This article outlines the legal framework for tax inspections and tax audits in Bulgaria. If you or your business is subject to an inspection or audit, our tax lawyers can advise you, working where appropriate with the experienced accountants in our team.

Tax liabilities arise by operation of law. Taxpayers must declare and pay their taxes within the statutory deadlines. Compliance with tax and social security legislation is monitored through inspections and audits. Obtaining advice from a tax lawyer and, where needed, an accountant at an early stage can help you understand the procedure and protect your rights.

Tax inspections

A tax inspection is carried out by the revenue authorities to check compliance with tax and social security legislation. The person under inspection must cooperate with the authorities.

An inspection may establish facts and circumstances relevant to tax liabilities and compulsory social security contributions. It does not, in itself, determine the tax or compulsory social security liabilities of the person under inspection. No express written order is required to initiate an inspection.

The person under inspection must provide access to accounting records and to any electronic systems used to maintain those records. In the circumstances prescribed by law, the revenue authorities may:

• secure evidence by preparing an inventory or seizing information carriers against an inventory;
• seal business premises or part of them;
• where cooperation is refused, request assistance from the police and seek a search and seizure under the Criminal Procedure Code.

The law also provides safeguards for the person under inspection. Actions taken by the revenue authorities may be challenged through the applicable administrative procedure and, subsequently, before the competent administrative court. Where an administrative challenge is required, it must be pursued before judicial review is available. We recommend seeking advice from a tax lawyer during a tax inspection.

Tax audits

A tax audit is conducted by the revenue authorities to establish tax liabilities and compulsory social security contributions. It begins with an order assigning the audit.

An audit may be assigned by the Executive Director of the National Revenue Agency (NRA), or an authorised deputy, in respect of any person and any type of liability. It may also be assigned by a revenue officer designated by the director of the competent territorial directorate.

The audit order defines the scope of the audit and must specify:

• the identity of the person being audited;
• the revenue officers conducting the audit and the audit team leader;
• the time allowed for the audit;
• the period under review;
• the types of tax liabilities and/or compulsory social security contributions being audited;
• other circumstances relevant to the audit.

The findings are set out in a tax audit report, which must be prepared no later than 14 days after the audit is completed. The report is served on the person being audited. Although the report cannot be appealed separately, the person concerned may submit a written objection. Our tax lawyers can assist with preparing an objection to a tax audit report.

A tax assessment is issued following the audit report. The tax assessment is the final administrative act in this procedure. It may:

1. establish, amend and/or offset tax liabilities and compulsory social security contributions;
2. determine refundable amounts for a tax period where a refund is provided for by law;
3. provide for the repayment of amounts paid or collected without being due.

Challenging a tax assessment

A tax assessment may be appealed. An administrative appeal to the director of the competent Appeals and Tax and Social Security Practice Directorate (ODOP) is a prerequisite for a subsequent court challenge.

A tax assessment is an administrative act and is subject to the applicable rules governing administrative and judicial review. Filing an appeal does not automatically suspend its enforcement. A suspension may be sought under the statutory procedure, including the applicable requirements for security.

It is also possible to pay the assessed amount and continue to challenge the assessment. If the challenge succeeds, amounts found not to have been due may be recoverable together with the statutory interest applicable in the circumstances. Our tax lawyers can discuss the available options in your case.

Procedural irregularities in issuing a tax assessment

A breach of the rules governing the audit or the collection of evidence may provide grounds for setting aside a tax assessment. Revenue authorities are public bodies and must act within the powers conferred on them by law.

The revenue authorities must substantiate the factual findings on which the challenged assessment is based. A tax lawyer will examine the conduct of the audit and identify procedural irregularities that may be relevant to the assessment’s validity or lawfulness.

For advice and assistance with tax inspections, tax audits, or other tax and social security matters, please contact us. Alongside the firm’s lawyers, our tax team includes accountants with many years of professional experience.

Zdravkov Law Firm
office@zdravkov-legal.com
+359 886 722 772
Sofia: 3 Pozitano Square
Plovdiv: 128 Tsar Boris III Boulevard