Bulgaria: Tourist tax unconstitutional

At the beginning of April the Bulgarian Constitutional Court ruled that the tourist tax, introduced in Bulgaria in April 2011, is unconstitutional.

When the Law on Local Taxes and Fees was amended last year, the tourist tax replaced the local tourist fees that hotel owners had to pay per overnight stay. The new tax was estimated on the annual occupancy of hotels and other accommodation establishments but set a minimum threshold of a 30% occupancy rate. Thus, the tax authorities acted on the assumption that every hotel had an occupancy rate of at least a 30% in a given year.

The motive for the introduction of the new tourist tax was the fact that it was widely believed that under the previous taxation method hotel owners misreported the number of stays in the hotels in order to pay lower fees.

The members of Parliament who had filed the complain with the Constitutional Court stated that the new tax in fact taxes the number of hotel beds, rather than the actual number of hotel stays in a given year.

According to the complainants’ arguments, the tourist tax, which is supposed to be an income tax, has been turned into a property tax thus mixing the two taxation concepts and contradicting the principles in the Bulgarian Constitution. The new tax is also said to be in violation of the principle that taxation must take into account the actual income.

In its ruling the Bulgarian Constitutional Court has agreed with the arguments of the complainants, stating that it is the number of overnight stays that need to be taxed, while the minimum 30% occupancy rate threshold turns the tourist tax into a property tax.

The judges ruled that this contradicts the Constitution in its requirement that income and property taxes be clearly differentiated. They have also based their sentence on a 1996 case in which the same court ruled that the two type of taxes mentioned above cannot be mixed in Bulgarian legislation.

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