Tax on Insurance Premiums
The taxation regime for insurance premiums is regulated in the Tax on Insurance Premiums Law effective as from 01.01.2011.
Scope of taxation
Insurance premiums under taxable insurance contracts, the risks of which are assumed by insurers, shall be subject to tax.
Insurance Premiums Exempt from Tax
No tax shall be levied on insurance premiums under reinsurance and retrocession contracts, life Insurance and annuities, marriage and birth insurance, life insurance linked to an investment fund, permanent health insurance, capital redemption, supplementary insurance, cargo in transit, insurance of aircraft and vessels, and third party liability for the possession and use of aircraft and vessels, cargo in transit insurance.
Taxable persons shall be:
- Insurers registered as a joint-stock company, a co-operative society or an insurer from a third state through a branch registered under the Commerce Law, which has received a licence under the terms, conditions, and procedure specified in the Insurance Code.
- Insurers from another member state under the conditions of the right of establishment or of the freedom to provide services.
- Tax representatives - in the events where such tax representatives have been determined in accordance with the procedure specified in the Law.
A tax event shall be the receipt of an insurance premium by an insurer under a concluded taxable insurance contract, and in the event of instalment payment of the insurance premium each receipt of part of the insurance premium shall be regarded as a separate tax event. A tax event shall occur on the date on which the insurer receives the insurance premium.
The tax shall become payable on the date on which the tax event has occurred.
The tax base shall be the insurance premium, received by the insurer under the taxable insurance contract. In the event of instalment payment of the insurance premium the tax base shall be the part of the insurance premium received by the insurer.
The tax base shall be increased with the bonuses and rebates reimbursed to the insurer under taxable insurance contracts. The bonuses and rebates granted from the insurance premium shall not be included in the tax base where they have been granted to the insured person with the payment of the insurance premium.
Rate of tax
The tax rate shall be 2 per cent.
Calculation of the Amount of Tax
The amount of tax shall be calculated by multiplying the tax base by the tax rate.
The tax period for assessing the tax payable shall be the calendar month.
Tax Payable for the Tax Period
The tax payable for the tax period shall be the difference between the total amount of the tax subject to payment by the insurer for the tax period and the total amount of the tax on the insurance premiums refunded during the same tax period. The total amount of the tax on the insurance premiums refunded during the same tax period shall be determined by multiplying the amount of the already taxed insurance premiums, which have been refunded during the corresponding tax period, by 2%.
Declaring the tax
Insurers shall submit tax returns in a standard form for the previous calendar quarter by the end of the month following this quarter to the territorial directorate of the National Revenue Agency in which they are registered.
Tax representatives and insurers from another member state working under the conditions of freedom to provide services shall also submit only once a tax return in a standard form for the first tax period for which tax is owed by the end of the following month.
The tax payable for the tax period shall be paid by insurers every month, by the end of the following month to the executive budget into the account of the territorial directorate of the National Revenue Agency in which they are registered.
In accordance with the provisions of Article 17 of the Tax on Insurance Premiums Law, interest in accordance with the Interest on Taxes, Fees and Other Similar State Receivables Law shall be owed on the tax payable, which has not been paid within the deadline.
In accordance with the provisions of Article 20 of the Tax on Insurance Premiums Law, any tax liable person which fails to submit a tax return in accordance with Article 14, fails to submit such a return within the deadline, fails to state or states incorrectly data or circumstances, resulting in a lower tax assessment, shall be punished with a fine - in the event of natural persons, or with a pecuniary sanction - in the event of legal entities, in the amount from BGN 500 to BGN 2,000. In the event of a repeated violation under paragraph 1 the amount of the fine or the pecuniary sanction shall be from BGN 1,000 to BGN 4,000.
In accordance with the provisions of Article 22 of the Tax on Insurance Premiums Law, acts for establishing of violations shall be drawn up by the National Revenue Agency bodies, and penal decrees shall be issued by the Executive Director of the National Revenue Agency or an official authorised thereby. The ascertainment of violations, the issuing, appeal against and enforcement of the penalty decrees follows the procedure established by the Administrative Violations and Sanctions Law.
For further information: http://www.nap.bg/