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Varadinov & Co.
Legal Bulletin

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Tax-Insurance Procedure Code
The recent amendments in the TIPC (OG 94/4.12.2015) provide for an intensification of the liability for failure of execution of public obligations and implementation of the requirements under the agreement between Bulgaria and USA FATCA, requiring all foreign financial institutions to provide information to the American tax authorities about the supported by them financial accounts of American taxpayers or of the controlled by the American taxpayers foreign enterprises.
It is provided that pecuniary liability will be imposed upon a member of a management body, manager, procurator, sales representative, sales assignee, of an obligated juridical person, who have hidden facts and circumstances, which they were obligated by law to declare before the body of revenues or before the public executor, due to which obligations for taxes or obligatory insurance installments cannot be collected. Such liability upon these persons will be imposed if they knowingly make payments in kind or in cash from the property of the debtor, representing a hidden distribution of the revenue or a dividend, gratuitous alienation of the property of the debtor or at prices significantly lower than the market ones, as a result of which the property of the debtor has decreased and therefore taxes or obligatory insurance installments have not been collected. The pecuniary liability is no more than the amount of the payments or the amount of the decreased property. The range of government bodies that could request the provision of data about tax and insurance information is being increased. For the purposes of the complex administrative services, competent authorities may request and receive, from the revenue bodies, certificates for a presence or a lack of obligations for the person with the exception of obligations under acts that have not come into force as well as prolonged or postponed ones or secured obligations. In cases when a declaration has been submitted, containing the sum for recovery, as well as when a claim for recovery is filed under Art. 129 from the TIPC, the revenue body could recover the entire claimed amount through the pointed, by the person, bank account or through a postal record in cases of recovery of local taxes, transferred to the pointed by the person address; in the payment order or postal record the number and date of the declaration, the claim for recovery respectively, must be marked.
In Title Two, Chapter Sixteen, a section IIIa is created called “Automatic exchange of financial information in the field of taxation”, governing the procedure for implementation of administrative cooperation through automatic exchange of financial information in the field of taxation with participating jurisdictions, the obligations of the financial institutions, that are providing information, for collection, implementation of the procedures for a complex control and the provision of financial information. This section also regulates the regime for exchange of information for the purposes of the Agreement between the Government of the Republic of Bulgaria and the Government of the United States for improvement of the tax compliance internationally and the implementation of FATCA, signed in Sofia on the 5th of December, 2014 and ratified by law (OG 47/2015).

Accountancy Act
A new Accountancy Act came into force in the early 2016 (OG 95/8.12.2015). The law transposes the requirements from Directive 2013/34/EU of the European Parliament and of the Council from June 26, 2013 about the annual financial statements and the related reports of certain types of companies and for amendment of Directive 2006/43/EU of the European Parliament and the Council and for cancelation of Directives 78/660/EEC and 83/349/EEC of the council. The Directive reduces the requirements for the financial statements of the small enterprises and allows the member states to benefit from a number of concessions for them. The Act regulates the requirements for ongoing accounting reports, for compiling and storing accounting documents, for the applicable accounting base for reporting and for compiling of the financial statements. The Act concerns the activity of traders under the Commerce Act, local juridical persons that are not traders under the Commerce Act, the budgetary enterprises, the not personified companies, the insurance funds, the trade missions and the foreign juridical persons that are executing commercial activities in Bulgaria.
Which are the new elements:
Special requirements are introduced, concerning the construction and maintenance of the accounting system in every enterprise through the definition of specific deadlines for the information and for the methods for storing and transferring. Specific rights and obligations for the managers of the enterprises, concerning the accounting reports and tax and financial discipline, are being introduced. The enterprises are categorized in a new manner – micro enterprises, small, medium and large enterprises, the criteria for which is the total of the balance sheet, net revenue and average number of employees for the financial year. The administrative penalties are being increased for a manager who allows the compiling of an accounting document and/or reporting of commercial information with which the data for the property or the financial condition of the represented by him enterprise is being distorted and the fine will be up to 10,000 leva.
Insurance Code
A new Insurance Code (OG 102/29.12.2015) implements the numerous requirements of the European legislation – Directive 2009/138/EC about the start and the execution of insurance and reinsurance activity (Solvency II) and the following amendments to it with Directives 2011/89/EC, 2012/23/EC. 2013/58/EC and 2014/51/EC. A new frame for defining the capital requirements for insurers and reinsurers, in accordance with their risk profile, was introduce by these Directives, as well as a frame for implementation of risk based supervision of their activity. The requirements towards the management system of insurers and reinsurers are also being improved. The functions of risk management, internal audit, function for accordance and actuarial function are being regulated. A new regime for calculation is being introduced, concerning the capital requirement for solvency of the insurers and reinsurers based on the reporting of all quantifiably measurable risks at which they are exposed. New institutes, applied until recently on the Bulgarian insurance market as a contractual practice, are being introduced. Among them is the institute of the insurance period which allows the closing of a limitless insurance contract, of a multi-year insurance contract, as well as of an insurance contract for a period less than a year. The opportunity for automatic renewal of the insurance contract just for one insurance period, after the expiration of the agreed term, is being regulated. The institutes of retroactive and prior coverage are being implemented.
There are also changes in the area of bankruptcy of insurers and reinsurers as the role of an assignee will be executed by the Guarantee Fund. The goal is achieving a greater efficiency in execution of the liquidation of the insurance portfolio and undertaking the expenses of the bankruptcy. An equalization of the guaranteed insurance receivables, during a bankruptcy of a life insurer, with the amount of the guaranteed deposits from a bankrupt bank is being introduced. It is also provided that the Guarantee Fund will pay the receivables of all persons during a bankruptcy of a life insurer, so that the receivables in one life insurer are guaranteed, regardless of the number of receivables of the authorized person and their amount – up to 196,000 leva.
In respect to the mandatory insurance “Civil responsibility”, against a unified sum, the driver will receive coverage for the territory of Bulgaria as well as for the Member States of the European Union and the European Economic Community and all of the countries that are members of the “Green card” system. The contract for the mandatory “Civil responsibility” insurance for drivers can be closed for a term of 3 years and its coverage can be expanded in specific hypotheses when the driver is not guilty but, despite that, it is justified that the harmed persons should be compensated.