Банкеръ Daily


Advance Tax on Non-Existent Profit Is an Economic Suicide

Non-existent profit tax advance in 2020 is economic suicide. We call on MPs not to accept this proposal, which is both untimely and moreover, detrimental to business and against the normality of crisis management. This is stated in the position of the Association of Industrial Capital in Bulgaria.

The Bulgarian business fully supports the first proposal made by the petitioners for the emergency measure act, but they are strongly against the second proposal – an amendment to the order for the advance payment of corporate tax on the basis of the tax profit declared for 2018.

"Under the current wording, companies that are required to pay corporate tax advances determine their size on the basis of their estimated profit for the year. In the event of the expected collapse for a number of businesses, it is proposed that the corporate tax contributions for the first six months of 2020 be calculated and determined ex officio by the NRA on the basis of the realized profit in 2018, without the right to change these contributions for the half-year of 2020. In practice, this means a mandatory advance tax payment in a difficult environment - business losses, dismissal of workers, bankruptcies, which is clear that at the end of the year it will be undue. This is inevitable in entire sectors of the economy that were profitable in 2018 - tourism, transport, a number of industries, trade, and which in 2020 will suffer a huge drop in sales revenue and will produce negative financial results on an annual basis. Many Bulgarian companies will be required to pay this unfairly determined advance tax, but will not have the financial capacity to pay it because of the financial problems caused by the crisis. It is these financially disadvantaged businesses that will be subject to additional costs, excessive interest on unpaid advance tax (basic interest rate + 10%), which will further "kill" the viability of these enterprises, "the position states.

According to BG business, all responsible governments around the world are looking for ways to ease their businesses by offering fiscal incentives to help them exist and grow tomorrow when the crisis passes  and in Bulgaria the proposal seeks the state to be financed in advance, and if it is not, the state overloads the business with excessive interest on unpaid advance taxes.

"There is no need for this proposed change, the current way of determining the advances is fair and objective enough. No one can predict the financial performance of an enterprise more accurately than its management or owners. The proposed change eliminates the possibility of businesses to change / reduce the amount of the advances for the first half of 2020, that is, even if a particular enterprise ceases to engage in commercial / manufacturing activities because the state has declared a state of emergency and obliges it to discontinue work which has deprived the enterprise of revenue, but it generates a loss of at least the amount of fixed costs, that same country obliges it to pay an advance tax on a forecast profit the state had determined, based on the profit, made in 2018, when the crown virus did not exist. Many companies have made a profit in 2018 but will discontinue operations or expect a loss for 2020. It is not normal  these companies to be required to pay a pre-tax for a non-existent profit for 2020. It is not the time now to change this regime," is the expert opinion of the business.

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