Legislation changes in Bulgaria, where enterprises often neglect to publish their financial statements in the trade register, may soon result in stronger enforcement and more penalties.
The publication of Annual Financial Statements (AFS) in the trade register is often neglected by Bulgarian trading enterprises. This may be due to the lack of effective penalties imposed by authorities over the years.
A new penalty recently introduced in local legislation should quickly change this practice as any failure to submit the AFS can result in a sanction. For companies with successful sales, the amount is likely to exceed reasonable expectations. Apart from the penalty risk, adhering to the rules is one of the most important targets for businesses striving to create and maintain a brand that is known for its manner of compliance.
General publication rules
The year-end-closing is in the middle of its hottest period and the final step will be the AFS publication. Although the procedure is not time consuming, it is a formal one and a set of documents must be collected to make sure that the trade register officers accept the published AFS.While there were no material changes in the publication rules, some updates in the Accounting Act in Bulgaria affect the publication of the AFS, as presented below.
Changes affecting the publication of financial statements
- All companies should submit their AFS to the trade register by 30 June of the year following the reporting year. Up to now, the deadline for joint-stock companies was 31 July, so the audits of their financial statements will need to be completed earlier this year.
- Small enterprises which are not subject to statutory independent financial audit are not required to publish their income statements and management reports (they still need to file/publish their financial statements but have the right not to publicly disclose all content).
- There is a substantial change in the way the penalty for not publishing the AFS will be calculated. Rather than a fixed penalty, enterprises will be penalised with a pecuniary sanction ranging from 0.1% to 0.5% of the net sales revenue for the reporting period. This may result in excessive fines if the company's net sales revenue is high. For companies with low net sales, the change can be considered positive, as the penalty imposed might decrease compared to previous years.
An important point to note is that in addition to the penalty imposed on the company, the person who fails to publish the financial statements (normally the company's director) will be fined in the range of approximately €100 to €1,500.
In the event of repeat violations, the fine or pecuniary sanction will be doubled.
It is difficult to predict if the new way of calculating penalties will change the attitude of the Bulgarian authorities, but it's expected that companies with high net sales results may suffer huge penalty costs for something that can be easily overlooked.
On the other hand, the fact that the penalties for companies with smaller net sales will decrease may result in active issuance of penalties, which is currently not routine in Bulgaria.
Branches of foreign entities are obliged to publish the AFS of the parent company in the trade register. There is no specific deadline for this publication because the AFS of the parent company is subject to rules that are outside the control of Bulgarian legislation. It is, nevertheless, recommended that publication is organised as early as possible after the AFS of the parent company is duly adopted, approved and published in its country of establishment.
Talk to us
Our experts in Bulgaria can assist enterprises and branches of foreign entities with publishing their AFS in the trade register. As part of the full scope of accounting services provided by TMF Bulgaria, we can also support you with the preparation of your AFS.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.