Bulgaria's Council of Ministers recently approved a 2% tax on insurance premium incomes, according to DNEVNIK. The new tax will apply to all premiums in the general insurance market except for cargo where the first and final point o travel are outside Bulgaria, as well as on permanent health insurance covers. Life insurance and reinsurance premium incomes will also be levied no tax.
The tax will be passed on to customers and comes along with a 10% tax on insurers' profits. The new tax is expected to trigger off an at least 2% increase in insurance prices. However, the hike could be tougher if companies need to make additional investment in their systems to adjust them to calculate the new tax, market players said at the announcement of the changes by the Ministry of Finance (MoF).
The tax on insurers' premium income forms part of a package of 60 measures hammered out by the Bulgarian government, employers and unions at the end of March. It is a softened version of the original proposal for a 10% tax on all premiums replacing the profit tax, which was scraped after vigorous protests by the industry. Insurers said the move would have placed them on an uneven playing field with other sectors and would violate European directives.
In 2009, Bulgarian insurance companies have reported EUR 849 million in premiums, down by 8.2% in comparison to 2008. there are 66 insurance, reinsurance and health insurance players operating on the local market.
