of tax legislation.

The November 2000 Report noted that Bulgaria had made further progress on VAT (introduction of special regimes, removal of certain zero ratings, extension of the definition of taxable persons, increase in the annual ceiling for turnover and export regime). However, no progress had been noted in the areas of excise duties and direct taxation. With regard to its administrative capacity, Bulgaria had begun to modernise its administration and the new fiscal procedure code entered into force in January 2000.

The November 2001 Report considered that Bulgaria was continuing to make progress on VAT (reduction of the time periods granted for the reimbursement of tax credits, procedure for reimbursement to foreign legal persons). Bulgaria had unified its excise on wine. However, there had been no developments in the area of direct taxation, administrative cooperation and mutual assistance. As far as its administrative capacity was concerned, the tax administration had set up an Internet site and a unit for combating fraud. The unified revenue collection office was to be operational in 2003.

The October 2002 Report stressed that Bulgaria had made further progress in harmonising its legislation with the existing Community rules. However, the report noted that the reform of the Bulgarian tax administration had made little progress.

The November 2003 Report stated that Bulgaria continued to make progress with alignment with the Community acquis on taxation. Although its alignment with the acquis is satisfactory, it needed to make more progress in the field of direct taxation. It also needed to improve the capacity of its tax administration significantly.

Negotiations on this chapter have been closed provisionally. Bulgaria has been granted transitional arrangements (until 31 December 2009) for the application of minimum rates of excise duties on cigarettes as well as specific arrangements allowing it to continue exempting international passenger transport from VAT with right of deduction, to apply a reduced excise duty rate to rakya produced from fruits and grapes for own consumption (up to 30 litres of fruit spirits per annum per household), and to apply a registration and exemption threshold of EUR 25 000 to small and medium-sized enterprises. Bulgaria is essentially meeting the commitments it made in the accession negotiations in this field.

The 2004 regular report notes that Bulgaria has continued to make progress in aligning its legislation on indirect taxation with the acquis. However, no progress is reported in the field of direct taxation. Further efforts will be needed to improve interconnectivity with EU tax systems.

The October 2005 Report stated that Bulgaria should be in a position to implement the acquis as soon as it joined the EU. Nevertheless it had to consolidate its tax administration by putting in place the national revenue collection office and by reinforcing tax collection and inspection. More efforts were needed in the fields of excise duty, taxation, administrative cooperation and mutual assistance.

The Treaty of Accession was signed on 25 April 2005 and accession took place on 1 January 2007.


The body of EU law in the area of direct taxation mainly concerns some aspects of corporation taxes and capital duty. The four Treaty freedoms have a greater impact on national tax systems.

The legal framework for indirect taxation consists primarily of harmonised legislation in the field of value added tax and excise duties. This includes the application of a non-cumulative general tax on consumption (VAT) which is levied at all stages in the production and distribution of goods and services and requires equal tax treatment of all domestic and import transactions.

In the field of excise duties, established EU law and practice comprises harmonised tax structures and minimum rates of duty together with common rules on the holding and movement of excisable goods (including the use of tax warehouses).

Finally, the Community legislation in the area of administrative cooperation and mutual assistance provides tools to avoid intra-Community tax evasion and tax avoidance for both direct and indirect taxation.


Direct taxation The two Directives on company taxation and the Arbitration Convention establish a mechanism that applies on the basis of reciprocity. The relevant provisions cannot therefore enter into force before accession.

In December 2001, company taxation was altered to introduce a uniform rate.

However, it seems that Bulgaria has particularly focused its efforts on preparing a more thoroughgoing reform of the national VAT and excise duty systems.

In 2003, no progress was recorded in the field of direct taxation. Bulgaria still has to abolish the withholding tax it applies to repatriated dividends and to interest and royalty payments by Bulgarian subsidiaries to their Community parent companies, and further align its legislation with the acquis.

No progress was noted in these fields in 2004, except that corporate income tax rate was brought down from the 2003 level of 23.5% to 19.5%. In 2005, several measures remained to be adopted, in particular with regard to transposing the directives on direct taxation.

Indirect taxation

  • Value Added Tax (VAT)

In the past, Bulgarian legislation was very vague and inconsistent in this field. However, several amendments have been made to existing legislation in order to bring it more closely into line with the acquis. The new VAT law is now in force. It ensures greater conformity with the general principles of the Community VAT system. Bulgaria has continued to streamline its VAT legislation, but a great deal remains to be done in terms of legislative harmonisation in order to respect the acquis (exempted operations, entitlement to deduction upstream, special regimes for travel agencies and second-hand goods).

The amendments made to the VAT law entered into force in January 2002. They introduced the standard rate of VAT on the supply of medicinal and pharmaceutical products and also a special regime for travel agencies.

