In the last decade, the problem of frequent refusals by the tax authorities to recognize the right to a tax credit upon acquisition by legal entities of motor vehicles - commercial vehicles has deepened. The problem received practical development in cases of acquisition of "combis" equipped with Certificate N1 and registered in the Traffic Police as "commercial vehicles." Merchants importing and selling new vehicles included in their advertisements the right to deduct a tax credit. In practice, however, it turned out that individuals who purchased new vehicles - either through direct sale or leasing - were refused by the tax administration to deduct the VAT paid. The problem was brought to court, leading to the initiation of dozens of administrative cases. Generally, the courts in the Republic of Bulgaria adopted the thesis that a vehicle equipped with Certificate N1 and registered in the Traffic Police with the designation "commercial" in the registration certificate should be treated for tax purposes as a commercial vehicle, and upon its acquisition, the purchaser has the right to utilize a tax credit equal to the VAT paid on the purchase price (as well as VAT charged on purchased consumables).

The specific trigger for this current analysis was a case where the right to use a tax credit was denied under Article 70, paragraph 1, points 4 and 5 of the VAT Act for the purchase of a new commercial vehicle, Skoda Octavia Combi Tour 1.6 MPI, acquired by "Autobohemia" AD under a financial leasing agreement from 2011 for the amount of 13203.54 euros inclusive of VAT, as well as for fuel and accessories for the passenger car purchased during the revised period. Based on the issued tax audit report, the company - the buyer, which had exercised its right to acquire the leased asset after the lease agreement expired, was denied the right to a tax credit. Thus, at the time of transferring ownership of the motor vehicle, the tax authorities initiated a VAT audit, which concluded with the mentioned tax audit report. The audit report was appealed to the Director of the Tax Office (currently the Tax Audit Office), who fully upheld the contested tax audit report. Therefore, based on Article 156 of the Tax and Social Security Procedure Code, the taxpayer exercised its right to appeal to the Administrative Court of Plovdiv. The main issue raised in the dispute before the court concerned whether the Skoda Octavia Combi Tour vehicle qualifies as "light" under the VAT Act §1, point 18 or as "commercial" (the type of certificate the vehicle actually holds). It was argued that the vehicle holds a registration certificate issued by the Traffic Police, describing it as a commercial vehicle.

Apart from that, and in addition to the fact that the vehicle is commercial by definition, it should be noted that the vehicle falls under the exception in the second sentence of the cited provision. In this sense, it should be taken into account the provision of § 1, point 2 of the Regulation No. 75 of 7.10.2003 on EU type-approval for new motor vehicles of categories M2, M3, N, and their trailers of category O concerning their masses and dimensions. According to this provision, a commercial vehicle represents a motor vehicle of category N, namely - a "commercial vehicle" of categories N1, N2, or N3, designed and constructed primarily or mainly for the carriage of goods; it may also tow trailers. The fact that the commercial vehicle is primarily intended for the carriage of goods is evident from its characteristics provided by the manufacturer, according to which the vehicle has a total weight of up to 3.5 tons and its payload is more than twice the weight of the permissible number of passengers, i.e., the vehicle has a predominant cargo functionality.

In its decision on the case, the court adopted the arguments of the appellant, finding in the decisive part of its reasoning that the exception in Article 70, paragraph 1, point 4 of the VAT Act did not apply, as a passenger car had not been purchased, but a commercial one. The deciding panel found that the reference made by the reviewing authorities to § 1, point 18 of the VAT Act was absolutely inapplicable to the category of commercial vehicles, which was indisputably established to be the case of the commercial vehicle, considering the European certificate of conformity submitted in the correspondence, as well as the certificate of registration of the vehicle issued by the Traffic Police. These are official documents within the meaning of Article 179 of the Code of Civil Procedure, certifying that the vehicle is a commercial vehicle, categorized as N1 (N1G) with seats for passengers and a driver "4+1".

For the completeness of the exposition, the administrative court analyzed the definition provided in Directive 2007/47/EC of the EU (which is applicable law in the territory of the Republic of Bulgaria) and discussed the conclusion of the expert appointed by the court in the judicial auto-technical expertise, that the requirement that the number of seats should not exceed six was met, and the inequality P - (M + N x 68) > N x 68, hence the vehicle is considered to be of category N (commercial).

The decision of the Plovdiv Administrative Court was appealed to the Supreme Administrative Court (VAS), which rejected the appeal of the NRA and fully confirmed the decision of the first-instance court."

REJECTING AN INHERITANCE by Elena Georgieva

In recent years, the indebtedness among citizens has significantly increased, along with the percentage of fast loans and other debts to financial institutions or individuals. In many cases, the heirs of a debtor are not even informed about the existing debts of their deceased relative. Due to this reason, it often happens in practice that the liabilities of the inheritance far exceed the inherited assets.

The Law of Succession (Articles 52-54) provides that heirs who have accepted the inheritance are liable for the obligations burdening it, in proportion to the shares they receive (Article 60, paragraph 1). It should be noted that the law also regulates a procedure for renunciation of inheritance, in which the heir forfeits their rights to the deceased's property but also becomes exempt from all liabilities of the inheritance, i.e., the existing obligations of the deceased.

