When are the tax authorities referring the case to the prosecutor?

Tax evasion in Bulgaria and criminal responsibility

Bulgaria enjoys the lowest EU flat tax rate of only 10%. But as is often the case, the coin has two sides. The dark side of the Bulgarian legislation is the ultra low level of tax evasion that triggers criminal responsibility.

Anyone who fails to declare or pay taxes in excess of 3000 BGN (€ 1534) is punished with imprisonment from one to six years and a fine of up to two thousand BGN. When the tax obligations are more than 12000 BGN (€ 6135), the penalty is imprisonment from three to eight years and partial or full confiscation of the property of the perpetrator.

Art. 255 of the Bulgarian Penal Code

By “taxes”, in Bulgaria is meant all sort of taxes, such as corporate tax, value added tax (VAT), municipal tax, tax on personal profits, etc.

Foreign businessmen falling in the trap of the penal code

Many foreign businessmen were attracted by the low tax rate and moved their businesses to Bulgaria. Unfortunately, unlike the locals, the foreigners weren’t realizing the dangers of not paying taxes. Many of them made big turnovers and good profits, only to realize later, that not all of their taxes were fully paid.

Most of the concerned businessmen thought that they can escape from paying the tax debts of their companies. Nothing can be further from the truth. The infamous article 19 of the Tax Processual Code is foreseeing personal financial liability for the tax debts of the company. But that’s not the biggest problem. The real horror scenario is the criminal responsibility.

And with the “penal trigger” at € 1534, many businessmen faced huge problems in Bulgaria. They are now undergoing severe criminal trials with lengthy jail sentences hanging over them like Damocles sword.

When will the tax authorities pass on the fiscal case to the Bulgarian prosecutor’s office

There were times when the prosecutor’s office was waiting for the tax inspection report on a company to be enforced in order to be able to prosecute the perpetrator. This is not the case anymore. With an extremely important resolution, the Supreme Court of Cassation decided that:

The performance of a tax audit and the issuance of an audit act, resp. its entry into force is not a necessary prerequisite for determining the tax liability under Art. 255 of the Criminal Code and to engage in criminal liability according to these norms of the law.

interpretative decision Nr.1/2009 – Supreme Court of Cassation

In other words, now the tax authorities can, at any time, put the tax audit on hold and send the case to the Prosecutor’s office. This is the horror scenario as it will trigger criminal investigation and penal lawsuit. If things escalate to that point, the financial responsibility for the unpaid taxes will be the least thing to worry about.

Wat to do if your business has unpaid taxes (even if you don’t think the tax authorities are right)?

Simply put – contact us immediately. Criminal responsibility for unpaid taxes is being engaged more and more often in recent years. In such cases, we are engaging the best criminal lawyers in Bulgaria to take care of everything and to protect our clients.

Serving time in Bulgaria is something that needs to be avoided at all cost. And we believe we can take care of that, best of anyone else in Bulgaria.