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The Bulgarian Constitutional Court outlawed a 20% tax on the revenues of renewable energy producers

06/08/2016

The Constitutional Court of Republic of Bulgaria announced on 31 July 2014 that it has found the 20% tax imposed on the revenues of the solar and wind renewable energy producers to be unconstitutional. The aim of the tax was to collect around EUR 75 million in order to finance the National Electricity Company. However, the so far collected EUR 44 million were designated, by the Finance Minister in resignation, as financial buffer for the national budget.

The case itself was brought in front of the Constitutional Court by the President of Republic of Bulgaria. The President argued that the provisions that implemented the tax were unconstitutional as they were: (1) not treating equally the economic subjects which were providing the same services (they were discriminatory), and (2) it was not clear what service was provided by the government in order to justify this tax. The decision of the court does not have a retrospective effect and the collected amounts will not be reimbursed to the renewable energy producers. The decision is to be published within 15 days in the Official Gazette and it will come into force three days after its publication. Ten judges supported the decision, which was welcomed by the Bulgarian Photovoltaic Association (BPVA). According to the BPVA, the judgment “affirms the supremacy of the constitution for ensuring the stability of the investment environment and equal treatment of economic subjects.”

The decision brings certainty and security for all renewable energy producers. Having in mind that a strong and independent Europe in terms of energy supply was ascertained as one of the top priorities of the new President-elect of the European Commission Jean-Claude Juncker, the judgment of the court is of high importance. Establishing a consistent and predictable legislature in Bulgaria will encourage foreign investments amidst a period when they are highly needed. Last but not least, this judgment will also enable Bulgaria to reach the “20-20-20” goals of the EU climate and energy package. This binding legislation aims to ensure that the European Union meets its ambitious climate and energy objectives for the year 2020, which are: (1) a 20% reduction in EU greenhouse gas emissions from 1990 levels; (2) raising the share of EU energy consumption produced from renewable resources to 20%; and (3) a 20% improvement in the EU's energy efficiency.

Authors

Picture of Ivan Gergov
Ivan Gergov
Senior Associate
Sofia