Relations Between European Law and Taxation in Bulgaria

Abstract

The Republic of Bulgaria joined the European Union (EU) in 2007. The aim of this article is to review the impact of European law on the Bulgarian tax system. As the topic is very broad, the study focuses on the Constitution on the one hand and certain tax statutes on the other. Attention is also paid to the latest challenges in the field of international taxation. First, the subject of the study is the amendments made to the constitutional provisions related to tax matters. In discussing them, it is necessary to use a broader concept of European law, since the European Charter of Local Self-Government was adopted by the Council of Europe. Articles 9 (1), 9 (2) and 9 (3) of the Charter set out important principles of self-government that influence the decision-making process on what amendments to undertake to the Constitution. Second, for the purposes of this article, the recent changes in the area of indirect taxation are taken into account, as indirect taxes have been harmonized with the VAT Directive transposed into the Bulgarian Value Added Tax Act (VATA). EU legislation also governs excise duties, which are levied on alcoholic beverages, tobacco and energy products. The provisions of Directive 2008/118/EC on the general arrangements for excise duty have been transposed into the Bulgarian Excise Duties and Tax Warehouses Act (EDWA). However, excise duties need a separate in-depth study. For this reason, they remain outside the scope of this article. Third, changes have been made in the area of direct taxation. A key objective of the EU is the creation of a common market, which implies the removal of obstacles to the free movement of goods, persons, services and capital between Member States. The Treaty on the Functioning of the European Union (TFEU) therefore contains provisions empowering the Union to introduce directives in the field of direct taxation. Nevertheless, as bilateral tax agreements also apply in the same area, the article sheds light on the conflicts between them and EU directives, as they are sometimes based on different legal principles.