Law on Tax on Insurance Premiums

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LAW ON TAX ON INSURANCE PREMIUMS Pub. - State Gazette, No. 86 of 02.11.2010, effective from 01.01.2011; amended, No. 105 of 19.12.2014, effective from 01.01.2015; amended, No. 102 of 29.12.2015, effective from 01.01.2016; amended, No. 43 of 07.06.2016; amended, No. 70 of 20.08.2024, effective from the date determined in a Decision of the Council of the European Union on the adoption of the euro by the Republic of Bulgaria, adopted in accordance with Article 140(2) TFEU, and a Council Regulation adopted in accordance with Article 140(3) TFEU Chapter One GENERAL PROVISIONS Subject of the Law Art. 1. This law regulates the taxation on insurance premiums, hereinafter referred to as "the tax". Taxable Object Art. 2. Insurance premiums under taxable insurance contracts, the risks of which are underwritten by insurers, are subject to tax. Persons Liable for Tax Art. 3. (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016.) (1) Persons liable for tax are:

1. insurers;
2. tax representatives - in cases where they have been appointed in accordance with Art. 19. (2) (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016.) In cases of transfer of an insurance portfolio under the conditions and procedure of the Insurance Code, the person assuming the insurance for the transferred taxable insurance contracts shall be the person liable for tax. When the assuming insurer is an insurer under Art. 12(1)(2) of the Insurance Code, operating under the conditions of freedom to provide services, and has appointed a tax representative in accordance with Art. 19, the tax representative shall be the person liable for tax. (3) Persons liable for tax shall declare and pay the tax. Taxable Insurance Contract Art. 4. A taxable insurance contract is any insurance contract under which the insurance premium is not exempt from taxation in accordance with Art. 5 and where the Republic of Bulgaria is the Member State where the risk is located. Insurance Premiums Exempt from Taxation Art. 5. Insurance premiums under the following insurance contracts are not subject to tax:
3. reinsurance and retrocession contracts;
4. contracts from Appendix No. 1, Section I to the Insurance Code;
5. cargo insurance contracts during international transport from Appendix No. 1, Section II, letter "A", item 7 to the Insurance Code, when the starting or ending point of transport is outside the territory of the Republic of Bulgaria;
6. insurance contracts from Appendix No. 1, Section II, letter "A", items 5, 6, 11 and 12 to the Insurance Code. Exchange of Information Art. 6. (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016.) The Financial Supervision Commission shall notify the National Revenue Agency of insurers under Art. 12(1)(2) of the Insurance Code who have expressed their intention to carry out activities under the conditions of the right of establishment or freedom to provide services. Chapter Two

DETERMINATION OF THE TAX Taxable Event Art. 7. (1) The taxable event is the receipt of an insurance premium by insurer under a concluded taxable insurance contract. (2) In case of installment payment of the insurance premium, each receipt of a part of the insurance premium shall be considered a separate taxable event. (3) The taxable event occurs on the date on which the insurer receives the insurance premium. (4) When a taxable insurance contract is concluded through the intermediary of an insurance intermediary, the taxable event occurs on the date on which the insurer receives the insurance premium from the insurance intermediary. (5) The offsetting of a due insurance premium against the settlement of counter-obligations of the insurer to the insured shall also be considered receipt of an insurance premium. In this case, the taxable event occurs on the date of offsetting or payment of the obligation. (6) A taxable event also exists upon the refund of bonuses and discounts to the insurer under a taxable insurance contract. In this case, the taxable event occurs on the date of receipt or offsetting of the bonuses and discounts by the insurer. (7) The tax becomes due on the date of occurrence of the taxable event. Tax Base Art. 8. (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016; amended, No. 70 of 2024 , effective from the date determined in a Decision of the Council of the European Union on the adoption of the euro by the Republic of Bulgaria, adopted in accordance with Article 140( 2) TFEU, and a Council Regulation adopted in accordance with Article 140(3) TFEU.) (1) The tax base is the insurance premium received by the insurer under a taxable insurance contract. (2) In case of installment payment of the insurance premium, the tax base is the part of the insurance premium received by the insurer. (3) The tax base is increased by the refunded bonuses and discounts to the insurer under a taxable insurance contract. (4) The tax base is reduced by the amounts included in the insurance premium for :