Alignment with the acquis was advanced by the entry into force of amendments to the law on VAT in January 2003. These amendments lowered the registration and exemption threshold applied to small and medium-sized businesses to 25 000 and adapted the scope of VAT exemptions on financial services. There is still work to be done on defining the scope and place of application of the tax and the scope of exemptions, and introducing special schemes for second-hand goods and travel agents.

In 2004 a great deal of Bulgarian VAT legislation was aligned with the Community acquis, although further alignment is still needed regarding special regimes and the scope of exemptions.

In 2005, the general degree of alignment was high. Work remained to be done on intra-Community transactions and special schemes.

  • Excise duties

In January 1999 Bulgaria also amended its excise-duty arrangements substantially as part of its tax reform. However, further adjustments were needed. In 2000, in spite of a new legislative timetable, it was worrying to note the lack of any progress. All efforts needed to be focused on a well-structured pre-accession strategy in order to continue with alignment in this field. In 2001, it was noted that the structure of duty on cigarettes contravened the acquis, and the levels of duties were still well below the Community minimum.

In December 2001, Bulgaria amended its law on excise duties, bringing it more into line with the acquis. In particular, it harmonised the scope of application of excise duties to beer and introduced excise duties on methane, heavy fuel oils, gas oil and kerosene. The levels of excise duties on filter cigarettes were also raised.

Bulgaria concluded international agreements designed to avoid double taxation with all the Member States (apart from Greece) and most of the candidate countries.

In January 2003 the law on excise duties was amended to introduce definitions of intermediate products, wine and fermented products other than wine and beer. The basis for the calculation of excise duty levied on intermediate products and the rate of duty applied to those products was established in line with the Community acquis. Bulgaria also reduced disparities with Community minimum rates by increasing the rates of excise duty on ethyl alcohol and gas oil. The need persisted to gradually raise these rates until they reached the minimum levels required by the Community acquis.

Duty suspension arrangements, in particular provisions for tax warehouses, had yet to be adopted.

The record for 2004 showed that extensive transposition was still required. Rates were still well below the EU minimum for a number of products including beer, spirits, leaded and unleaded petrol, gas oil, LPG, methane and kerosene used as propellants, and cigarettes. The need persisted to gradually raise the rates applied to these products until they reach the minimum levels required by the Community acquis. Bulgaria also urgently needed to prepare the transposition and implementation of the acquis on tax warehouses and duty suspension arrangements.

In 2005 Bulgaria aligned the structure of its duties and raised them in line with the programme to which it is committed.

Additional efforts were now needed to align provisions for intra-Community movement of all categories of harmonised products, duty on cigarettes and maximum rates. Transposition of the acquis concerning tax warehouses and duty suspension was still lagging behind. The Bulgarian authorities would also have to focus on introducing a reduced excise duty rate for rakya produced from grapes and other fruit for personal consumption.

  • Administrative capacity

Although substantial measures had been taken to modernise the tax administration, and its implementation powers had been strengthened, results were slow to appear. Overall, cooperation with the other State bodies remained unsatisfactory. The administrative reform had to be sped up so that Bulgaria could apply the acquis communautaire in full.

In 2002, there was hardly any progress in the reform and reinforcement of the Bulgarian tax administration other than a few changes in its management. Tax discipline had scarcely improved, even though amendments to the administrative penalties law in February 2002 introduced heavy fines for infringement or non-fulfilment of a Council of Ministers tax measure.

Reform and enhancement of the Bulgarian tax administration advanced in 2003. With the law on the National Revenue Agency adopted in November 2002, Bulgaria was on the way to a new system of revenue collection. In June 2003 a central liaison office was created to take responsibility for administrative cooperation with the Member States after accession.

In the field of administrative cooperation and mutual assistance the need persisted for Bulgaria to commit itself fully to making its computerised tax information system completely operational and capable of being linked to the EU's computer systems. Qualified human resources were needed.

No substantial progress was recorded in the field of administrative cooperation and mutual assistance in 2004. Work continued on the development of an integrated information system and interconnectivity strategy. Bulgaria continued the transfer of taxation matters from the General Tax Administration (GTD) to the National Revenue Agency (NRA) during the reporting period as part of its work on administrative capacity. Building upon the main results of a pilot project on the restructuring of a Territorial Tax Directorate launched in July 2003 in the city of Burgas, the restructuring of all remaining territorial and local offices started in January 2004. A Code of Ethics for tax officials was adopted in February 2004 and distributed to all officials.

In 2005, administrative cooperation and mutual assistance legislation was yet to be completed.

Administrative capacity had not reached a satisfactory level, especially in the fields of collection and inspection. Only limited amounts of excise duties were collected, and VAT collected from small and medium-sized businesses was negligible compared to that collected from larger-scale businesses. More legal provisions needed to be adopted to transfer powers from the Directorate-General for Taxation to the National Revenue Agency and to the National Customs Agency.

Last updated: 14.12.2005