Special tax

Amendments to the Law on Determining the Origin of Property and Special Tax just before the start of its implementation

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The Law on Determining the Origin of Property and Special Tax was adopted on 29th February 2020, and entered into force on 11th March 2020, while its implementation was postponed until 12 March 2021. During the drafting of bylaws for the application of the Law on Determining the Origin of Property and Special Tax, it was determined that it is necessary to amend certain provisions of this law until the beginning of its application, in order to eliminate problems that could arise in its application.

Major changes

The proposed amendments to the Law primarily refer to the definitions of terms contained.

Namely, it was proposed to change the definition of the term “illegally acquired property” to “property on which a special tax is determined”, so that this term would not be equated with the term “property derived from a criminal offense” and to add the term “expenditures for private needs of a natural person” which is defined as expenditures that a natural person had for private needs, in order to determine the origin of income acquired by a natural person and not spent on the acquisition of property.

The competence of the special unit of the Tax Administration, which will lead and implement the procedure of determining and collecting the special tax, is also prescribed. An integral part of this special unit will be members who should be delegated by the Ministry of Interior, NBS, Anti-Money Laundering Administration, Anti-Corruption Agency, Republic Geodetic Authority, Business Registers Agency and Central Registry of securities depot and clearing.

In order to harmonize with the provisions of the Law on Tax Procedure and Tax Administration, it is proposed that the data obtained by the Tax Administration in the procedure of determining the origin of property and special tax do not represent a professional secret, but secret data in accordance with the Law on Tax Procedure and Tax Administration.

Application and possibilities for abuse

We remind you that the Law in question applies to all citizens for whom a disproportion between the declared income and the increase of property is determined, and not only to politicians, as it is usually thought.

Practically, everyone who is suspected or determined to have, for a maximum of three consecutive calendar years, a difference of over 150,000 euros between the increase in assets and reported income, will be hit by the law. During the inspection, it will be practically a matter of cross-checking the property, which will be conducted by a special unit in the Tax Administration.

Who will be checked will be determined by the annual guidelines issued by the director of the Tax Administration, which are not public, but the procedure can be initiated upon the application of citizens or some institution.

For now, it is not known on the basis of which criteria it will be determined which persons will be controlled, on the basis of which criteria as well as rough estimates of the number of persons who could fall under this control annually, which may lead to abuse of the Law.

The law stipulates that illegally acquired property is taxed at a tax rate of as much as 75 percent. Also, if the grounds for suspicion that a criminal offense has been committed are acquired in the procedure of property inspection, the Tax Administration unit shall inform the police, the Tax Police and the Public Prosecutor’s Office. In the event that the court finds that the property in question was acquired by a criminal offense, it could confiscate all illegally acquired property.

Although it is planned that the Law in question will start with the implementation on March 12, 2021, it should be borne in mind that the adoption of bylaws has been delayed for half a year, which calls into question the efficient implementation of the Law itself.

This article is for informational purposes only and does not constitute legal advice. If you need additional information regarding the subject, feel free to contact us by email office@ncrlawyers.com or by phone +381677049551.