1. (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016.) The Guarantee Fund under Art. 518 of the Insurance Code;
2. (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016.) The Fund for Securing Insurance Claims under Art. 521(1)(2) of the Insurance Code;
3. The State Fund "Agriculture" in accordance with Art. 14(1)(3) of the Law on Support for Agricultural Producers. (5) Provided bonuses and discounts from the insurance premium are not included in the tax base when they are provided to the insured upon payment of the insurance premium. (6) (Amended - State Gazette, No. 70 of 2024, effective from the date determined in a Decision of the Council of the European Union on the adoption of the euro by the Republic of Bulgaria, adopted in accordance with Article 140(2) TFEU, and a Council Regulation adopted in accordance with Article 140(3) TFEU.) When the insurance premium or part thereof is received in a foreign currency, respectively when the bonuses and discounts under para. 3 are refunded in a foreign currency, the tax base is determined based on the euro equivalent of that currency at the exchange rate announced by the Bulgarian National Bank on the date of occurrence of the taxable event. Tax Rate

Art. 9. The tax rate is 2 percent. Determination of Tax Amount Art. 10. (1) The amount of the tax is determined by multiplying the tax base by the tax rate. (2) The tax must be stated separately in the insurance contract from the due insurance premium and from the total amount due to the insurer. Tax Period Art. 11. (Amended - State Gazette, No. 105 of 2014, effective from 01.01.2015.) The tax period for determining the due tax is the calendar quarter. Due Tax for the Tax Period Art. 12. (1) The due tax for the tax period is the difference between the total amount of tax that is due from the insurer for the tax period and the total amount of tax on returned insurance premiums during that tax period. (2) The total amount of tax on returned insurance premiums during the tax period is determined by multiplying the sum of already taxed insurance premiums that are returned during that tax period by the tax rate. (3) When the total amount of tax on returned insurance premiums during the tax period exceeds the total amount of tax due from the insurer for that tax period, the excess is successively deducted from the due tax for the following tax periods. Accounting Records Art. 13. Persons liable for tax are obliged to maintain detailed accounting records and preserve information sufficient for the revenue authorities to establish their obligations under this law. Chapter Three DECLARATION, PAYMENT AND REFUND OF TAX Declaration of Tax Art. 14. (Amended - State Gazette, No. 105 of 2014, effective from 01.01.2015.) (1) Persons liable for tax shall submit a tax declaration by form for the preceding calendar quarter by the end of the month following the quarter. (2) (Repealed - State Gazette, No. 105 of 2014, effective from 01.01.2015.). (3) (Amended - State Gazette, No. 105 of 2014, effective from 01.01.2015.) The tax declaration shall be submitted to the territorial directorate of the National Revenue Agency according to the registration of the person liable for tax. (4) (Amended - State Gazette, No. 105 of 2014, effective from 01.01.2015.) The form of the tax declaration shall be approved by order of the Minister of Finance and published in the "State Gazette". Payment of Tax Art. 15. (Amended - State Gazette, No. 105 of 2014, effective from 01.01.2015; amended, No. 43 of 2016 .) (1) (Amended - State Gazette, No. 105 of 2014, effective from 01.01.2015.) The due tax for the tax period shall be paid by persons liable for tax by the end of the month, following the calendar quarter for which it is due. (2) (Amended - State Gazette, No. 43 of 2016.) The due tax shall be paid into the revenue of the state budget via the account of the territorial directorate of the National Revenue Agency according to the registration of the person liable for tax. (3) (Amended - State Gazette, No. 43 of 2016.) The due tax shall be considered paid on the date, on which the amount has been credited to the state budget via the account of the corresponding territorial directorate of the National Revenue Agency. Refund of Tax Art. 16. (1) Upon return of an already taxed insurance premium or part thereof, the insurer shall refund the tax to the insured.

