December 2021 / Bulgaria

During 2020, Bulgaria extended the scope of application of the reduced 9% VAT rate for various goods and services until 31 December 2021 as a COVID-19 pandemic related measure. On 23 December 2021, the Bulgarian parliament voted at first and second (final) reading, amendments to the VAT Act extending the period for application of the lower rate until the end of the COVID-19 pandemic. The goods and services for which the reduced 9% VAT rate will continue to apply are the following:

• restaurant and catering services;
• tour operator services, including the organization of excursions by tour operators and travel agents with occasional transportation;
• books and some other publications;
• services related to use of sports facilities; and
• foods suitable for babies and young children as well as baby nappies and similar baby hygiene products (provided in a list included in Annex 4 to the VAT Act).

Accommodation services in hotels and other similar establishments are also subject to 9% VAT rate in Bulgaria, but this rate is applied permanently, i.e. not as a temporary measure in relation to COVID-19 pandemic.

The full text, issued on 23 December 2021, is available here (in Bulgarian only).

New measures due to high electricity prices will be introduced in our country. This was announced by Energy Minister Alexander Nikolov at a briefing.

According to him, all proposals are to be discussed both in the Council of Ministers and in additional formats.

"The period for compensation is extended from December to the end of the first quarter of 2022. The goal is to cover the most difficult period ahead, with the highest consumption of energy resources," said Nikolov.

He stressed that the compensation from December onwards will be calculated according to the real stock exchange price from "day ahead" for July.

"That means BGN 185.59 per megawatt-hour. This is the base from which to start," Nikolov said.

Users with contracts below this price will not be compensated. Under this measure, the state's expenditures in support of business are expected to exceed BGN 900 million.

The proposals will also include consumers of natural gas on the regulated market.

"We will offer a fixed scheme per megawatt-hour for resource costs. This will alleviate the pressure to potentially increase heat prices to end-users. About BGN 200 million have been earmarked for this,” said the Minister of Energy.

According to Nikolov, within the next 4 months, the resource that will be allocated is expected to exceed BGN 1.5 billion.

"There is a crisis in electricity prices all over Europe. Bulgaria continues and will become an increasingly sustainable member of the EU, which means that we cannot maintain very low prices in our country," said the Minister of Energy.

He pointed out that medium-term and long-term measures are being discussed with all counterparties involved, leading to a significantly higher degree of transparency and predictability for both producers and consumers.

"It is unthinkable for the system regulator, as well as the ERPs, to trade and buy their technological costs the day before. Initiatives will be taken so that these costs are in line with the EWRC and there are long-term contracts that will be transparent," Nikolov added.

He was adamant that these technological costs would not be under the umbrella of commercial companies.

The Minister of Energy also announced that from next year we will have a plant for the production of solar panels.

"The investment will exceed 150 million euros. The goal is to produce panels with a capacity of at least 1 gigawatt in Bulgaria next year, and this will be expanded as soon as possible," he said.

According to him, opportunities for storage of electricity are being studied, as well as partnerships for rapid implementation of projects related to the so-called "Smart grids".

Source: Novinite

The Bulgarian National Revenue Agency announced that persons who have been fined for administrative violations of the tax legislation will be able to pay only 80% of the amount of the imposed fine. This is allowed only when the person pays the fine within 14 days of the imposition of the fine. The measure is aimed at encouraging fast and timely payment of fines and to reduce pressure on tax collectors.

The newly adopted rule is applicable retroactively as of 23 December 2021. Thus, a person could pay only 80% of the amount of the fine, if the fine is imposed after 22 December 2021, as well as if the fines was imposed before 22 December 2021, if 14 days have not elapsed from day of the imposition of the fine.

The full text of the announcement, published on 29 December 2021, is available here (in Bulgarian only).

Bulgaria is facing a serious rise in inflation, which in 2022 could double, depending on how the government reacts - warned financial expert and former MP from "There Is Such a People" Mika Zaykova.

"Inflation is a bigger threat than a pandemic. It is not a temporary phenomenon. Although some colleagues think that things will calm down in the next few months, unfortunately, it will not happen because the economy of both the EU and the world is energy. Bulgaria has additional problems - the state of district heating and the moratorium on prices. It does not solve problems, it only postpones them," Zaykova told Nova TV.

According to her, however, Bulgaria is favored because the external supply of energy sources is about 13%. But a green deal is ahead. 60% of energy is nuclear energy, which the EU refuses to accept as clean energy. Furthermore, Bulgaria is the third "coal" country in the EU.

According to the social expert and former Minister of Social Affairs Ivan Neykov, inflation will be higher in the first three months of the new year, and then we expect a decline.

"Part of the problem is that we had forgotten just inflation. I do not think it's the worst problem in the social sphere. Already there is a decrease in oil prices because of reduced consumption. I think after the first quarter of the new year inflation will go down. The social sphere does not generate inflation. It must create tools to help people. It is important to decide who and how to help," he explained.

In January the Value of the Bulgarian Lev will Decrease

According to him, the big challenge for the new Ministry of Social Affairs is how to adjust the tools that will help the really needy. “Now the mantra continues that if you are retired, you are poor, which is not the case. The cycle of energy support needs to be reconsidered”, Ivan Neykov believes.

However, Mika Zaykova reminded that there are really poor pensioners in Bulgaria, but there are also working poor - incomes lag behind the cost of living, and this is a very serious challenge. Bulgaria is the only country in the EU whose minimum wage is below 400 euros. Therefore, there must be a balance between income and what is happening in the economy. Zaikova was adamant that the issue of taxation of the minimum wage must be resolved.

"I don't know how long it will take for us to understand that the minimum wage should be determined not by the will of a minister, but by principles. When you adopt a principle, the rules are determined," Neykov said.

“The moratorium on the price of electricity may have only one meaning - to gain time to find a solution”, said Neykov. According to the two experts, there is an over-expectation of the government, even though it has been going on for several days.

Source: Novinite