The British pound, the U.S. dollar, the Swiss franc and other currencies in which Bulgarian citizens keep deposits will cause headaches not only to them but also to bank employees. The question of which course will be taken to convert the interest on income on foreign currency deposits should never be underestimated because, according to the reports of the Central Bank in August, the banking system had about 500 thousand pieces of citizens’ deposits totalling 2.7 billion lev, which however were not into national currency, nor into euros. This is not a question without importance for the banks who will be deducting and remitting the tax directly to the budget nor is it marginal for depositors paying to the National Revenue Agency. This will be a kind of currency substitution (changing from one currency to another) for the purposes of tax reporting and taxation.
And for now banks prepare balance sheets and profit and loss accounts only in Bulgarian levs. It is their responsibility under the Accounting Act. According to the CEO of Postbank Dimitar Shumarov all transformations in the accounts of credit institutions for statistical purposes and the payment of taxes are made in the Central Bank rate towards the lev. This rule does not apply only when we have deals for buying and selling currencies. They are recorded at the rate in which the transaction takes place. Yet withholding tax at the source is not a monetary transaction. Logically the income tax is calculated from a foreign currency deposit, the transformation for taxation purposes to be carried out at the C-Bank rate of exchange at the day of the maturity date of the interest. Based on this lev equivalent 10% tax is to be deducted by the bank and then send to the National Revenue Agency, Mr. Shumarov said. The same opinion is shared by the auditor and chairman of the Supervisory Board of Municipal Bank Stefan Nenov. I think what will be used are the rates of exchange for the day that the bank credits the account with a client’s interest income, said Nenov.
When cash earnings are in foreign currency, they are converted into Bulgarian levs at the BNB exchange rate at the date of acquisition. This is explicitly written in the article. 10.3 of the Law on Income Tax of Individuals, said Nevena Kovacheva, senior manager of audit and consulting company Erst amp; Young Bulgaria LTD.
After the entry into force of the proposed government tax, the application of the clause on currency conversion will apply to all Bulgarians who have savings in euros, dollars, Swiss francs, British pounds and other currencies other than levs. The system of calculation and withholding the tax should be the following. On the date of maturity of interest on dollar deposits, for example, the sum will be converted into local currency at the C-Bank rate for the day. From this sum the bank deducts a 10% tax and within transfers it to the National Revenue Agency.
