NRA Representation

Power of Attorney and Authorisation

Representation before the NRA requires a special power of attorney — a general power of attorney is insufficient (Art. 10 TSIPC). The special power of attorney must specify:

Type of proceedings — inspection, audit, appeal, applications
Types of taxes/social security contributions — VATA, CITA, Personal Income Tax Act, Social Security Code, etc.
Tax periods — specific years or months
Scope of authority — receipt of documents, filing of returns, signing of protocols

The power of attorney does not require notarisation but must be signed by the legal representative of the company. For electronic filing, authorisation via a qualified electronic signature (QES) is possible, allowing remote representation.

The NRA's practice is to require a specific power of attorney for each separate proceeding. Our recommendation is to prepare a sufficiently broad power of attorney that covers all potential actions within the given proceeding.

Inspections and Audits — Key Differences

The distinction between an inspection and an audit is of fundamental importance for the rights of the taxpayer (Art. 110 TSIPC).

Inspection (Art. 110(2) TSIPC)

CANNOT independently establish tax liabilities
May be documentary (at the NRA office) or on-site (at the taxpayer's premises)
No formal assignment order is required
Does not result in an act with direct legal effect

Types of Inspections

VAT offset/refund inspection — the most common type, upon a declared VAT refund (Art. 92 VATA)
Income-to-assets inspection — comparison of declared income with acquired assets (individuals)
Fact-finding inspection — preliminary gathering of information
Thematic inspection — on a specific issue (e.g. correct application of a DTT)

Tax Audit (Art. 110(1) TSIPC)

CAN establish and amend tax liabilities
Assigned by a formal order (audit assignment order)
Concludes with a tax assessment act — a legally binding document
Subject to administrative and judicial appeal

Important: if grounds for determining liabilities are found during an inspection, an audit is initiated. An inspection may "escalate" into an audit at any time.

Voluntary Disclosure and Corrections

Correcting tax returns is an important compliance tool that can prevent more severe consequences in a subsequent audit.

Correction before the Filing Deadline

Before the statutory filing deadline, a tax return may be corrected an unlimited number of times. Each new return replaces the previous one.

Correction of the Annual CITA Return

Legal entities are entitled to one correction of their annual corporate tax return by 30 September of the year following the reporting year (Art. 75(3) CITA, in conjunction with Art. 92 CITA). The correction may include changes to the tax financial result, adjustments, reliefs, etc.

Correction of the Annual Personal Income Tax Return

Individuals may correct their annual tax return by 30 September of the year following the year of income receipt (Art. 53(2) Personal Income Tax Act).

Strategic Significance

Bulgarian tax law does not have a formal "voluntary disclosure" institute with automatic immunity from penalties. Nevertheless, early correction of errors is treated favourably by the tax administration — it reduces the risk of an audit, and in the event of an audit, the good faith of the taxpayer is taken into account.

Instalment and Deferral Arrangements

Where a one-time payment of tax liabilities is not possible, the TSIPC provides for instalment arrangements (payment in instalments) or deferral (postponement of payment) under Art. 183-189 TSIPC.

Three Cumulative Conditions

Financial inability — the person cannot pay the liabilities in full without jeopardising their business activity
Viability — the person is capable of paying the liabilities under an instalment/deferral arrangement
Security — the liabilities are secured (pledge, mortgage, bank guarantee)

Competent Authorities by Liability Amount

NRA Territorial Director — up to BGN 100,000 and up to 1 year
NRA Executive Director — from BGN 100,000 to BGN 300,000 and up to 2 years
Minister of Finance — over BGN 300,000 and up to 3 years

Interest during Instalment Periods

During the instalment/deferral period, interest is due at the BNB base interest rate (not the statutory default interest rate). The decision on instalments is issued within 3-4 months from the filing of the request.

Prohibited Cases

Instalment/deferral arrangements are not permitted where:

The person is in liquidation or insolvency
The liabilities are for VAT and excise duty, unless established by a final tax assessment act
1-2 instalments are missed — the entire outstanding liability becomes immediately due and payable

Interim Measures

The NRA has the power to impose interim measures to secure the future collection of established or anticipated tax liabilities (Art. 121 TSIPC).

Types of Interim Measures

Freezing of bank accounts — the most common measure. Blocks disposal of funds held in bank accounts
Seizure of movable property — motor vehicles, machinery, inventory
Encumbrance (mortgage) on real estate — prohibition on disposal of properties
Attachment of receivables from third parties — e.g. receivables from counterparties

When Are They Imposed?

Interim measures may be imposed at any stage of the tax proceedings — during an audit, after the issuance of a tax assessment act, or where there is evidence of concealment of assets. The measures are imposed by a decree of the public enforcement officer (Art. 195 TSIPC).

Appeal

The decree imposing interim measures is subject to appeal within a 7-day period before the NRA Territorial Director (Art. 197 TSIPC). The appeal is reviewed within 14 days. If the decision is unfavourable, it may be appealed before the administrative court within 7 days.

Substitution of Security

The taxpayer has the right to request substitution of the imposed interim measures with a cash deposit or bank guarantee (Art. 199 TSIPC). Upon provision of a cash deposit or bank guarantee covering the full amount of liabilities with interest, the revenue authority is obliged to lift the imposed measures — this is mandatory, not discretionary.

Rights of Third Parties

If an interim measure affects the property of a third party (not the debtor), the third party may file an appeal for the annulment of the measure by proving their ownership right. Our team has experience in protecting the rights of both taxpayers and affected third parties.

Frequently asked questions

Do I need a lawyer for an NRA inspection?

Although an inspection cannot independently establish tax liabilities (unlike an audit), engaging a tax attorney is strongly recommended. There are several reasons. First, an inspection may escalate into an audit at any time — if discrepancies are found. Second, information provided during the inspection may be used against you in a subsequent audit. Third, a lawyer can control the scope of documents and explanations provided — not everything requested is mandatory. Fourth, in a VAT offset/refund inspection, professional representation can expedite the process and prevent an unjustified refusal. In practice, the value of legal assistance during an inspection is incomparably lower than the consequences of incorrectly provided information.

Can I pay a tax liability in instalments?

Yes, the TSIPC provides for instalment arrangements (payment in instalments) and deferral (postponement of payment) of tax liabilities under Art. 183-189 TSIPC. Three cumulative conditions must be met: financial inability to make a one-time payment, viability (ability to pay in instalments), and provision of security. Maximum periods are: up to 1 year for liabilities up to BGN 100,000; up to 2 years for BGN 100,000-300,000; and up to 3 years for over BGN 300,000. Interest at the BNB base rate is due during the instalment period. Important restriction: instalments are not permitted for VAT and excise duty unless the liabilities are established by a final tax assessment act. Also, missing 1-2 instalments results in the entire outstanding liability becoming immediately due and payable.

The NRA has frozen my bank account — what should I do?

Freezing of a bank account is one of the most frequently applied interim measures by the NRA (Art. 195 TSIPC). In the event of a freeze, you have several options. First, appeal the freeze decree within 7 days before the NRA Territorial Director — check whether the measure is proportionate to the liability. Second, request substitution of the freeze with a bank guarantee or cash deposit (Art. 199 TSIPC) — upon provision of full security, the NRA is obliged to lift the freeze. Third, if the freeze affects property that does not belong to the debtor (e.g. marital community property), the affected person may challenge the measure. Fourth, where a freeze is imposed during an audit, it may be appealed together with the tax assessment act. We recommend contacting a tax attorney immediately — every day of delay can cause significant damage to the business.