Filing a tax return based on the work of an unreliable accountant in the past

Here is our problem for today. A Bulgarian company has entrusted its accountancy to a person or to a company (we will call it the “bad accountant”) that has acted in bad faith. The bad accountant has filled for the company wrong and eventually falsified documents in the past. The company has dismissed the bad accountant and is considering to file criminal complaint if there will be enough evidences that a crime is committed.

The show must go on, the tax reporting too

In the meantime however, the company has to keep on fulfilling its tax obligations and responsibilities. This means that the company has to file its annual returns and to pay its taxes. The problem is however, that in order for the annual tax return to be filled, the company has to rely on the work of the bad accountant. And this may have catastrophic consequences. Not filling the tax return on the other side is also a violation of the law. Both actions, filling wrong tax return or not filling tax return at all, can lead to criminal responsibility to be imposed.

The danger of not filling tax return and not paying tax

The problem with not paying the tax is quite obvious. If the amount of the tax unpaid is more than 1532 EUR, the punishment foreseen by the penal code is scary:

Whoever avoids the establishment or payment of tax liabilities in large amounts (>3000 BGN / 1532 EUR) by failing to submit a declaration shall be punished by imprisonment from 1 to 6 years and a fine of up to 2000 BGN.

Art. 255, par. 1, p. 1 of the Bulgarian penal code

If the amount is more than 12000 BGN (6128 BGN), the jail term foreseen is from 3 to 8 years with full or partial confiscation of the offender’s property.

And if you thought that if you owe taxes that don’t exceed 3000 BGN, think again. According to an interpretative ruling of the Supreme Court, the owed taxes are counted for a period of 10 years. This means that even if your taxes are only 1000 BGN, finding another 2000 BGN in the past will result in criminal proceedings.

So not filling your tax return and not paying the annual tax is not advisable, to put it mildly.

The problem with filling tax declaration, based on unreliable data

Filling wrong declaration is very dangerous too. For wrong declaration, the Bulgarian penal code also foresees jail term:

(1) Whoever confirms an untruth or conceals the truth in a written statement or a communication sent by electronic means, which by virtue of a law, a decree or a decree of the Council of Ministers is given to a public authority to certify the truth of certain circumstances, shall be punished by imprisonment for a term not exceeding 3 years or by a fine from one 100 to 300 BGN.

(2) Where the act referred to in par. 1 is committed in order to avoid payment of taxes due, the penalty shall be imprisonment for up to 3 years or a fine of up to 1000 BGN.

Art. 313, par. 1 and 2 of the Bulgarian penal code

Although the penalties are less severe than for not paying taxes, we are absolutely sure nobody wants to risk jail term in Bulgaria. And a criminal record as an added “bonus”.

Another bad news is that both the director(s) of the company and the accountant who submits the wrong declaration can be criminally charged.

So what could be done in such case in order to eliminate the risk of messing with the penal code?

Paying your taxes, but don’t filling tax declaration

Theoretically, the only feasible option in such case is NOT to file a declaration, but to pay the taxes in full and in time. This is the only option to avoid declaring false data and to avoid not paying your taxes. Does this option have its drawbacks? Certainly yes. Your tax compliance will be shattered and you will be most probably subject to “special attention” by the tax authorities.

Finding a brave accountant to file your declaration, but explain to the tax authorities your situation

The other option is to file a declaration that is as accurate as possible. At the same time, to explain to your accountant the whole situation and to eventually even inform the National Revenue Agency about it. This option may prove to be most compliant with the tax laws.

All in all, a bad accountant can make a lot of damage. Whatever you do, please stay legal and don’t underestimate your Bulgarian tax compliance. Please don’t hesitate to contact us if you need assistance.

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