(2) The amount of tax subject to refund under para. 1 is determined by the insurance premium subject to return multiplied by the tax rate. (3) The tax subject to refund shall be refunded simultaneously with the return of the insurance premium or the part thereof. Late Payment Interest Art. 17. For the due tax not paid on time, interest shall be due in accordance with the Law on Interest on Taxes, Fees and Other Similar State Claims. Correction of Errors in Declaration Art. 18. (1) Errors made in tax declarations submitted under Art. 14 shall be corrected in accordance with paras. 2 and 3. (2) Errors established before the expiration of the deadline for submitting the tax declaration shall be corrected in accordance with Art. 104 of the Tax and Social Insurance Procedure Code. (3) Errors established after the expiration of the deadline for submitting the tax declaration shall be corrected in the tax declaration for the tax period during which they were established. Chapter Four TAX REPRESENTATIVE Appointment of Tax Representative Art. 19. (Amended - State Gazette, No. 105 of 2014, effective from 01.01.2015; amended, No. 102 of 2015 , effective from 01.01.2016.) (1) (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016.) An insurer under Art. 12(1)(2) of the Insurance Code, operating under the conditions of freedom to provide services, may appoint a tax representative. (2) A tax representative of the insurer under para. 1 may only be a legally competent natural person with a permanent address in the country or permanently residing, or a local legal entity that is not in liquidation proceedings and has not been declared bankrupt and has no due and unpaid tax obligations and social security contributions collected by the National Revenue Agency. (3) The tax representative represents the insurer under para. 1 in all their tax relations arising under this law. (4) Upon termination of the person - tax representative, or upon the occurrence of other circumstances that make it impossible for that person to fulfill their obligations under this law, the insurer under para. 1 may appoint a new tax representative. Until the appointment of a new tax representative, the person liable for tax shall be the insurer under para. 1. (5) The tax representative is jointly and severally liable without limitation for the obligations under this law of the insurer under para. 1 whom they represent. (6) (Amended - State Gazette, No. 105 of 2014, effective from 01.01.2015.) The registration of the tax representative, or in cases where no tax representative has been appointed - of the insurer under para. 1, shall be carried out in accordance with Art. 82 of the Tax and Social Insurance Procedure Code at the competent territorial directorate of the National Revenue Agency under Art. 8 of the same Code based on the first submitted tax declaration. Chapter Five ADMINISTRATIVE PENALTY PROVISIONS Art. 20. (1) A person liable for tax who fails to submit a declaration under Art. 14, fails to submit it on time, fails to state or incorrectly states data or circumstances leading to the determination of a lower amount of due tax, shall be punished with a fine - for natural persons, or with a pecuniary sanction - for legal persons, in the amount of 500 to 2000 BGN.

(2) In case of a repeated violation under para. 1, the amount of the fine or pecuniary sanction shall be 1000 to 4000 BGN. Art. 21. (1) An insurer who fails to state the tax in the insurance contract in accordance with the requirements of Art. 10(2) shall be punished with a pecuniary sanction in the amount of 500 to 2000 BGN. (2) In case of a repeated violation under para. 1, the amount of the pecuniary sanction shall be 1000 to 4000 BGN. Art. 22. (1) Acts establishing violations shall be drawn up by the authorities of the National Revenue Agency, and penalty decisions shall be issued by the Executive Director of the National Revenue Agency or by an authorized official. (2) The establishment of violations, issuance, appeal, and execution of penalty decisions shall be carried out in accordance with the Law on Administrative Offences and Penalties. ADDITIONAL PROVISIONS § 1. (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016.) For the purposes of this law:

