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Doing business in Bulgaria
04/09/2009
The first was a powerful source of income to the state budget which, however, kept companies hostage - delaying Valued Added Tax (VAT) reimbursements for months.
The appointment of World Bank leading economist and author of the Bank’s Doing Business report,
Simeon Dyankov, as Finance Minister was welcomed by Bulgarian business as a sign of the new Cabinet’s will to improve the country’s business environment. A month after his appointment, Dyankov has something to show to the business community by undertaking two simple steps in this direction.
The first was a powerful source of income to the state budget which, however, kept companies hostage - delaying Valued Added Tax (VAT) reimbursements for months. Millions of leva were blocked by tax authorities even though the law said that VAT should be reimbursed within 30 days.
Tax authorities’ way to get around this was to say that their tax reviews of companies’ expenses lasted more than this period, which was why companies could not get their money in sufficient time to keep to their business plans. The benefit to the previous government was that by holding on to the money, it could report the funds in its balance sheet, concealing the country’s Budget deficit or using the money for other purposes.
Now Dyankov, enthusiastically supported by his party’s right-wing partners from the Union of Democratic Forces (UDF), decided to end this situation by asking the National Revenue Agency (NRA) to reimburse VAT to companies within the stipulated 30-day period.
At the end of July, Dyankov said that the NRA had reimbursed 160 million leva out of the 600 million leva blocked at that point. This money is also supposed to serve as a saving option for many SMEs in times of deepening economic crisis, and to save jobs.
Meeting business people on July 31 in the city of Rousse on the Danube, Dyankov said that reimbursing VAT was nothing complicated but had not happened because there was a lack of political will. In August, Dyankov’s efforts resulted in the 600 million leva blocked in June shrinking to 440 million still to be reimbursed.
Another step, this time aimed at those who want to start businesses in Bulgaria, was the announcement of a plan to decrease the legally-required starting capital for registering a Limited Liability Company (LLC). At the end of August, it was announced that the 5000 leva currently required to start a LLC will be reduced to just two leva – the equivalent of one euro. It was again a move highly welcomed by the UDF, whose leader Martin Dimitrov was the main campaigner for it in the previous National Assembly, but failed because of a lack of support from the then ruling majority.
The two leva fee will make it easier for companies to be set up and shut down but, according to analysts, more needs to be done for the process to become more efficient.
Such future steps could include reducing the large number of various licences and regulatory requirements that companies are subject to, depending on the field of their business. These bureaucratic obstacles are often cited in surveys as sources of corruption and a reason why employers prefer to move their businesses out of Bulgaria.
The first was a powerful source of income to the state budget which, however, kept companies hostage - delaying Valued Added Tax (VAT) reimbursements for months. Millions of leva were blocked by tax authorities even though the law said that VAT should be reimbursed within 30 days.
Tax authorities’ way to get around this was to say that their tax reviews of companies’ expenses lasted more than this period, which was why companies could not get their money in sufficient time to keep to their business plans. The benefit to the previous government was that by holding on to the money, it could report the funds in its balance sheet, concealing the country’s Budget deficit or using the money for other purposes.
Now Dyankov, enthusiastically supported by his party’s right-wing partners from the Union of Democratic Forces (UDF), decided to end this situation by asking the National Revenue Agency (NRA) to reimburse VAT to companies within the stipulated 30-day period.
At the end of July, Dyankov said that the NRA had reimbursed 160 million leva out of the 600 million leva blocked at that point. This money is also supposed to serve as a saving option for many SMEs in times of deepening economic crisis, and to save jobs.
Meeting business people on July 31 in the city of Rousse on the Danube, Dyankov said that reimbursing VAT was nothing complicated but had not happened because there was a lack of political will. In August, Dyankov’s efforts resulted in the 600 million leva blocked in June shrinking to 440 million still to be reimbursed.
Another step, this time aimed at those who want to start businesses in Bulgaria, was the announcement of a plan to decrease the legally-required starting capital for registering a Limited Liability Company (LLC). At the end of August, it was announced that the 5000 leva currently required to start a LLC will be reduced to just two leva – the equivalent of one euro. It was again a move highly welcomed by the UDF, whose leader Martin Dimitrov was the main campaigner for it in the previous National Assembly, but failed because of a lack of support from the then ruling majority.
The two leva fee will make it easier for companies to be set up and shut down but, according to analysts, more needs to be done for the process to become more efficient.
Such future steps could include reducing the large number of various licences and regulatory requirements that companies are subject to, depending on the field of their business. These bureaucratic obstacles are often cited in surveys as sources of corruption and a reason why employers prefer to move their businesses out of Bulgaria.
Source: sofiaecho.com