REQUIRED DOCUMENTS FOR RENUNCIATION OF INHERITANCE:

1. Copy - extract from the death certificate;
2. Certificate of heirs (current) - it should be noted that the validity of this document is 6 months;
3. Application form;
4. Declaration of renunciation of inheritance - notarized;
5. Declaration under Article 25, paragraph 2 of the Law on Notaries and Notarial Activity (LNA) - "Before drawing up the respective act, the notary carries out a check for the existence of any security measure imposed under the Law on the Forfeiture in Favor of the State of Illegally Acquired Property.";
6. Document proving payment of a state fee in the amount of 20 leva together with an additional fee of 5 leva for issuing a certificate of renunciation of inheritance.

The competent authority to consider the application for renunciation of inheritance and to pronounce a decision is the District Court in the area where the inheritance is opened. The place where the inheritance is opened is considered to be the place where the deceased's last permanent address was located. The renunciation is recorded in a special register for this purpose.

The renunciation of inheritance is not limited by a deadline. However, it should be noted that renunciation of inheritance is possible only if the heir has not already accepted it because renunciation of inheritance after it has been accepted – explicitly or through conclusive actions (by actions of the heir that undoubtedly imply his intention to accept the inherited property, Article 49, paragraph 2 of the Law) is invalid. Examples of conclusive actions, which are considered as acceptance of the inheritance, include: receiving the deceased's salary or receiving sums from his savings account, or paying his debt by his heirs, entering into an agreement for the use of the inherited property, concealing the inherited property - performing any of these actions constitutes tacit acceptance of the inheritance. It should be noted that withdrawing the deposit of a deceased spouse by the surviving spouse, as well as paying off his debts, constitute actions of accepting the inheritance, although the deposit and debts are considered common to the spouses."

Note: Submitting a declaration for determining tax on properties acquired without consideration is merely a precautionary measure to avoid the sanction of Article 124 of the Local Taxes and Fees Law ("An heir, legatee, or their legal representative who fails to submit a declaration under Article 32, fails to submit it within the deadline, fails to declare, or falsely declares property received through inheritance shall be fined from 10 to 500 BGN"). According to Article 32 of the same law, heirs are obliged to submit a declaration within a 6-month period so that taxation on the inheritance can be timely and accurately carried out ("Upon the opening of an inheritance, the liable persons under Article 31 or their legal representatives are obliged to submit a declaration to the municipality at the deceased's last place of residence, and if the latter had a residence abroad - at the location of the majority of his property in the country"). Failure to declare constitutes a violation punishable by a fine. Therefore, submitting a declaration in compliance with the law does not imply an intention to accept the inheritance. In its practice (Decision No. 54-61-OCS Supreme Court of Cassation and PP Supreme Court of Cassation 4-64), the Supreme Court of Cassation (SCC) concludes that submitting a declaration for taxation and even appealing the assessed tax and paying it do not by themselves imply tacit acceptance of the inheritance.

The portion renounced enlarges the shares of the remaining heirs, but not of all heirs, only those who are in the same line and who have accepted the inheritance. If any of the heirs has transferred their inheritance to a third party before renunciation (i.e., a person who is not an heir), the seller-heir has the right to the increase in the inheritance share, not the buyer of the inheritance (Interpretative decision No. 137a of November 17, 1955, Case No. 126/55. At the SCC). Accordingly, if there are no other heirs in the same line or if all have renounced, it passes to the next line of heirs. This means that if the renouncing heir has descendants (children, grandchildren), then after their renunciation, they cannot acquire any rights over the renounced inheritance, in accordance with Article 53 of the Law. It passes to the other heirs in the same line, whose shares are increased, or to the next line of heirs.

Upon renunciation of the inheritance declared by some of the deceased's children, and also upon its non-acceptance by some of them, the surviving spouse receives a share of the inheritance equal to the share of each of the children who have accepted the inheritance (i.e., the surviving spouse will not inherit solely the portion renounced by the renouncing children, but together with those of them who have accepted the inheritance). Upon renunciation of the inheritance declared by all of the deceased's children, and also upon its non-acceptance by all of them, the surviving spouse inherits along with the descendants of the next line (e.g., if the children refuse to accept the inheritance, the surviving spouse will inherit along with the deceased's parents, or with the deceased's siblings). Only if there are no heirs from the next line of descendants (i.e., if the deceased has no living parents, siblings, nieces, etc.), the surviving spouse will inherit the entire estate (Interpretative decision No. 148 of December 10, 1986, Case No. 119/86, SCC).

Heirs cannot accept a portion of the inheritance and renounce the other. The law expressly provides that renunciation of inheritance made under condition, for a term, or for a portion of the inheritance is invalid (Article 54, paragraph 1 of the Law). Likewise, renunciation of inheritance cannot be contested due to mistake (Article 54, paragraph 2 of the Law).

References:

1. Tasev, H., Tasev, S., Petkanov, G., Inheritance Law, Ciela;
2. Decision No. 54-61-OCS Supreme Court of Cassation and PP Supreme Court of Cassation 4-64;
3. Interpretative decision No. 137a of November 17, 1955, Case No. 126/55. At the SCC;
4. Interpretative decision No. 148 of December 10, 1986, Case No. 119/86, SCC;
5. Law of Succession;
6. Law on Local Taxes and Fees.