1. (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016.) "Insurer" means the one under Art. 12(1) of the Insurance Code.
2. "Insurance premium" means the agreed sum in an insurance contract, which is paid to the insurer as a price against the risks underwritten by them for the duration of the insurance contract. Paid interest and penalties to the insurer that have a compensatory nature are not considered part of the insurance premium.
3. (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016.) "Reinsurance contract" means a contract under which a reinsurer under Art. 12(2) of the Insurance Code or an insurer operating under the conditions of Art. 25(1) of the Insurance Code has assumed all or part of the risks covered by an insurer or another reinsurer, against the cession of an insurance premium.
4. "Retrocession contract" means a contract under which risks underwritten under a reinsurance contract are transferred to another reinsurer or insurer that conducts active reinsurance.
5. (Amended - State Gazette, No. 102 of 2015, effective from 01.01.2016.) "Member State where the risk is located" means the one under § 1(12) of the Additional Provisions of the Insurance Code.
6. "Bonuses and discounts" for the purposes of Art. 7(6) and Art. 8(3) are the refunded bonuses and discounts to the insurer, which were provided by them to the insured upon conclusion of the insurance contract as a reduction of the insurance premium and which were received or offset by the insurer due to non-fulfillment of the conditions under which they were provided. TRANSITIONAL AND FINAL PROVISIONS § 2. Art. 10(2), Art. 21 and § 3(1) and (2) shall not apply to insurance contracts concluded before the entry into force of this law. § 3. The following amendments are made to the Insurance Code (Pub., State Gazette, No. 103 of 2005; amended, No. 105 of 2005, No. 30, 33, 34, 54, 59, 80, 82 and 105 of 2006, No. 48, 53, 97, 100 and 109 of 2007, No. 67 and 69 of 2008, No. 24 and 41 of 2009 and No. 19, 41 and 43 of 2010):
7. In Art. 287(3), fourth sentence, the words "may be stated" are replaced with "shall be stated".
8. In Art. 311i(4), second sentence, the words "may be stated" are replaced with "shall be stated".
9. In § 1 of the Additional Provisions: a) item 15 is amended as follows: "15. 'Establishment in a Member State' means a seat, branch or agency of a legal person, including any permanent presence of the legal person on the territory of a Member State, even when this presence is not in the form of a branch or agency, but through a permanent office managed by the legal person's own personnel or by a person who is independent but has permanent authority to act on behalf of the legal person."; b) in item 22 letter "g" is amended as follows: "g) in all other cases the risk is located in: aa) the Member State where the insured has permanent residence, if the insured is a natural person, or bb) the Member State where the legal person to which the insurance contract relates is established, if the insured is a legal person". § 3a. (New - State Gazette, No. 105 of 2014, effective from 01.01.2015.) The due tax for the last tax period of 2014 shall be paid by 31 January 2015. § 4. This law shall enter into force on 1 January 2011. The law was adopted by the 41st National Assembly on 20 October 2010 and is sealed with the official seal of the National Assembly. Speaker of the National Assembly: Tsetska Tsacheva Transitional and Final Provisions to the LAW on Amendment and Supplement of the Law on Value Added Tax (State Gazette, No. 105 of 19.12.2014, effective from 01.01.2015) § 45. The following amendments and supplements are made to the Law on Tax on Insurance Premiums (State Gazette, No. 86 of 2010):
10. In Art. 11 the words "calendar month" are replaced with "calendar quarter".
11. In Art. 14: a) paragraph 2 is repealed; b) in para. 3 the words "Tax declarations shall be submitted" are replaced with "The tax declaration shall be submitted"; c) in para. 4 the words "The forms of tax declarations shall be approved" are replaced with "The form of the tax declaration shall be approved", and the word "published" is replaced with "published".
12. In Art. 15 para. 1 is amended as follows: "(1) The due tax for the tax period shall be paid by persons liable for tax by the end of the month following the calendar quarter for which it is due."
13. In Art. 19(6) the words "tax declaration under Art. 14(2)" are replaced with "first submitted tax declaration".
14. In the transitional and final provisions § 3a is created: "§ 3a. The due tax for the last tax period of 2014 shall be paid by 31 January 2015." § 46. This law shall enter into force on 1 January 2015, except for:
15. paragraph 17 regarding Art. 154(2) and Art. 156(2), which shall enter into force on the day of publication of the law in the "State Gazette";
16. paragraph 39, item 7, letter "b", items 9-13 and item 19, letters "a", "b", "c", "d", "e" and letter "e" - regarding items 71-74, and item 23, letter "a" and § 42, items 11 and 17, which shall enter into force on 1 January 2014;
17. paragraph 34, item 7, which shall enter into force on 1 January 2016, item 21, letter "a" (regarding Art. 84(6), item 9), which shall enter into force on 1 July 2015, and item 2, letter "c", items 30, 31, 32, 35 and 39 and § 35, which shall enter into force after the adoption of a positive decision by the European Commission under a notification procedure initiated by the Ministry of Finance in accordance with Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations and on rules on Information Society services. Transitional and Final Provisions to the INSURANCE CODE (State Gazette, No. 102 of 29.12.2015, effective from 01.01.2016) § 37. The following amendments are made to the Law on Tax on Insurance Premiums (Pub., State Gazette, No. 86 of 2010; amended, No. 105 of 2014):
18. In Art. 3(2) the words "Art. 8(1)(2)" are replaced with "Art. 12(1)(2)".
19. In Art. 6 the words "Art. 8(1)(2)" are replaced with "Art. 12(1)(2)".
20. In Art. 8(4): a) in item 1 the words "Art. 287" are replaced with "Art. 518"; b) in item 2 the words "Art. 311d" are replaced with "Art. 521(1)(2)".
21. In Art. 19(1) the words "Art. 8(1)(2)" are replaced with "Art. 12(1)(2)".
22. In § 1 of the Additional Provisions: a) in item 1 the words "Art. 8(1)" are replaced with "Art. 12(1)"; b) in item 3 the words "Art. 8(2)" are replaced with "Art. 12(2)", and the words "Art. 9(2), first sentence" are replaced with "Art. 25(1)"; c) in item 5 the words "§ 1, item 22" are replaced with "§ 1, item 12". Transitional and Final Provisions to the LAW on Amendment and Supplement of the Law on Public Finances (State Gazette, No. 43 of 07.06.2016) § 43. In the Law on Tax on Insurance Premiums (Pub., State Gazette, No. 86 of 2010; amended, No. 105 of 2014 and No. 102 of 2015) in Art. 15(2) and (3) the words "the republican budget" are replaced with "the state budget". Transitional and Final Provisions to the LAW on the Introduction of the Euro in the Republic of Bulgaria (State Gazette, No. 70 of 20.08.2024) § 41. In the Law on Tax on Insurance Premiums (Pub., State Gazette, No. 86 of 2010; amended, No. 105 of 2014, No. 102 of 2015 and No. 43 of 2016) in Art. 8(6) the words "lev equivalent" are replaced with "euro equivalent".

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