Lower VAT in Bulgaria

December 30, 2011 Taxation in Bulgaria

3rd of March 2011SOFIA – Bulgaria will lower its value added tax rate in 2012, although the government will not yet specify the date or extent of the reduction.

In a televised interview on December 29th the Deputy Prime Minister of Bulgaria Simeon Djankov confirmed that the government will lower the national value added tax rate by either 1 or 2 percent in 2012.

The upcoming changes will come as part of the government’s pledge to decrease the value added tax rate to 16 percent by 2015, from the current rate of 20 percent. The Prime Minister explained that the government will aim to cut the tax rate by a maximum of 2 percent, but will only do so if fiscal conditions allow.

The Prime Minister did not to specify when the tax rate change will tax place, and said that the government will give very little prior warning before lowering the VAT. He said that if consumers know the date of the change, they may intentionally delay some purchases until after the rate is dropped, which would ultimately be a negative effect on the economy.

The VAT rate cut is not expected to decrease the government’s overall fiscal standing, as the lowered revenues from the tax will be balanced by the higher than expected cumulative tax collections seen in 2011. The tax rate change will also have no negative effect on the government’s plans to boost funding into the health care sector, or carry out reforms to the education sector.

Photo by veni markovski