MinFin Djankov: Romanian Business Lured by Tax Heaven Bulgaria15.12.2010

Romanian companies are moving in droves to Bulgaria attracted by lower taxes, which the government has maintained at pre-recession levels, Sofia finance minister has said.
"We`ve maintained the same tax system, unlike Romania or Greece. Over here, the value-added-tax rate remained at 20%. The profit tax amounts to 10%, while in Romania it is 16% and the tax on dividends amounts to 5% in Bulgaria and about 12% in Romania," Simeon Djankov pointed out in an interview for Romanian Adevarul newspaper.
The article cites data, according to which nearly 300 a month, are moving base to the Bulgarian town of Russe on the Danube River. Already no fewer than 1,500 Romanian companies have opened offices in Russe, while others are setting up their business in the Bulgarian capital, Sofia.
Djankov` s statement comes on the heels of numerous Bulgarian media reports that nearly 2 500 Romanian companies flocked to the southern neighbor over the spending cuts and austerity measures imposed in Romania, lower taxes and better business conditions across the Danube.
According to the articles the recent increase of the value-added-tax from 19% to 24% in Romania just came to further deteriorate the business climate, already strained by unskilled labor force, high social securities, bureaucracy and heavy indirect taxes.
The Romanian cabinet however was quick to refute the reports.
In an official statement, issued by Bucharest at the end of October, the number of businesses , registered and operating in Bulgaria by July, 2010, have been set at 284.
Bulgaria has the lowest personal and corporate income tax in the EU at 10%, which was introduced at the beginning of 2008, replacing the previous system, which combined several different tax rates - between 20 and 24%, depending on income.
Bulgaria also has the lowest social security rates, which coupled with a 10% flat rate, makes it very attractive for physical entities, employers and potential investors.
Bulgaria`s Prime Minister Boyko Borisov has denied reports that a hike in tax rates may be looming after the government scrapped its plans for a VAT increase this year, which was hoped to plug a budget gap that has thwarted the new EU member`s euro efforts.


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